EC1310 Economics for Business 2019/20
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit
EC1310
2019/20
Economics for Business
|
Section A: Answer ALL TWENTY questions |
|
1. Consider the market for butter, where equilibrium price and quantity is determined by demand and supply. If butter is a normal good and there is an increase in income and a per unit tax is imposed on butter, which of the following will occur? (a) The equilibrium price and quantity will be higher. (b) The equilibrium price will be higher, but the equilibrium quantity will be lower. (c) The equilibrium price will be higher, but the impact on quantity will be unknown. (d) The equilibrium price will be lower, but the equilibrium quantity will be higher. |
2. Which of the following statements is true for a Giffen good?
(a) Following a fall in the price of the good, there will be a decrease in the quantity
demanded due to the substitution effect; an increase in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect.
(b) Following a fall in the price of the good, there will be an increase in the quantity
demanded due to both the substitution and income effect and the two effects will therefore reinforce each other.
(c) Following a fall in the price of the good, there will be an increase in the quantity demanded due to the substitution effect; a decrease in the quantity demanded due to the income effect; the substitution effect will outweigh the income effect.
(d) Following a fall in the price of the good, there will be an increase in the quantity demanded due to the substitution effect; a decrease in the quantity demanded due to the income effect; the income effect will outweigh the substitution effect.
3. Which of the following could explain a change in the price elasticity of supply for a firm’s product from +1.0 to +5.3?
(a) A firm experiences multiple machines breaking down, thus reducing its spare
productive capacity.
(b) If the firm starts to consider the supply of the good in the long run rather than the
short run.
(c) A firm realizes that its stocks are lower than normal.
(d) The firm is finding that the ease and cost of factor mobility is falling.
4. If the price of strawberries rises from 90p to £1.10 per pack and this causes a 75% increase in the demand for raspberries, which of the following is the cross-price elasticity of demand?
(a) 83.3+ = ⃞ߝ⃞
(b) 83.3− = ⃞ߝ⃞
(c) 72.0+ = ⃞ߝ⃞
(d) 72.0− = ⃞ߝ⃞
|
5. |
Which of the following statements is true? |
|
|
(a) A concave production possibility frontier derives from decreasing opportunity cost. (b) The law of diminishing returns means that as a firm increases the number of workers it uses, with capital held fixed, each additional worker will produce less and less extra output. (c) If a firm has increasing returns to scale at all levels of output, then the average cost curve will always lie under the marginal cost curve. (d) We can find a firm’s average cost by finding the slope of the firm’s total cost curve. |
|
6. |
If a firm sees its long run average costs falling as the industry gets bigger, which of the following would best describe this situation? (a) The firm is experiencing internal economies of scale. (b) The firm is experiencing internal diseconomies of scale. (c) The firm is experiencing external economies of scale. (d) The firm is experiencing external diseconomies of scale. |
7. Consider the following total cost function: ⃞⃞ = ⃞ଶ + ⃞⃞ + ⃞⃞ଷ where ⃞ represents output and ⃞, ⃞, ⃞ are constants. What can we conclude?
(a) The firm experiences rising average fixed costs, but falling average variable costs. (b) The firm experiences falling average fixed costs, but rising average variable costs.
(c) The firm experiences falling average fixed costs and falling average variable costs.
(d) The firm experiences rising average fixed costs and rising average variable costs.
8. Consider the following table that shows a firm’s costs of production between 0 and 5 units of output.
Output TC (£) AC (£) MC (£)
0
1
2
3
4
5
55
85
110
130
160
210
–
30
85
25
55
20
43.3
30
40
50
42
At 5 units of output, which of the following is the firm’s total fixed costs and average fixed costs?
24 = ⃞⃞⃞ ;012 = ⃞⃞⃞
24 = ⃞⃞⃞ ;55 = ⃞⃞⃞
11 = ⃞⃞⃞ ;55 = ⃞⃞⃞
11 = ⃞⃞⃞ ;012 = ⃞⃞⃞
9. The matrix below shows the annual profits of two hardware stores, Alpha Inc. and Beta Ltd. if they sell paint at various prices. Both firms are setting their price simultaneously and the profits of each firm depend on the price it sets and the price its competitor sets. Which of the following cells is the Nash equilibrium?
Cell A.
Cell B.
Cell C.
|
|
£15.00 |
£10.00 |
|
|
£15.00 Alpha Inc.’s |
A £8 million each |
C |
£4 million for Alpha Inc. £10 million for Beta Ltd. |
|
price £10.00 |
B £11 million for Alpha Inc. £5 million for Beta Ltd. |
D |
£6 million each |
(d) Cell D.
10. In which market structures does the firm face a downward sloping demand curve? (a) Perfect competition, monopolistic competition, oligopoly and monopoly. (b) Only monopolistic competition and oligopoly.
(c) Only perfect competition and monopolistic competition.
(d) Only monopolistic competition, oligopoly and monopoly.
2022-05-12