1. q₆, such that P(q₆) = MC(q₆)

2. q₇, such that P(q₇) = ATC(q₇)

3. Any q₈, such that P(q₈) > MR(q₈)

4. q₉, such that MR(q₉) = MC(q₉)

5. More than one answer is correct

28. Which of these statements about monopolies is wrong?

1. For any given level of output, a monopoly would normally charge a higher price than a price-taking firm with the same cost schedule

2. Monopolization usually entails social losses

3. A monopoly does not have a supply function

4. In a monopolized market, discrimination can actually increase social welfare

5. A monopoly would produce at such level of output q, that the difference between price and marginal cost would be highest

29. The graph above describes a non-discriminating monopoly. According to the graph, economic profit of this monopoly would be equal to:

1. (p₄ – p₁)q₁

2. (p₂ – p₁)q₃

3. (p₆ – p₄)q₁

4. (p₅ – p₁)q₂

5. (p₅ – p₃)q₂

30. Suppose that ATC curve of a natural monopolist crosses the demand curve at 666 units of output. This firm would:

1. always produce more than 666 units

2. always produce less than 666 units

3. always produce 666 units

4. always produce less than 333 units

5. cannot tell from the information given

31. If demand for a monopoly’s output is perfectly inelastic, imposing a per-unit tax on this monopoly will:

1. Increase the equilibrium price, and decrease the equilibrium quantity

2. Increase consumer surplus, but decrease social welfare

3. Decrease consumer surplus, and cause a deadweight loss

4. Increase both average and marginal cost

5. Increase monopoly profits

32. With respect to price elasticity, it is true that:

1. In general, a monopoly faces less elastic demand than a competitive firm

2. If a competitive industry gets monopolized, price elasticity of market demand for this industry’s output won’t necessarily change

3. A monopoly should not produce where demand is inelastic

4. Statements A and C are correct

5. All statements are correct

33. Which of the following is true when the production of a good results in negative externalities?

1. The government must produce the good.

2. Private firms will produce too little of the good in the absence of government regulation.

3. The competitive market price will be too low.

4. The competitive market price will be too high.

5. More than one answer is correct.

34. If a firm that polluted a river had to pay all social costs the result would be

1. A larger output

2. A smaller output

3. A marginal cost curve which would be above the marginal private cost curve

4. A marginal cost curve which would be below the marginal private cost curve

5. None of the above.

35. According to the graph, the private equilibrium quantity of the good and social cost of the externality are equal to

1. F; S_EABF

2. F; S_ABC

3. F; S_ADC

4. E; S_ADC

5. E; S_ABC

36. Characteristics of pure public good are:

1. Would never be produced in an unregulated competitive equilibrium.

2. Good produced by natural monopolies.

3. Good for which the law of diminishing marginal utility doesn’t hold.

4. All of the above.

5. None of the above.

37. Laffer (tax rate on horizontal axis) curve function is usually

1. Has an extreme

2. Increasing

3. Decreasing

4. A and B correct

5. A and C correct

38. Consider an industry that is perfectly competitive in its output market and in all input markets. Then the industry demand curve for labour is given by:

1. The horizontal sum of individual MRPL

2. The horizontal sum of individual MVPL

3. The vertical sum of individual MRPL

4. More than one applies

5. None applies

The answer is E, as neither of the sums captures the feedback from output market.

39. Which of the following should be true for a perfectly competitive firm using labour and capital as its inputs in the short run?

1. Total costs per unit of output are minimized at the chosen output level

2. MPL=MPK

3. MVPL=MVPK

4. Wage rate is minimized

5. More than one applies

The answer is A, which implies technological efficiency.

40. For a given output level, a competitive firm's total costs in the long run are, ceteris paribus:

1. Always higher than in short run

2. Always lower than in short run

3. Always the same as in short run

4. May be higher than in short run

5. May be lower than in short run

The answer is E, due to the possibility of choosing a better mix of inputs.

41. If the individual labour supply curve is NOT backward-bending, this implies that:

1. Leisure is inferior

2. Consumption is inferior

3. Leisure is normal

4. More than one possibility exists

5. None applies

The answer is D, as a strictly upward-sloping individual labour supply curve can be obtained with both normal and inferior leisure.

42. Assume that a person obtains a non-working income (such as a retirement pension) that he/she did not receive before, with the wage rate and preferences being unchanged. In this case:

1. The individual labour supply will necessarily decrease

2. The individual labour supply will necessarily increase

3. The individual labour supply will increase, only if the income effect is positive

4. The individual labour supply will increase, only if the income effect is negative

5. The individual labour supply will not change

The answer is D, as leisure is inferior in this case.

43. In the following situations, the economic rent to labour is the highest when (ceteris paribus):

1. Labour supply is absolutely elastic and the industry is competitive

2. A trade union exists, and employers compete in the labour market

3. A trade union exists and confronts a single employer

4. A single employer is a monopolist in its output market, and no trade union exists

5. A trade union exists nominally, but has no real bargaining power

The answer is B, as in this case the trade union is not constrained in maximizing the total wage bill and thus economic rents of its members.

44. Which of the following is NOT an explanation to involuntary unemployment?

1. High efficiency wages

2. High reservation wages

3. High equilibrium wages

4. Both A and C

5. Both B and C

The answer is E, by definition.

45. Signalling theories suggest that:

1. More educated workers are likely to be more skillful

2. More educated workers are likely to acquire skills easier

3. Potential employees' education is irrelevant to the employers

4. Employers can determine the potential employees' productivity easily

5. Receiving education is a signal of being unable to get employed instead for some reason

The answer is B, by definition.

46. When evaluating investment decisions, present values of cash flows are typically considered rather than their direct sums, because: