1. I am sitting next to a man with whom Adele conld have had it all, but who now
ID: 2429350 • Letter: 1
Question
1. I am sitting next to a man with whom Adele conld have had it all, but who now does not return her calls even though she must've called a thousand times. These phone calls are annoying me. I am experiencing?·
a. Negative externalities because I enjoy the cellphone ring tones
b. Adele's hello from the outside
c. A connection with Adele
d. Negative externalities because I am getting annoyed by the phone going off
2. In a competitive market, the actions of any single buyer or seller will
a. have a negligible impact on the market price.
b. have little effect on market eqnilibrinm quantity bnt will affect market equilibrium price.
c. affect marginal revenue and average revenue but not price.
d. adversely affect the profitability of more than one firm in the market.
3. Which is not a fixed cost?
a. Monthly rent of $1,000 contractually specified in a one-year lease
b. an insurance premium of $50 per year, paid last month
c. An attorney's retainer of $50,000 per year
d. A worker's wage off $15 per hour
4. Short run production decisions are:
a. constrained because all inputs are variable.
b. constrained because all inputs are fixed.
c. constrained because some inputs are fixed while others are variable.
d. unconstrained.
5. One way the "lemons problem" (defective cars) in the used-car industry can be mitigated is by
a. raising the price of used cars
b. hiring auto experts to sell used cars.
c. requiring sellers to guarantee trouble-free cars.
d. allowing owners to trade in their own cars when they purchase a used car.
Explanation / Answer
a) "D"
It is negative externality because the person sitting next to is getting annoyed by the phone call.
b) "C"
It will affect the marginal revenue and average revenue but not the price. The price in the perfectly competitive market is decided by the demand and supply forces and a single person can't influence it.
c) "D"
The work wage is the fixed cost.
d) "C"
Some are fixed and some are variable in the short run.
e) "C"
requiring sellers to guarantee trouble-free cars.
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