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Final Exam Mba501

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Final Exam Mba501
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Final Exam MBA501
Version A

There are 25 multiple choice questions. Please select the one alternative that best answers each question. Each question is worth 3 points.

1) Suppose farms in the competitive market for potatoes are identical. Each farm’s long-run average cost is minimized at 500 pounds, and the corresponding minimum average cost is $0.20 per pound. If the long-run supply curve is horizontal, then
A) some firms will enjoy positive long-run economic profits because they operate at the minimum average cost.
B) the long-run equilibrium price in potato market is $0.20 per pound.
C) each consumer will purchase $100 worth of potatoes.
D) the long-run price will be set just above $0.20 per pound.
Answer: B 2) This question is a continuation on question 1). Suppose the demand for potatoes is Q =10,000/p. How many firms will this industry sustain in the long run?
A) 0
B) 100
C) 50,000
D) There is not enough information to answer.
Answer: B

3) In a competitive industry with identical firms, long run equilibrium is characterized by
A. P = AC.
B. P = MC.
C. MR = MC.
D. All of the statements associated with this question are correct.
Answer: D
4) Residents in a small town have identical demand for DVD rental. A local DVD rental store estimates a consumer’s demand per year is Q = 7 - 2P. Its marginal cost of each rental is $0.5. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal two-part pricing strategy?
A. $9.
B. $10.
C. $11.
D. $12.
Answer: A
5) Theatres charge lower prices for a matinee (movie presented in the daytime, usually in the afternoon) and usually do not accept coupons for the night showing of movies because
A) consumers that attend the matinee have a higher price elasticity of demand.
B) consumers that attend the night show

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