If the government imposes a specific tax on a monopoly, the consumer’s tax incidence A) can exceed 100%. B) will always be between 0-100%. C) may be negative. D) will be the same as when the tax is imposed on a perfectly competitive firm. ANSWER A
Date: September 9th, 2020
If a competitive firm is in short-run equilibrium, then A) profits equal zero. B) it will not operate at a loss. C) an increase in its fixed cost will have no effect on profit. D) an increase in its fixed cost will have no effect on output. ANSWER D
Date: September 9th, 2020
When the production of a good involves several inputs, an increase in the cost of one input will usually cause total costs to A) rise more than in proportion. B) rise less than in proportion. C) remain unchanged. D) rise by the exact amount of the input price increase. ANSWER B
Date: September 9th, 2020
Suppose a firm’s costs are F + v q2 where F and v are positive real numbers and the firm sells its product at the market determined price p. Profits are calculated using A) p q – F – v q2. B) [p -(F/q + v q)] q. C) [(p […]
Date: September 9th, 2020
Suppose TC = 10 + (0.1 q2). If there are 100 identical firms in the market, the market supply curve is A) Q = 1000 p. B) Q = 500 p. C) Q = 100 p. D) Q = 10. ANSWER B
Date: September 9th, 2020
An increase in the cost of an input will result in A) a leftward shift in the firm’s supply curve. B) an upward shift of the firm’s marginal cost curve. C) a leftward shift of the market supply curve. D) All of the above. ANSWER D
Date: September 9th, 2020
Suppose TC = 10 + (0.1 q2). If p = 10, the firm’s profits will be A) 240. B) 250. C) 260. D) -10 because the firm will shut down. ANSWER A
Date: September 9th, 2020
If a firm is currently in short-run equilibrium earning a profit, what impact will a lump-sum tax have on its production decision? A) The firm will decrease output to earn a higher profit. B) The firm will increase output but earn a lower profit. C) The firm will not change output but earn a lower […]
Date: September 9th, 2020
Suppose that market demand for a good is Q = 480 – 2p. The marginal cost is MC = 2Q. Calculate the deadweight loss resulting from a monopoly in this market. What will be an ideal response? ANSWER First, solve for the competitive equilibrium by substituting MC for p in the demand equation and […]
Date: September 9th, 2020
If the government’s goal is to generate a certain amount of tax revenue, a specific tax and an ad valorem tax on a monopoly have the same impact on social welfare. Indicate whether the statement is true or false ANSWER False. The ad valorem tax will reduce output and consumer surplus by less than […]
Date: September 9th, 2020
