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Problem Set 6

The document contains problem set questions for an economics course, focusing on concepts such as consumer behavior, market structures, and game theory. It includes multiple-choice questions related to economic models, competitive markets, and profit maximization strategies. Additionally, it features an open-ended question discussing the telecommunications market in Singapore and its movement towards perfect competition.

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17 views

Problem Set 6

The document contains problem set questions for an economics course, focusing on concepts such as consumer behavior, market structures, and game theory. It includes multiple-choice questions related to economic models, competitive markets, and profit maximization strategies. Additionally, it features an open-ended question discussing the telecommunications market in Singapore and its movement towards perfect competition.

Uploaded by

winoladengly
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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NTU SSS Economics HE1001

Problem Set 6

Questions from Mi9

1. Which of the following behaviours is inconsistent with standard economic models?


A) John shops at Benjamin Barker. He chooses to purchase only 1 item when the promotion
is "Buy 2 and get 25% off" but he switches to purchase 2 items when the promotion is
revised to "Buy 1 and get 1 50% off."
B) As stated in the lyrics of the recent popular Caifan song, Annette and Ben cannot decide
what food to order at a caifan stall. (Note: caifan is mixed vegetable rice)
C) When playing the ultimatum game, the proposer offers 10% of the endowment to the
recipient. The recipient decides to reject the offer because he finds it unfair.
D) All of the behaviours described above are inconsistent with standard economic models.

2. During the lecture, we played a game called "Choosing a Marriage Partner." The purpose
of the game is to test whether people's choices align with which assumption in standard
economic theory?
A) Completeness
B) Non-satiation (more is better than less)
C) Transitivity
D) Self-interest

3. In the ultimatum game, proposers on average offer _____ of the endowment to the
responders.
A) 10% - 25%
B) 26% - 36%
C) 40% - 50%
D) 51% - 60%

4. In the dictator game, proposers on average offer _____ of the endowment to the
recipients.
A) 0%
B) 10%
C) 20%
D) 30%
E) 40%

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Questions from Mi10

1. Which of following is a key assumption of a perfectly competitive market?


A) Firms can influence market price.
B) Commodities have few sellers.
C) It is difficult for new sellers to enter the market.
D) Each seller has a very small share of the market.

2. Firms often use patent rights as a:


A) barrier to exit.
B) barrier to entry.
C) way to achieve perfect competition.
D) none of the above

3. Marginal revenue, graphically, is:


A) the slope of a line from the origin to a point on the total revenue curve.
B) the slope of a line from the origin to the end of the total revenue curve.
C) the slope of the total revenue curve at a given point.
D) the vertical intercept of a line tangent to the total revenue curve at a given point.
E) the horizontal intercept of a line tangent to the total revenue curve at a given point.

4. A firm maximizes profit by operating at the level of output where:


A) average revenue equals average cost.
B) average revenue equals average variable cost.
C) total costs are minimized.
D) marginal revenue equals marginal cost.
E) marginal revenue exceeds marginal cost by the greatest amount.

5. At the profit-maximizing level of output, what is relationship between the total revenue
(TR) and total cost (TC) curves?
A) They must intersect, with TC cutting TR from below.
B) They must intersect, with TC cutting TR from above.
C) They must be tangent to each other.
D) They cannot be tangent to each other.
E) They must have the same slope.

6. Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only
item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to
$3.95 per meal; the costs of the lease, insurance and other such expenses average out to
$1.25 per meal. Bette should:
A) close her doors immediately.
B) continue producing in the short and long run.
C) continue producing in the short run, but plan to go out of business in the long run.
D) raise her prices above the perfectly competitive level.
E) lower her output.

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7. Suppose you are the manager of a firm operating in a competitive market. Your cost of
production is given by C = 200 +2 * q2 , where q is the level of output and C is total cost. The
fixed cost of production is $200.
a. If the price of the product is $100, how many units of product should you produce to
maximize profit?
b. What will the profit level be?
c. **At what minimum price will the firm produce a positive output?

8. [Open-ended question] Discuss whether the telecommunications services in Singapore have


been getting closer to a perfectly competitive market in the past few years.
Lower barriers to entry, more sellers, make firms more competitive
Lower transaction costs when switching providers, users can easily port their existing
number to a new provider with no cost
As a result, the telecommunication services in Singapore have moved closer to a perfectly
competitive market structure.

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