1. I and II only

2. I and III only

3. II only

4. III only

5. I, II and III

26) If a firm is a sole employer in a small town, but sells its output in a competitive market then the employment optimization condition can be written as:

A) MPL = w/P

B) P = MCL/w

C) MPL = MCL

D) P = MCL/MPL

E) None of the above

27) A firm finds that its marginal cost of labor curve is horizontal. This means that:

1. Additional unit of labor hired will not increase costs

2. Marginal cost of production is zero

3. The firm can not influence the wage rate

4. Firm should not hire additional workers

5. More than one answer is correct

28) What is TRUE about the preferences of individual depicted on the figure above?

1. Leisure can not be inferior

2. Consumption can be inferior

1. I only

2. II only

3. I and II

4. None of the above

5. Not enough information to answer the question

29) Setting minimum wage may result in all of the following except:

1. Increase in the number of people employed

2. Decrease in the number of people employed

3. Increase in the wage rate

4. Decrease in the total wage paid to all workers

5. Deficit of labor in the market

30) A firm uses two inputs (labor and capital) to produce its output. If it chooses both inputs optimally:

1. Wage rate must be equal to the interest rate

2. Average products of both factors must be equal to the marginal products of corresponding factors

3. Marginal products of these factors are equal

4. Increase in output resulted from hiring additional unit of labor is equal to the increase in output following increase in capital by 1 unit.

5. Additional dollar spent on labor will increase output by the same amount as additional dollar spent on capital

31)Vasya Pupkin is studying microeconomics. He makes two statements:

1. A competitive industry’s demand for capital curve can be obtained as a horizontal sum of individual firms’ marginal value product of capital (MVPK) curves.

2. For a large economy, the overnight supply of capital is perfectly elastic.

1. Only statement I is correct.

2. Only statement II is correct.

3. Both statements are correct.

4. Both statements are wrong.

32)Marginal value product of capital…

1. …is equal to the change in total revenue from selling the product of another unit of capital, other inputs held fixed.

2. …is equal to the revenue obtained from selling the product of another unit of capital, other inputs held fixed.

3. …is equal to the price of another unit of output.

4. …is equal to the marginal revenue from producing another unit of output.

5. More than one answer is correct.

33)Marginal revenue product of capital…

1. …is always smaller than the marginal value product of capital.

2. …is declining, if the law of diminishing marginal returns holds.

3. …is equal to the output price times the marginal product of capital.

4. More than one answer is correct.

5. None of the above

Comment: In this question full mark was given for answers B and D, because the concept of MRPK (and MRPL) was almost always applied to situations with market power in the product market, in which case the answer A is also correct.

34)For a profit-maximizing quantity of capital, the marginal revenue product of capital is equal to the marginal cost of capital, if a firm…

1. Is a monopoly with no market power in the capital market.

2. Is a perfectly competitive firm with market power in the capital market.

3. Has market power in both output and capital markets.

4. Has no market power in either output or capital market.

5. More than one answer is correct.

35)Which of the following is not a flow variable?

1. Foreign investment in Russian automobile industry in 2007.

2. The size of Russian foreign debt.

3. Interest payments on Vasya Pupkin’s mortgage in 2006.

1. I only

2. I and III only

3. II only

4. I, II, III only

5. None of the above

36)In country A, 60% of all capital equipment produced is bought by A.ON, a large electricity producer. All import of capital goods is banned. A.ON’s demand curve for capital, then:

1. Must be downward-sloping.

2. Must be perfectly price-elastic in short-run.

3. Must coincide with A.ON’s MRPK curve.

4. Coincides with A.ON’s MVPK curve.

5. More than one answer is correct.

6. None of the above.

37)A risk-free perpetuity bringing $10 annually costs $200 today. Assuming that i, the interest rate on bank deposits (the only other investment opportunity) will stay constant, and the annual inflation rate would stay at 10%, you should only buy it, if:

1. i ≤ 15%

2. i ≥ 15%

3. i > 5%

4. i ≤ 5%

5. You should buy it in any case.

38)Which of the following events would decrease an industry’s demand for capital goods?

1. An earthquake has destroyed much of the country’s capital assets.

2. The new government has abolished all taxes on imported capital goods.

3. A change in fashion has increased the demand for that industry’s output.

4. More than one answer is correct.

5. None of the above.

39)Which of the following statements about capital supply is true:

1. A decrease in demand for capital services would reduce the supply of capital assets.

2. The larger the industry is, the flatter its capital supply curve would be.

3. In the long-run, capital services supply curve would be horizontal for any industry.

4. More than one answer is correct.

5. None of the above

40)Suppose that all the available land in country A is being rented for either housing or farming. If the government started to subsidize wheat production, it would, in the long run:

1. reduce the supply of farmlands.

2. Increase the rental rates for housing land.

3. Increase the rental rates for farmlands.

A) I only

B) I and II only

C) II and III only

D) III only

E) I, II and III

41) Pareto-efficient resource allocation…