When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of:

• A) A two-part tariff.
• B) Second-degree price discrimination.
• C) Intertemporal price discrimination.
• D) First-degree price discrimination.

When government imposes per unit tax on the output level produced by a monopolist, the resulting price increase will:

• A) Always be less than the tax.
• B) Always be more than the tax.
• C) Always be less than if a similar tax were imposed on firms in a competitive market.
• D) Not always be less than the tax.

Third-degree price discrimination involves:

• A) Charging each consumer the same two part tariff.
• B) Charging lower prices the greater the quantity purchased.
• C) The use of increasing block rate pricing.
• D) Charging different prices to different groups based upon differences in elasticity of demand.

What will be the result of an increase in import tariff?

• A) Higher domestic price.
• B) Loss of consumer surplus.
• C) All of the given options.
• D) A deadweight loss.

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

• A) When there are many firms in the market and the demand curve faced by each firm is relatively elastic.
• B) When there are many firms in the market and the demand curve faced by each firm is relatively inelastic.
• C) When there are few firms in the market and the demand curve faced by each firm is relatively elastic.
• D) When there are few firms in the market and the demand curve faced by each firm is relatively inelastic.

The rule of thumb for pricing is:

• A) P=1/Ed
• B) P=1+Ed
• C) P=MC/Ed
• D) P=MC/ 1+ (1/Ed)

An electric power company uses block pricing for electricity sales. Block pricing is an example of:

• A) First-degree price discrimination.
• B) Block pricing is not a type of price discrimination.
• C) Third-degree price discrimination.
• D) Second-degree price discrimination.

Average revenue for a monopolist is:

• A) Greater than price.
• B) Less than marginal revenue.
• C) Greater than marginal revenue.
• D) Equal to marginal revenue.

The profit maximizing rule MC = MR is followed by:

• A) A perfectly competitive firm, but not a monopoly.
• B) Both a monopoly and a perfectly competitive firm.
• C) Neither a monopoly nor a perfectly competitive firm.
• D) A monopoly, but not a perfectly competitive firm.

The sum over all units produced of the difference between market price of the good and firm’s marginal cost of production is:

• A) Marginal revenue.
• B) Producer surplus.
• C) Maximum profit.
• D) Total revenue.

Assume that a firm's production process is experiencing increasing returns to scale over a broad range of outputs. Long run average costs over this range of output will tend to:

• A) Increase.
• B) Fall to a minimum and then rise.
• C) Decline.
• D) Remain constant.

Which of the following measures Economies of scale?

• A) Slope of Isocost line
• B) cost-output elasticity
• C) Producer surplus
• D) Firm's expansion path

Suppose Fauji Fertilizer Company Limited spends Rs. 10000 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) to produce 10 bags of Urea. If the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, then slope of the Isocost line will be:

• A) -200
• B) - 1/2
• C) -2
• D) -1/200

The long-run supply curve of an increasing cost industry is:

• A) Downward sloping.
• B) Upward sloping.
• C) Vertical.
• D) Horizontal.

Revenue is equal to:

• A) Price times quantity.
• B) Price times quantity minus average cost.
• C) Price times quantity minus marginal cost.
• D) Price times quantity minus total cost.

In a constant-cost industry, price always equals:

• A) LRMC and LRAC, but not necessarily minimum LRAC.
• B) LRMC and minimum LRAC.
• C) Minimum LRAC, but not LRMC.
• D) LRAC and minimum LRMC.

In the long run, which of the following is considered a variable cost?

• A) Expenditures for capital machinery and equipment.
• B) All of the given options.
• C) Expenditures for raw materials.
• D) Expenditures for wages.

In the long run under perfect competition a firm produces at a point where:

• A) Price is less than long run average cost
• B) Price is equal to long run average cost
• C) Price is greater than long run average cost
• D) Price is greater than long run marginal cost

The producer surplus for a market can be measured as:

• A) Area under the demand curve to the left of equilibrium output.
• B) Area between the equilibrium price line and the supply curve to the left of equilibrium output.
• C) Area under the supply curve to the left of equilibrium output.
• D) Vertical intercept of the supply curve.