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# Economics Multiple Choice Questions Assignment Paper (Multiple Choice Questions Sample)

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QUESTION 1
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 81 +4q +q2. Assume that initially the price in this market equals 18. Which of the following is true for a typical firm in the industry?
In the short run, the firm realises profits but in the long run as more firms join the market, the profits will reduce setting this firm out of business
A profit maximising firm will shut down in the short run and exit the industry in the long run.

A profit maximising firm will not shut down in the short run but will exit the industry in the long run.

A profit maximising firm will not shut down in the short run and will not exit the industry in the long run.

A profit maximising firm will shut down in the short run and but will re-enter the industry in the long run.

None of the above.

1 points Â Â
QUESTION 2
1 When Picassoâ€™s Gelatos ice-creamery in Newtown increases the price of their triple waffle by 10 percent, sales decrease by 5 percent. This indicates that:
Demand decreases by less than the change in price hence inelastic at a rate of 5/10 = 1/2
Demand is elastic and own price elasticity of demand in absolute terms equals 2.

Demand is inelastic and own price elasticity of demand in absolute terms equals 2.

Demand is elastic and own price elasticity of demand in absolute terms equals Â½.

Demand is inelastic and own price elasticity of demand in absolute terms equals Â½.

None of the above

1 points Â Â
QUESTION 3
1 Assume that the price of sorbet at Giuseppeâ€™s Best Italian ice-creamery increases from \$3.90 to \$4.10. If the quantity demanded of triple waffles at Picassoâ€™s Gelatos ice-creamery decreases by 10 percent this is consistent with:
Ice cream and waffles are complements hence demand for one leads to fall in demand for the other hence price elasticity is given by (3.9 â€“ 4.1) / 0.1 = -2
Using the mid-point formula, sorbet and waffles having a cross price elasticity equal to -0.5 and being substitutes.

Using the mid-point formula, sorbet and waffles having a cross price elasticity equal to -2.0 and being substitutes.

Using the mid-point formula, sorbet and waffles having a cross price elasticity equal to -0.5 and being complements.

Using the mid-point formula, sorbet and waffles having a cross price elasticity equal to -2.0 and being complements.

None of the above

1 points Â Â
QUESTION 4
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 +8q +2q2. Further, the market demand curve is given by: p = 72-2Q. In the long run the equilibrium price equals:
(check the image calculation sent to you earlier)
2.

4.

8.

40.

1 points Â Â
QUESTION 5
1 The market supply curve for scooters is given by the following: Qs= 2p â€“ 100. At a price of 100:
Qs = (2*100) â€“ 100 = 100 Percentage change of quantity is higher than change in price hence elastic (100/100) =1
Own price elasticity of supply equals 1/2 and supply is elastic.

Own price elasticity of supply equals 2 and supply is elastic.

Own price elasticity of supply equals 1/2 and supply is inelastic.

Own price elasticity of supply equals 2 and supply is inelastic.

Own price elasticity of supply equals 1 and supply has unit elasticity.

1 points Â Â
QUESTION 6
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 +8q +2q2. Further, the market demand curve is given by: p = 72-2Q. In the long run equilibrium profit for each firm equals:
B(check calculation sent earlir
0.

32.

64.

1024.

1 points Â Â
QUESTION 7
1 Consider a constant cost industry that is perfectly competitive and in which the demand curve is downward sloping. Further, starting from a long run equilibrium assume that firms experience an improvement in technology that lowers average total cost but does not change marginal cost. In the long run, we would expect:
The improvement in technology will only affect the producers hence improvement will be noticed on their parts as opposed to consumers.
Consumer surplus to increase and producer surplus to remain unchanged.

Consumer surplus to decrease and producer surplus to remain unchanged.

Producer surplus to increase and consumer surplus to remain unchanged.

Producer surplus to decrease and consumer surplus to remain unchanged.

1 points Â Â
QUESTION 8
1 Consider a competitive market where firms have U-shaped cost curves. Which of the following is true?
In the long run, there is low demand due to the high costs while in the short run, the standardized prices result to a consistent demand that is neither increasing or decreasing.
The long run market supply curve for a constant cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping.

The long run market supply curve for an increasing cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping.

The long run market supply curve for a decreasing cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping.

The long run market supply curve for an increasing cost industry is downward sloping, and, the short run supply curve of each firm is horizontal.

None of the above.

1 points Â Â
QUESTION 9
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 81 +4q +q2. At what price will a firm shut down in the short run?
The firms will shut down when demand is lower than cost.
2.

4.

9.

22.

1 points Â Â
QUESTION 10
1 Consider a market with the following demand and supply curves:Â QD= 500 - 2pQs= p + 50Â At the market equilibrium, what is the consumer surplus (CS) and producer surplus (PS)?
Difference between what the consumer is willing and able to pay and the actual amount pay) ( I will attache the calculation as an image)
CS= 10000, PS=0.

CS=0, PS=10000.

CS=5000, PS=5000.

CS=10000, PS= 10000.

None of the above.

1 points Â Â
QUESTION 11
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 +8q +2q2. Further, the market demand curve is given by: p = 72-2Q. In the long run the number of firms in the market equals:
We need to be given the market price so that we divide by the units available for each firm. This information is not available
2.

4.

8.

40.

1 points Â Â
QUESTION 12
1 The market supply curve for scooters is given by the following: Qs= 2p â€“ 100. Between a price of 55 and 65:
Demand decreases by less than the change in price hence inelastic at a rate of 60/180 = 1/3
Own price elasticity of supply equals 1/3 and supply is elastic.

Own price elasticity of supply equals 3 and supply is elastic.

Own price elasticity of supply equals 1/3 and supply is inelastic.

Own price elasticity of supply equals 3 and supply is inelastic.

None of the above

1 points Â Â
QUESTION 13
1 Consider a competitive market for coffee mugs that exhibits constant cost and in which the demand curve is downward sloping. Further, starting from a long run equilibrium assume that incomes increase and coffee mugs are an inferior good. In such a case in the long run we would expect:
In the case of an inferior goods, an increase in income will lead to an increase in demand therefore leading to an increase in the market price of the mugs. Similarly, the equilibrium quantity would also increase due to the increase in demand.
Market price to remain unchanged and equilibrium quantity in the market to increase.

Market price to remain unchanged and equilibrium quantity in the market to decrease.

Market price to increase and equilibrium quantity in the market to decrease.

Market price to increase and equilibrium quantity in the market to increase.

Market price to increase and equilibrium quantity in the market to remain unchanged.Â Â

1 points Â Â
QUESTION 14
1 Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 +8q +2q2. Further, the market demand curve is given by: p = 72-2Q. In the long run the equilibrium each firm that remains in the market will produce:
TC = TR =128 + 8q +2q2 = 72q â€“ 2q2
2.

4.

8.

40.

1 points Â Â
QUESTION 15
1 Consider a market with the following demand and supply curves:Â QD= 500 - 2pQs= p + 50Â At the market equilibrium:
500 â€“ 2p = p + 50 3p = 450 p = 60
PED = change in quantity/ change in price
= 180/120 = 3/2
The absolute value of own price el...
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