Microeconomics Answers

a) Price of the Tablet (P610 Samsung Galaxy Tab-S6 Lite Octa-Core 4GB Ram 64GB Storage 

10.1 Inch Wifi with S Pen) increases from PKR 57000 to PKR 66000. Due to this change in 

price

1. What will happen with the Quantity Demanded?

2. Draw a demand curve accordingly.

3. What will happen with the Quantity Supplied?

4. Draw a supply curve accordingly?

b) In response to the above price change if quantity demanded changes 40% and quantity 

supplied changes 20%

1. Find the elasticity of demand and explain this change.

2. Find the elasticity of supply and explain this change.

The marginal utility per rand of good A exceeds the marginal utility per rand of good B. 

Which of the following statement(s) is/are correct?

Maize is considered to be an inferior good. Assume that the original demand curve is D1 and the original supply curve is S1.

1.Explain the impact of an increase in income on the maize market .

2.Explain the impact of an increase in the price of rice(a substitute in consumption for maize) on the maize market.

3.Explain the impact of an increase in wages for farm labourers on the maize market.

 Price of the Tablet (P610 Samsung Galaxy Tab-S6 Lite Octa-Core 4GB Ram 64GB Storage 

10.1 Inch Wifi with S Pen) increases from PKR 57000 to PKR 66000. Due to this change in 

price

1. What will happen with the Quantity Demanded?

2. Draw a demand curve accordingly.

3. What will happen with the Quantity Supplied?

4. Draw a supply curve accordingly?

b) In response to the above price change if quantity demanded changes 40% and quantity 

supplied changes 20%

1. Find the elasticity of demand and explain this change.

2. Find the elasticity of supply and explain this change.

Compare the following two pairs of goods:

• Coke and Pepsi

• Skis and ski bindings

a. In which case are the two goods complements? In which case are they substitutes?

b. In which case do you expect the indifference curves to be fairly straight? In which case do you expect the indifference curves to be very bowed?

c. In which case will the consumer respond more to a change in the relative price of the two goods?

QUESTION 16

A monopolistically competitive industry will:

1. Cease to exist.
2. Charge a higher price than would a perfectly competitive industry.
3. Produce a smaller quantity than would a perfectly competitive industry.
4. Both answers A and B above.
5. Both answers B and C above.

QUESTION 17

A monopolistically competitive industry does not display:

1. Its wares.
2. Productive or allocative efficiency.
3. Productive efficiency, but it is allocatively efficient.
4. Allocative efficiency, but it is productively efficient.
5. All of the above.  

QUESTION 18

Product differentiation is based on:

1. Variety.
2. Innovation.
3. Variety and innovation.
4. Variety but not innovation.
5. Innovation but not variety.

QUESTION 13

Positive economic profits being earned by firms in a monopolistically competitive market:

1. Attract competing firms into the industry, driving the original firms’ demand up.
2. Attract competing firms into the industry, driving the original firms’ demand down.
3. Dissuade competing firms from entering the market.
4. Will have no effect on other firms’ entry into or exit from the market.
5. Will have no effect on firms producing complementary products.

QUESTION 14

The process of new entry into a monopolistically competitive market will:

1. Ensure that every want is satisfied.
2. Increase economic profits for all involved.
3. Drive down economic profits to zero in the long run.
4. Drive down economic profits to zero only in the short run.
5. Drive downtown for a burger. 

QUESTION 15

Monopolistic competition:

1. Will reach a productively efficient outcome.
2. Will not be productively efficient.
3. Is nothing like the real world.
4. All of the above.
5. None of the above.

QUESTION 11

A monopolistic competitor who earns a profit must expect:

1. Those profits to continue without change.
2. Firms to exit the market.
3. Firms with similar, but differentiated, products to enter the market.
4. Firms with identical products to enter the market.
5. Firms with complementary products to leave the market.  

QUESTION 12

The demand curve that a monopolistically competitive firm faces:

1. Will shift left due to the entry of other firms into the same general market.
2. Will shift right due to the entry of other firms into the same general market.
3. Will shift right due to the exit of other firms into the same general market.
4. Will not be affected by the entry of other firms into the same general market.
5. Will not be affected by the exit of other firms into the same general market. 

QUESTION 8

The demand curve facing a monopolistically competitive firm is:

1. Perfectly elastic.
2. Perfectly inelastic.
3. More elastic than that of a monopoly.
4. Less elastic than that of a monopoly.
5. More elastic than in perfect competition. 

QUESTION 9

If a monopolistic competitor raises its price:

1. It will lose revenue.
2. It will gain revenue.
3. The firm’s revenue will remain unchanged.
4. It will lose more customers than would a monopoly that raised its price.
5. It will lose fewer customers than would a monopoly that raised its price.

QUESTION 10

The process by which a monopolistic competitor chooses its profit-maximizing quantity and price:

1. Resembles closely how a monopoly makes these decisions.
2. Resembles closely how a perfectly competitive firm makes these decisions.
3. Resembles closely how a firm in oligopoly makes these decisions.
4. Resembles no other market structure decision-making processes.
5. All of the above.

QUESTION 4

Oligopolies are characterized by high barriers to entry with firms choosing pricing, output, and other decisions strategically based on:

1. The public’s interest.
2. Decisions of the other firms in the market.
3. The needs of the consumers.
4. The wants of the consumers.
5. Their predictions about past events. 

QUESTION 5

Intangible aspects of a differentiated product may be:

1. Services like free delivery.
2. The price of the product.
3. The quality of the product itself.
4. The quantity of the product itself.
5. The prices charged to other consumers. 

QUESTION 6

Product differentiation:

1. Can only be accomplished by producing a better quality product.
2. May occur in the minds of buyers.
3. Is a purely positive concept.
4. Cannot be normative.
5. All of the above.

QUESTION 7

The monopolistic competitor can:

1. Never earn a profit.
2. Lower its price to gain more customers.
3. Raise its price to without losing all of its customers.
4. Both answers A and B above.
5. Both answers B and C above.