Part A (21 Marks)
Answer all of the following multiple-choice questions in your answer book (not on this paper). Each question is worth 1 mark. Clearly number all the questions and write your answers in CAPITAL LETTERS.
For example your answers to this section should look like:
And so on....
Note that your answers should consist ONLY of the questions number and the letter of the answer you believe to be correct. NO explanations of answers will be taken into account in marking.
1) If a monopolist's price is $65 a unit and its marginal cost is $25 for the last unit produced, then: A) to maximise profit the firm should decrease output.
B) to maximise profit the firm should continue to produce the output level it is producing. C) not enough information is given to conclude what the firm should do to maximise profit. D) to maximise profit the firm should increase output.
2) If a monopolist's price is $50 at 65 units of output and marginal revenue equals marginal cost and average total cost equals $43, then the firm's total profit is:
3) One of the main differences between oligopoly and monopolistic competition is:
(A) The amount of advertising that firms do.
(B) The amount of non-price competition that occurs.
(C) The degree of interdependence among firms.
(D) That the profit maximizing output level occurs where MR = MC
4) A firm has $500 million in revenue and explicit costs of $200 million per year. Its owners have invested $100 million in the company. This could have been invested at 10 percent per year. The firm’s annual economic profit is
(A) $300 million.
(B) $290 million.
(C) $200 million.
(D) $10 million.
5) It takes you 1 hour to mow the lawn and 2 hours to cook a meal. For the same quality of mowed lawn or cooked meal, your partner needs half an hour to mow the lawn and three-quarters of an hour to cook a meal. If you want to allocate your time between the two tasks efficiently,