(Get Answer) – Economics quiz 3 | Economics homework help QUIZ 3 Please put your answers to multiple choice questions in the proper cell of the Excel file under the link Quiz 3 MC Answer Sheetand provide your answers to short-answer questions/prob of transaction costs lems in a separate Word file. MULTIPLE CHOICE QUESTIONS (2 pts. EACH) 1. Characteristics of a perfectly competitive market includeA. The absence of transaction costs B. Differentiated products C. Few sellers, some with a large market shareD. All of the above 2. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined asat prices below $4 and zero for prices above $4. Zach’s demand for milk isdefined as at prices below $5 and zero for prices above $5. If the market pricefor milk is $4.50, market demand isA. Zero B. 1.5C. 1 D. 10 3. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function isat prices above $0.50 and zero at prices below $0.50. Mega Cow’s supplyfunction is at prices above $0.33 and zero at prices below $0.33. At a price of$0.45 A. Milky Moo is the only supplier of milkB. Mega Cow is the only supplier of milk C. Both Milky Moo and Mega Cow supply milk D. Neither Milky Moo nor Mega Cow supply milk 4. With free entryA. The long run market supply curve is horizontal at the market priceB. The long run market supply curve is vertical at the market price C. The short and long run market supply curves are the same D. A and D5. The market demand for milk is . Additionally, suppose that a dairy’s variablecosts are (where Q is the number of gallons of milk produced each day), its marginalcost is and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms’ profit per unit in the short run equilibrium? A. $4B. $20 C. $24D. $10 6. A monopoly market isA. A market with many sellersB. A market with a single seller C. A market with a few sellers D. B and C7. Suppose Kate’s Great Crete (KGC) has annual variable costs of andmarginal costs of , where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC’s demandfunction is . What is the profit maximizing sales quantity?A. 20 B. 2,000 C. 8,000 D. 0 8. A firm’s markup over its marginal cost is greaterA. The more elastic is the demand curveB. The less elastic is the demand curveC. The lower its fixed costs D. The lower its average costs 9. The Solo Coal Mine is the only employer in the small town of Way out there. The marketsupply of coal miners is and , where W is the annual wage of a coal miner and Q is the number of coal miners. What is the profit maximizing number of coal miners for the coal mine to hire? A. 100B. 150 C. 50D. 233.3410. A market is a natural monopoly whenA. A good is produced most economically by several firms B. A good is produced most economically by one firm C. The government grants a firm a patent on a goodD. The firm’s average cost function is everywhere upward sloping 11. Price discrimination is based on observable customer characteristicsA. When a firm can distinguish consumers with a high versus low willingness to pay B. When a firm offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay C. A monopolist knows perfectly the customer’s willingness to pay for each unit its sells and can charge a different price for each unit D. B and C 12. A movie monopolist sells to students and adults. The demand function for students isand the demand function for adults is . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist’s profit from students? A. $400B. $2400 C. $2500 D. $0 13. Mixed bundlingA. Is the practice of selling several products together as a packageB. Is the practice of selling the same good to different types of consumers at different pricesC. Is the practice of selling several products together as a package while also offering those products for sale individually D. Is the practice of selling goods in bulk at a reduced per unit price 14. With a two-part tariffA. Consumers simply pay a fixed fee if they buy anything at all B. Consumers pay a fixed fee if they buy anything at all, plus a separate per-unit price for each unit they buy C. Consumers pay a fixed fee if they buy anything at all, plus an annual fee for the right to purchase anything D. Consumers simply pay a fee for the right to buy anything 15. At the Nash equilibrium of an oligopoly market A. Only one firm is able to earn profitsB. Each firm is making a profit-maximizing choice, regardless of the choices of its rivals C. Each firm is making a profit-maximizing choice given the choices of its rivals D. Each firm produces the same quantity16. A residual demand curveA. Shows the relationship between the market price and the quantity demanded by consumers at each price B. Shows the relationship between a firm’s output and the market price given the prices charged by the firm’s rivals C. Shows the relationship between a firm’s output and the market price given the outputs of the firm’s rivals D. Shows the remaining demand for a good after a firm’s rivals have sold their output 17. Kate and Alice are small-town ready-mix concrete duopolists. The market demand function iswhere P is the price of a cubic yard of concrete and Qd is the number ofcubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. What is Alice’s inverse residual demand function?A. , Where the term in parentheses is constantB. , Where the term in parentheses is constantC. , Where the term in parentheses is constantD. , Where the term in parentheses is constant 18. Kate and Alice are small-town ready-mix concrete duopolists. The market demand functionIs where P is the price of a cubic yard of concrete and Qd is the number ofcubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot modeldescribes the competition in this market. How much does Alice produce in the Nashequilibrium? A. 2,000 B. 1,333.33 C. 800 D. 4,000 19. Suppose the daily demand for Coke and Pepsi in a small city are given by And where QC and QP arethe number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are theprices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can. If PC = $0.60, what is Pepsi’s demand function?A.B.C.D. 20. Firms engage in tacit collusion whenA. They predict what the other will do and attempt to undercut them B. They collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction C. They communicate to reach an agreement about the prices they will charge D. They communicate what type of good they will produceSHORT ANSWER QUESTIONS / PROBLEMS (10 points) Suppose the wiz-pop market is in long-run equilibrium. Suddenly, fixed costs decrease, although variable costs remain unchanged. Discuss the short-run and long-run changes in market equilibrium. (10 points) After Apple introduced its new iPhone, the price of standard cell phones rose. A consumer advocacy group that has long claimed that standard cell phone producers are colluding like a monopolist asserts that this is further evidence of that fact. You’ve noticed that the elasticity of demand for standard cell phones increased after Apple’s entry. Does this shed any light on the group’s claim? (20 pts.) Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service isand 300 low-demand consumers, each of whose monthly demand curve for minutes of wireless is, where P is the per-minute price in dollars. Its marginal cost is $0.25 per minute. Suppose Always There Wireless charges $0.25 per minute. How many minutes will high-demand consumers purchase?How many minutes will low-demand consumers purchase?How much can Always There Wireless charge as a fixed fee without losing the low-demand consumers?What are the profits from sales to each of the low-demand consumers? 4. (20 pts.) a. Define the Bertrand model and its assumptions. Explain why the model predicts the perfectly competitive outcome despite the number of sellers. Discuss the limitations of the model. b. Compare and contrast the Bertrand and Cournot models of oligopoly. Your discussion should include assumptions made, goals of the firms and the resulting outcomes.