1. ECO 550 Week 5 Midterm Quiz
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1
The different methods by which the sellers inform their potential buyers about the product is
called
1. Jane regularly sends funds to organizations seeking to save endangered animal species.
This is an example of:
2. Carla had received very low annual return from her investment portfolio comprising of
stocks of five companies for two years. Her decision to continue holding the same
portfolio of assets will be an example of
3. In the example of Ireland described in the text, the country’s production set shifted
outward over time because
4. Suppose Zia spends her time picking berries and apples. Her production set is described
by the equation , where is the number of berries and y
the number of apples. Which of the following statements will be true?
5. When the slope of a country’s production set declines, it implies:
6. Bankers supported the Federal Reserve Board’s Regulation Q because
7. Suppose the adoption of a new software reduces the marginal cost of publishing books.
For a given demand curve for books, this will be represented by
8. Starting from a pure exchange equilibrium, an increase in the demand for a commodity
will result in
9. Let the marginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be
2; the price of labor is given by $10. What will be the price of capital such that the isocost
and the isoquant are tangent to each other
10. Which of the following is a property of an isoquant?
11. Refer to Figure 4-1. If the firm produces 2,000 dolls per month when the market price is
$4:
Figure 4-1
The following figure shows the marginal cost curve (MC) for a firm producing fancy
dolls for children. The market price for a doll is $4 per unit.

2. 12. Refer to Figure 5-1. Which of the following points represents the long-run equilibrium
price-output combination?
In the figure given below MC denotes the marginal cost and AC denotes the average cost
of a firm under perfect competition.
Figure 5-1
13. Which of the following conditions define the short-run for any industry
14. Suppose beer producers in Munich became aware of the low price of one barrel of beer in
the domestic market relative to that in the United States. What will be the impact of this
price difference?
15. Refer to Figure 6-2. What would be the consumer surplus if this remained a perfectly
competitive market?
A group of firms in competitive market produced 20 units of a good when the market
price was $2. They incurred no marginal cost. Eventually they realized the benefits they
could get by teaming up and acting as a monopolist. The following figure shows the
demand curve and marginal revenue curve for this profit maximizing monopolist.
Figure 6-2
16. Refer to Figure 6-4. Calculate the profit earned by the monopolist when the marginal cost
of production is $15 per unit.
The following figure depicts the demand, marginal revenue (MR), and marginal cost
(MC) for a monopolist.
Figure 6-4
17. Which of the following is a possible explanation for the fall in prices after an industry is
monopolized by combining a group of competitors
18. Refer to Figure 4-2. Identify the supply curve of the firm.
Figure 4-2
The following figure shows the cost curves of a firm producing good X.
19. High barriers to entry protect the market power of existing firms and discourage the
formation of firms which
20. The principle of backward induction proves that in price-fixing oligopoly games
21. Refer to Figure 7-1. What will be the dominant firm’s profit maximizing output?
The figure given below represents the total output and price produced in an oligopoly
market characterized by a dominant firm and a fringe. SF represents the supply curve of
the fringe, D is the market demand curve, DRES represents the residual demand curve of
the dominant firm, MRRES represents the residual marginal revenue curve of the dominant
firm, and MCD

3. represents the marginal cost of the dominant firm.
Figure 7-1
22. In a mixed strategy situation, like the “heads or tails” game, the players can maximize
their income by randomly choosing head or tail each with a probability of:
23. Refer to Table 7-3. What will be the Nash equilibrium if there is no interaction between
the two students?
The following matrix represents the payoffs to two students who have been caught
cheating in a class.
24. Which of the following games will have a solution in mixed strategies