## 2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

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### 2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

1 A well-organized cartel would probably set prices and quantity for the market at the same levels as would

a monopolist

2 To maximize satisfaction subject to a budget constraint, the consumer should choose the commodity basket that is located where

the highest possible indifference curve
the highest indifference curve has contact with the budget line
MRS=Px/Py
***all of the above

3 Which of the following is not a mathematical technique frequently used in microeconomics

graphing

4 Which of the following utilizes an ordinal scale of measurement

temperature

5 Over time, an increase in wages in one labour market, relative to others, will

increase labour force participation

6 The slope of the demand curve for an input such as labour will be

negative

7 When input A is the only variable input for an imperfect competitor in the product market, the firm’s demand for input A is given by its

MRP curve

8 The demand for input is called

derived demand

9 With a single variable input, the demand curve for the input will be

the VMP curve

10 A profit maximizing firm selling its product in a competitive market should hire a single variable input up to the point where

the VMP equals the price of the input
the last unit of the input adds as much to costs as it does to revenue
the VMP equals the addition to costs
***all of the above

11 Payment received by households from the sale of resources and resource services are called

house hold income

12 The relationship between wages and leisure time for a worker is

indire ct

13 To maximize utility subject to budget constraint, the ratio of marginal utility to price should be

the same for all goods cons umed

14 Cartel agreements that are illegal or not enforceable may be short lived because

there is an incentive for members to cheat on their output quotas

15 Which of the following does not influence the market supply of labour

substit ute goods

16 Which of these is not assumed property of the ordinal preference function

a change in income will shift the budget line

17 When total utility increases, marginal utility is

posit ive and declining

18 In the resource markets

households are sellers and producers are buyers

19 Which of the following is not an assumption of the indifference curve model

consumers can make choices among comm odity basket

20 Oligopoly is characterized by

few sellers

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### Re: 2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

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1 The statement C = D = 10 utils implies

an ordinal and a cardinal measure of utility

2 Monopolistic competition there will be

strategy toward rival firms

3 In the case of price leadership by the dominant firm, all the firms in the purely oligopolistic industry will produce their best level of output

always

4 Which of these is not the property of budget line

diminishing marginal rate of substitution

5 Which form of monopoly regulation is most advantageous for the consumer

Price control

6 In monopolistic competition, we have

many firms selling a differentiated product

7 When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point on its LAC curve

never

8 Which of these is not the property of indifference curves

positive slope

9 Third degree price discriminating monopoly result in

different prices to buyers in different markets

10 With reference to the Cournot model, determine which of the following statements is false

The solution is stable

11 At long-run equilibrium, the average cost of production for a monopolist will be

on the LRAC curve

12 Profit must be equal to zero for a typical firm in the long run equilibrium because

firms maximizes profits

13 The quantity that will maximize profit for monopolist will occur where

marginal cost rises to equal marginal revenue

14 If the demand curves for a monopolist’s commodity are identical in two separate markets, then, by practicing third degree price discrimination, the monopolist

cannot increase TR and total pro fits

15 In long-run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make pure profits because of

blocked entry

16 Which of the following methods is not employed in microeconomics

dissect ion

17 One of these topics is covered under the heading if microeconomics

inflation

18 Microeconomic theory studies how a free-enterprise economy determines

the price of goods
the price of service s
the price of economi c resources
***all of the above

19 The demand curve facing the monopolist

has a negative slope

20 The meaning of the word “economic” is most closely associated with the word

scarce

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### Re: 2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

