MGEA02H3 Study Guide - Final Guide: Monopoly Profit, Marginal Revenue, Economic Equilibrium

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Published on 14 Dec 2014
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MGEA02 Study Guide 2014
MGEA02 Study Guide 2014
Questions from Past Finals
First-Semester
First Term Test (2014)
Question 3
After studying the economic concept of opportunity costs, we can draw the following
conclusions:
Answer to Question 3
The value of people’s time and normal returns on money invested are major opportunity
costs often ignored by non-economists.
The opportunity costs associated with any decision include the implicit costs and explicit
costs of purchasing goods or services.
If an economic resource has no alternative possible uses, it has no opportunity costs.
Question 10
Which of the following statements about the elasticity of demand are generally true?
Answer to Question 10
If the demand is elastic, a rise in price will cause the total spent on the good by
consumers to fall.
If the demand is inelastic, a fall in quantity demanded along the same demand curve will
generally cause the total revenue received by producers to rise.
A linear demand curve that touches both axes will have all possible values of the
elasticity of demand somewhere along its length.
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Question 11
Which of the following statements about the elasticity of supply are generally true?
Answer to Question 11
If the supply is elastic, a rise in equilibrium price will cause the total amount of revenue
received by producers to rise.
If the intercept of a linear supply curve passes through the origin, the supply curve will
have a constant elasticity along its entire length.
If the intercept of a linear supply curve meets the vertical axis above the origin, the
supply curve will be elastic along its length.
Question 22
A point on the graph of a supply curve has co-ordinates P1 and Q1. Which of the following
interpretations of this point (on the supply curve) are correct?
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MGEA02 Study Guide 2014
Answer to Question 22
At the price P1, the maximum amount of the good that suppliers are willing to supply is
Q1 of the good.
Although some suppliers are willing to supply a good for less than P1, the minimum price
suppliers are willing to accept for the last unit of the good (i.e., the Q1th unit of the good)
is P1.
Question 14
Which of the following statements are key aspects/assumptions of the perfectly competitive
market?
Answer to Question 14
Consumers in this market will have perfect information about the characteristics of the
good sold by each producer and the price charged by each producer.
Access to resources, to best-practice technology and to product designs are readily
available to any potential producer, so there are no barriers to firms wishing to enter this
market.
Prices will be uniform across all sellers in the market.
Question 15
Which of the following statements are correct about the cost functions/cost curves drawn by
economist
Answer to Question 15
A monopoly does not have a supply curve, but a supply point QM (MR=MC), but the price
PM is determined by the demand curve which intersects at the supply point QM.
The LRAC curve is the envelope of the SRAC curves.
The fundamental reason why MC curves are positively sloped in the SR can be found in
the law of diminishing marginal product (also known as the law of diminishing returns).
The MC curve intersects the AC/ATC curve and AVC curve at their minimum.
Final Exam (2009)
Question 17
“Opportunity Cost” refers to:
Answer to Question 17
The value of the benefits that would have been received if resources had been used in their
next most valuable way.
Question 30
Consider the following three statements about perfect competition, which are true about a
perfectly competitive industry?
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