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Richards Econ112: Principles of Microeconomics Final Exam Sample Questions 1. To profit maximize, the firm will choose to produce __________ units and charge a price of __________. A) 400; $4 B) 400; $12 C) 500; $6 D) 500; $10 E) 800; $6 Page 1 2. A) B) C) D) E) At the point of profit maximization, the monopolist earns a profit of $800 a loss of $800 a profit of $1600 a loss of $1600 a profit of $3000 3. A) B) C) D) E) When a monopolist sells additional units, total revenues always rise. marginal revenues are constant. total revenues always fall. marginal revenues rise. total revenues may rise, fall, or remain unchanged. The market for bagels in San Marcos, TX contains two firms: BagelWorld (BW) and Bagels'R'Us (BRU). For simplicity, assume the cost of bagel production is zero so that total revenues and profits are identical. The owners of the two firms decide to fix the price of bagels. The table shows the total revenues the firms will collect if the abide by the price setting agreement or if they cheat on the agreement. Bagels'R'Us Cheat Abide Bagel World Cheat Abide $40 for BW $0 for BW $40 for BRU $80 for BRU $80 for BW $45 for BW $0 for BRU $45 for BRU 4. A) B) C) D) E) Based on the payoff matrix, Bagels 'R' Us finds that __________ is its __________. abiding by the agreement; dominated strategy cheating on the agreement; dominated strategy abiding by the agreement; dominant strategy either cheating or abiding; dominant strategy neither cheating or abiding; dominant strategy 5. A) B) C) D) E) Based on the payoff matrix, Bagel World finds that __________ is its __________. abiding by the agreement; dominant strategy cheating on the agreement; dominated strategy either cheating or abiding; dominant strategy cheating on the agreement; dominant strategy either cheating or abiding; dominated strategy Page 2 6. A) B) C) D) E) An oligopolist is a firm which finds it is the only supplier the only supplier of a good with no close substitutes. one of many suppliers of a good with perfect substitutes. one of a few firms. one of a few firms that produces a good with close substitutes. P 40 35 Price 30 25 20 15 10 5 1 2 3 5 4 6 Quantity 7 8 Q 7. A) B) C) D) E) If the monopolist decreases price from $30 to $25, its total revenue will ______ increase by $5 decrease by $5 increase by $15 decrease by $15 insufficient information 8. A) B) C) D) E) What is the marginal revenue of selling the 4th unit? $0 $5 $10 $20 $25 Page 3 24000 22000 20000 Domestic supply Price of cars ($) 18000 16000 14000 12000 10000 8000 World Price 6000 4000 2000 Domestic demand 10 20 30 40 50 60 70 80 90 100 Quantity of cars (thousands) 9. A) B) C) D) E) If this is an open economy, quantity demanded of cars (in thousands) will be 20 40 60 80 100 10. A) B) C) D) E) How many cars (in thousands) will this country import in an open economy situation 20 40 60 80 100 Page 4 Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. B A E A D E C B C B Page 5