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Whatsapp: 08155572788

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1 Which of the following are assumptions of the model of perfect competition

homogeneous goods
perfect knowledge
***all of the above

2 If the price in a perfectly competitive firm is N5, determine its profit function if TC = Q3- 8Q2 + 15Q+ 10

5Q- Q3+ 8Q2 -15Q- 10

3 The model of perfect competition assumes that

there is free entry and exit in markets

4 For a firm in perfect competition market, marginal revenue will

equal the market price

5 If a firm produces in the short run, it should select that output for which

marginal revenue equals marginal cost

6 In perfect competitive market

P = AR

7 If demand decreases (shift left) the shortrun market response will be a(n)

reduction in price and quantity exchanged

8 A perfectly competitive firm has its cost function as TC = Q3- 8Q2 + 15Q+ 10. Find the marginal cost of the firm

3Q2 – 16Q + 1 5

9 Which of the following is not a necessary condition for a short run competitive equilibrium

profit must be greater than zero

10 A firm should cease production in the short run if price

is less than variable cost

11 The short-run supply curve of the perfectly competitive firm is given by

the rising portion of its MC curve over and above the break-even point

12 The best, or optimum, level of output for a perfectly competitive firm is given by the point where

MR equals MC and MC is rising

13 If input prices increases as the industry output increases, this is an example of a(n)

increasing cost industry

14 Which of these is not a key implication or result from model of perfect competition

average fixed costs decline with increased quantity

15 Total profits are maximized where

the TR curve a nd the TC curve are parallel and TR exceeds TC

16 When the perfectly competitive firm and industry are both in long-run equilibrium

P = MR = SAC = LAC
P = MR = SMC = LMC
P = MR = lowest point o n the LAC curve
***all of the above

17 Microeconomics deals primarily with

comparative statics, partial equilibrium, and positive economics

18 A firm in perfectly competitive market has a cost function of the form C = 5000 – 10Q + Q2 . find the profit – maximizing quantity for
the firm if the market price P is N200. Calculate the profit as a function Q

210Q- 5000 –Q2

19 Which of the following is incorrect

Microeconomics is concerned primarily with the time path and process by which one e quilibrium position evolves into another

20 At equilibrium, the slope of the indifference curve is

equal to the slope of the budget line

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Joined: Mon Nov 06, 2017 6:59 am
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### Re: 2017_1 TMA Solutions: ECO231 - Micro Economic Theory I

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Whatsapp: 08155572788

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1 To maximize satisfaction subject to a budget constraint, the consumer should choose the
commodity basket that is located where

the highest possible indifference curve
the highest indifference curve has contact with the budget line
MRS=Px/Py
***all of the above

2 If an oligopolist incurs losses in the short run, then in the long run_.

the oligopolist will go out of business
the oligopolist will stay in business
the oligopolist will break even
***any of the above is possible

3 Which of the following is incorrect

Microeconomics is concerned primarily with the time path and process by which one equilibrium position evolves into another

4 An indifference curve is a curve which shows the different combinations of two products that_.

give a consumer equal total utilities

5 If a consumer has an income of N100, the price of bread is N10, and the value of butter is N20, the maximum quantity of bread the consumer is able to buy is_.

10

6 Which of these is not assumed property of the ordinal preference function_.

a change in income will shift the budget line

7 When total utility increases, marginal utility is_.

posit ive and declining

8 Market shares in oligopolistic industries are typically determined on the basis of_.

9 The supply curve for a pure monopolist_.

does not exis t

10 Total profits are maximized where_.

the TR curve and the TC curve are parallel and TR exceeds TC

11 When the income of a consumer is N20, the price of bread is N5, the price of butter is N2, and the quantity of bread is measure horizontally, the slope of the_. budget line is

2.5

12 Payment received by households from the sale of resources and resource services are called_.

household income

13 Microeconomic theory studies how a free-enterprise economy determines_.

the price of goods
the price of service s
the price of economi c resources
***all of the above

14 The quantity that will maximize profit for monopolist will occur where_.

marginal cost rises to equal marginal revenue

15 The concept of economic profit suggests that_.

all opportunity costs have t o be counted before profit is calculated

16 Competition among firms in an industry is said to prevail when_.

new firms are free to enter an industry and no single firm can influence price

17 Which of these is not a key implication or result from model of perfect competition_.

average fixed costs decline with increased quantity

18 Which of the following is not a necessary condition for a short run competitive equilibrium_.

profit must be greater than zero

19 Which of the following does not influence the market supply of labour

substitu te goods

20 A barrier to entry that significantly contributes to the establishment of a monopoly would be_.

economies of scale

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