Economics Question Paper

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QUIZ 2

Post Graduate Programme in Management (Section ‘E’) 2009-10
Time 1 hour Instructions Total Marks 40

1.Exam is closed book
2.All questions in Part A and in Part B are compulsory
3.Each question in Part A carries 1 mark & each Question in Part B carries 10 marks 4.All Questions to be answered in the Question Booklet

1. In the diagram above, d and MR represent, respectively, the demand curve and the marginal revenue curve of an oligopolist. The kink in the demand curve means that the firm will a.match any price increase above P1, but will not match any price decrease below P1. b.not match any price increase above P1, but will match any price decrease below P1. c.match any price increase above P2, but will not match any price decrease below P2. d.not match any price increase above P2, but will match any price decrease below P3. e.match any price increase above P2, but will not match any price decrease below P3.

ANS:B

2. In the diagram above, d and MR represent, respectively, the demand curve and the marginal revenue curve of an oligopolist. The firm producing Q units of output is earning profits equal to the area a.0P1 times 0Q.

b.P1P3 times 0Q.
c.P1P2 times 0Q.
d.P2P3 times 0Q.
e.cannot be determined

ANS:E

3. In the diagram above, d and MR represent, respectively, the demand curve and the marginal revenue curve of an oligopolist. Q0 is the output level at which a.total revenue is maximized.
b.total revenue is minimized.
c.marginal revenue is minimized.
d.total output is maximized.

ANS:A

4. In the diagram above, d and MR represent, respectively, the demand curve and the marginal revenue curve of an oligopolist. A shift in the marginal cost curve from the MC1 to the MC2 position will, ceteris paribus, lead to a change in a.the production level.

b.price.
c.total revenue.
d.profits.
e.none of the above

ANS:D

5 .A significant difference between perfect competition and monopolistic competition is that a.a perfectly competitive firm is a price searcher, while a monopolistically competitive firm is a price taker. b.a perfectly competitive firm faces a downward-sloping demand curve, while a monopolistically competitive firm faces a perfectly elastic demand curve. c.a perfectly competitive firm sells a homogeneous product, while a monopolistically competitive firm sells a differentiated product. d.a perfectly competitive firm sets price above marginal cost, while a monopolistically competitive firm sets price equal to marginal cost.

ANS:C

6. For a perfectly competitive firm,
a.the marginal revenue curve and the demand curve are the same. b.the marginal revenue curve and the marginal cost curve are the same. c.the supply curve and the marginal revenue curve are the same. d.the demand curve and the marginal cost curve are the same. e.none of the above

ANS:A

7. Equilibrium price is $9 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 125 units of output. At 125 units, ATC is $11, and AVC is $10. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ and total variable cost equals __________ for this firm. a.continue to produce; $125; $1,375

b.shut down; $125; $1,250
c.shut down; $1,375; $1,250
d.continue to produce; $125; $1,250
e.There is not enough information to answer all parts of the question.

ANS:B

8. Mixed Bundling works best when

a.When the reservation prices ofgoods involved are positively co-related b.When the reservation prices of goods involved are...
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