Final Assignment

Eco 101
Spring 2020

Score: 60 points Deadline: June 4, 2020

Syed Mortuza Asif Ehsan

Name: ................................................. ID: ................................................

 Submit you work through google classroom (instruction attached).

 You must provide graph along with the explanation, if the question asks for it.

Question 1.

(a) Consider the mobile banking industry of Bangladesh. Which type of market structure can explain the
market mechanism in this industry? Provide three reasons in support of your answer. (5)

(b) Under what circumstance the mobile-banking industry of Bangladesh might behave like a monopoly
market? Explain why. (5)

Question 2.

(a) Explain three types of price discrimination and provide one example of each type of price
discrimination. (6)

(b) In which case a profit-maximizing monopolist will be resource-allocative efficient? Explain your
answer. (4)

Question 3.

A garment factory was initially at a Long-run equilibrium. How the long-run equilibrium of this firm will
be adjusted due to the COVID-19 pandemic? Explain with the adequate graph. (5)

Question 4.

Consider the market for facemask. In the backdrop of COVID-19 pandemic, if the government imposes
a sales tax on facemask, how the tax burden will be distributed between the consumer and the seller of
face-masks? Explain with an adequate graph. (10)

Question 5.
(a) Explain the concept of consumer equilibrium in terms of the Equi-marginal principle. Provide
appropriate graph for explaining you answer (5)
(b) Suppose you have a budget of 1000 taka. The price of one unit of X is 20 taka, and the price of one
unit of Y is 10 taka. If X provides you utility and Y gives you disutility, what is the equilibrium amount
of X and Y for the consumer? Explain your answer using appropriate graph. (10)

Question 6. (10)

This question will be considered as a Quiz-assignment.

Choose the correct answer from the options provided:

1. Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC
at 233 units of output. At 233 units, ATC is $11, and AVC is $9. The best policy for this firm is to
__________ in the short run. Also, total fixed cost equals __________ for this firm.

a. continue to produce; $2
b. shut down; $450
c. continue to produce; $466
d. shut down; $2,097
e. continue to produce; $2,097

2. In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by
other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the
short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the
resource it employs and the firm will then earn __________.

a. normal profit; ATC; positive economic profit

b. positive economic profit; ATC; normal profit
c. positive economic profit; marginal revenue; zero profit
d. losses; ATC; positive economic profit
e. none of the above

3. Suppose the demand curve for a monopolistic competitor becomes steeper, but its average total costs
do not change. Which of the following is likely to be an effect?

a. The firm will no longer equate MR and MC.

b. Excess capacity will increase.
c. The firm will incur a loss.
d. The firm will no longer be able to maximize profit.

4. In what industry structure is the mutual interdependence of the firms a key characteristic?

a. perfect competition
b. monopolistic competition
c. oligopoly
d. monopoly

5. When price = $15, quantity demanded = 200. When price = $14, quantity demanded = 250. When the
firm lowered price from $15 to $14, it discovered that demand is __________ and total revenue
__________.

a. elastic; increased
b. elastic; decreased
c. inelastic; increased
d. inelastic; decreased
e. none of the above

6. Which of the following is true?

a. It is possible for total utility to rise as marginal utility falls.

b. Marginal utility is the same as total utility.
c. As marginal utility falls, total utility always falls.
d. a and c

7. Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer
equilibrium. Then the price of Coke decreases. The consumer will likely __________ her consumption of
Coke and the marginal utility of Coke will __________ while the total utility from Coke will
__________.

a. increase; increase; increase

b. increase; decrease; decrease
c. increase; decrease; increase
d. decrease; increase; increase
e. decrease; decrease; decrease

8. The average-marginal rule states that if the marginal magnitude is

a. less than the average magnitude, the average magnitude falls.

b. greater than the average magnitude, the average magnitude falls.
c. rising, the average magnitude is necessarily above it.
d. falling, the average magnitude is necessarily below it.
e. c and d

9. A fixed input, X, and a variable input, Y, are used to produce good A. If the marginal physical product
(MPP) of Y is constant, it follows that the

a. marginal cost curve is upward sloping.

b. total fixed cost curve is vertical.
c. total variable cost curve is downward sloping.
d. b and c
e. none of the above
10. If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its
marginal revenue curve will cut its marginal cost curve at a __________ level of output than where its
demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of
output consistent with where its demand curve cut its marginal cost curve, the firm would be
__________.

a. lower; earning profits

b. lower; resource-allocative efficient
c. higher; productive efficient
d. lower; minimizing costs
e. none of the above