ECON 545 Week 3 Imperfect Competition – Quiz
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1. (TCO A) There is a decrease in the cost of labor for producing bicycles.
(4 pts.) What happens to bicycle supply?
(6 pts.) What happens to bicycle demand? (Points : 10)
2. (TCO A) Peanut butter and jelly are complements in consumption. The price of jelly falls.
(4 pts.) What happens to the demand for peanut butter?
(6 pts.) What happens to the demand for jelly? (Points : 10)
3. (TCO A) The number of new home sellers in a given market decreases.
(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes? (Points : 10)
4. (TCO A) A market is in equilibrium with equilibrium quantity Q* and equilibrium price P*.
(2 pts.) What happens to P* if there is an increase in supply?
(4 pts.) What happens to Q* if there is a decrease in supply and a decrease in demand?
(4 pts.) What happens to P* if there is an increase in demand followed by a decrease in supply followed by another increase in demand?(Points : 10)
c. Total Revenue at $15 is $15*40= $600 and at $10 total revenue is $10*100=$1000. Therefore, total revenue increases.
8. (TCO C) Answer the next question on the basis of the following cost data for a purely competitive seller:
9. (TCO C) Answer the next question on the basis of the following cost data for a purely competitive seller:Total Product TFC TVC
0 $50 $0
1 50 70
2 50 120
3 50 150
4 50 220
5 50 300
6 50 390
10. (TCO C) A firm has Total Costs (TC) of $10,000 over the next three months (TOTAL for the 3 months - not per month), of which $6,000 are fixed costs (TFC) for rent on its lease that cannot be broken. If it stays in business over those months, then the firm will collect only $5,000 in revenues (TR). So, considering only this information, should they stay in business for those three months or should they close down right now? Provide your reasoning. (Points : 10)