Supply and Demand and Perfect Competition

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TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES
COLLEGE OF BUSINESS EDUCATION
Principles of Economics With Land Reform and Taxation (Econ 003)

NAME:_______________________________________________SCORE : ____________________________

MIDTERM QUIZ No. 1 (Take Home)SECTION: _____________________________

DIRECTION: Write the CAPITAL LETTER of the CORRECT ANSWER on the space provided. Any form of ERASURES is strictly not allowed.

1. If you were running a firm in a perfectly competitive industry you would be spending your time making decisions on A. how much of each input to use.B. how much to spend on advertising.C. what price to charge. D. the design of the product. 2. Market power is:

A. a firm's ability to sell any amount of output it desires at the market-determined price. B. a firm's ability to charge any price it likes.
C. a firm's ability to monopolise a market completely. D. a firm's ability to raise price without losing all demand for its product. 3. Which of the following would not be considered a legitimate measure of demand elasticity? A. Price elasticity of demandB. Income elasticity of demandC. Supply elasticity of demandD. Cross-price elasticity of demand 4. The price elasticity of demand is calculated by dividing: A. he absolute change in quantity demanded by the absolute change in price. B. the percentage change in quantity demanded by the percentage change in price. C. the absolute change in quantity demanded by the percentage change in price. D. the percentage change in quantity demanded by the absolute change in price. 5. Assume a 10 percent increase in price causes quantity demanded to decrease by 18 percent. In this case, we could conclude that: A. demand is elastic.B. demand is inelastic.C. demand is unit elastic. D. there is not enough information to determine the price elasticity 6. Which of the following describes a perfectly elastic demand function? A. The quantity demanded is completely insensitive to changes in price. B. Price is completely sensitive to changes in quantity demanded. C. When price changes by a certain percentage, quantity demanded changes by the same percentage. D. The demand function is horizontal at the given price. 7. When ______ substitutes exist, a monopolist has ______ power to raise price. A. no; infiniteB. fewer; lessC. more; moreD. more; less 8. Relative to a competitively organised industry, a monopoly: A. produces less output, charges lower prices and earns economic profits. B. produces less output, charges lower prices and earns only a normal profit. C. produces more output, charges higher prices and earns economic profits. D. produces less output, charges higher prices and earns economic profits. 9. A normal rate of profit:

A. is zero in a perfectly competitive industry.B. is the rate that is just sufficient to keep owners or investors satisfied. B. is the difference between total revenue and total costs.D. is the rate of return on investments over the interest rate on risk-free govt. bonds. 10. Economic profits are:

A. a rate of profit that is just sufficient to keep owners and investors satisfied.C. the opportunity costs of all inputs. B. anything greater than the normal opportunity cost of investing.D. the difference between total revenue and total costs. 11. From society's point of view, society would be better off if a monopolist: A. produced more and charged a lower price.C. produced less and charged a higher price. B. produced less and charged a lower price.D. produced more and charged a higher price. 12. Monopolistic competition differs from perfect competition primarily because: A. in perfect competition, firms can differentiate their products.C. in monopolistic...
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