汕头大学 2008至 2009学年第一学期《微观经济学》试卷
学院年级姓名学号分数评卷
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Part I. Multiple choice (1 points per each, 20 points in total)
1. The demand curve for color TV sets might shift to the left because ( C ).
A. The price of color TV sets increases
B. The price of black-and-white TV sets increases
C. Consumers expect that the price of color TV sets will fall
D. Consumers’ income increases
2. Among the following cost curves, ( B ) is NOT U-shaped.
A. Average Variable Cost B. Average Fixed Cost
C. Average Total Cost D. Marginal Cost
3. In terms of market structure, ( D ) is close to perfectly competitive market.
A. Automobile B. Cigarette
C. Newspaper D. Agricultural produce
4. At the optimal output level of monopolists, ( A ).
A.MR=MC B.P=MC
C. Price = the minimum of AVC D. Price is the highest
5. If you exhibit the endowment effect as a decision maker, then you are ( C )
A. deciding on the basis of sunk costs.
B. buying something you can't really afford because you expect to save in the future.
C. ignoring opportunity costs.
D. consuming based on celebrity endorsements.
6. One limitation of the Coase Theorem is that ( D ).
A. it is valid only when there are many producers
B. it is valid only when there are many consumers
C. it is valid only when property system is well established
D. it is not valid when transaction costs are high
7. Which of the following is correct about a simple circular flow model? ( C )
A. Producers are neither buyers nor sellers in the product market.
B. Households are sellers in the product market.
C. Producers are buyers in the factors market.
D. None of these are correct.
8. A firm will shut down in the short run if the price is below ( A ).
A. Average variable cost B. Average total cost
C. Average fixed cost D. Marginal cost
9. In terms of dividing the tax burden, consumers (not producers) will pay the tax if ( C ).
A. price elasticity of supply and price elasticity of demand are both very large
B. price elasticity of supply is close to zero
C. price elasticity of demand is close to zero
D. price elasticity of supply and price elasticity of demand are similar
10. The ultimate purpose of patents and copyrights is to ( D )
A. provide owners with large profit forever.
B. protect firms from being taken advantage of by competing firms.
C. protect domestic firms from foreign competition.
D. encourage the expenditure of funds on research and development to create new products.
11. The substitution effect results in ( D )
A. sellers substituting less expensive inputs in production.
B. buyers buying more of a good because their purchasing power has increased.
C. sellers producing products when input prices fall.
D. buyers buying more of a relatively cheaper good.
12. A cartel whose members adhere to the agreement is typicall
y able to ( B )
A. break even.
B. earn large profits
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C. entirely avoid competitive forces.
D. produce a large amount of output.
13. Businesses feel that slowly rising general prices are good for business because ( A )
A. demand is kept strong because buyers expect prices to be higher in the future.
B. the price of substitute goods must be rising faster.
C. prices are rising slowly means buyers incomes must also be rising, so demand will increase.
D. tastes are moving in a positive direction for goods whose prices are rising.
14. Producers lobby the government to convince law makers to impose a price floor, so that they might
( B )
A. charge consumers more than consumers are willing to pay.
B. receive a larger producers surplus.
C. receive a larger consumers surplus.
D. hire workers for less than they would otherwise have to pay.
15. The minimum wage is an example of ( C )
A. a competitive equilibrium price.
B. a price ceiling.
C. a price floor.
D. a tax on a market.
16. The production possibilities frontier shows ( B )
A. the various products that can be produced now and in the future.
B. attainable combinations of two products that may be produced in a particular time period with available
resources.
C. what an equitable distribution of products among citizens would be.
D. what people want to have produced in a particular time period.
17. If 20 units are sold at a price of $50 and 30 units are sold at a price of $40, then the elasticity of demand
calculated using the midpoint formula is ( B )
A. minus 0.56.
B. minus 1.8.
C. minus 1.
D. 1.
18. Among those who benefit from free trade are ( A )
A. the people of a country as a whole.
B. each firm in the country.
C. each person in the country.
D. all of the above.
19. Consumers pay 100% of a new sales tax on a good ( D )
A) always.
B) when demand is horizontal.
C) never as the tax is on the seller.
D) when the demand curve is vertical.
20. A primary difference between a sole proprietorship and a partnership is ( C )
A. sole proprietorships have unlimited liability while partnerships have limited liability.
B. partnerships can issue stocks and bonds while sole proprietorships cannot.
C. partnerships have more owners than do sole proprietorships.
D. sole proprietorships have more layers of management than partnerships.
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Part II. Term explanation (2 points per each, 20 points in total)
1. Public Goods
A good that is both nonrivalrous and nonexcudable.
2. Oligopoly
A market structure in which a small number of interdependent firms compete.
3. Economies of Scale
Economies of scale exists when a firm’s long-run average costs fall as it increases output.
4. Externalities
A benefit or cost that affects someone who is not directly involved in the production or consumption of a
good or service.
5. Nash Equilibrium
A situation
where each firm chooses the best strategy, given the strategies chosen by other firms.
6. Natural Monopoly
A situation in which economics of scale are so large that one firm can supply the entire market at a lower
average total cost than two or more firms.
7. Indifference curve
A curve that shows the combination of consumption bundles that give the consumer the same utility.
8. Deadweight loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
9. Consumer Surplus
The difference between the highest price a consumer is willing to pay and the price the consumer actually
pays.
10. Comparative advantage
The ability of an individual, firm, and country to produce a good or service at a lower opportunity cost than
other producers.
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Part III. Answer Problems (5 points per each, in total 40 points)
1. What makes a firm successful in a competitive market?
The factors under a firm’s control—the ability to differentiate its product and the ability to produce it at lower
cost (referring to the value created relative to competing firms)—combine with the factors beyond its control
such as factors affecting the firm’s market and chance events to determine the firm’s profitability.
2. Define rivalry and excludability and use these terms to discuss the four categories of goods.
Rivalry occurs when one person’s consuming a unit of a good means that no one else can consume it.
Excludability occurs when anyone who doesn’t pay for a good cannot consume it. Rival-excludable goods
are called private goods, which comprise most of the goods we consume. Rival-nonexcludable goods are
called common resources – such as fish in the sea. Nonrival-nonexcludable goods are called public goods.
Nonrival-excludable goods are often called natural monopolies.
3. Is zero economic profit inevitable in the long run?
No. The key to earning economic profit is either to sell a differentiate product or to find a way of producing an
existing product at a lower cost.
4. Why do economists refer to the pricing strategies of oligopoly firms as prisoners’ dilemma game?
A prisoners’ dilemma is a game in which pursuing dominant strategies results in noncooperation that leaves
everyone worse off. The outcome of noncooperative pricing (competition) will leave firms worse off than if
they cooperated and set higher prices.
5. Suppose that a perfectly competitive industry becomes a monopoly. Describe the effects of this change on
consumer surplus, producer surplus, and market efficiency.
If a perfectly competitive industry is monopolized, the price will rise and the quantity produced will fall.
Consumer surplus will fall, producer surplus will rise and a deadweight loss will arise.
6. What are the main sources of comparative advantage?
The main sources of comparative advantage include climate and natura
l resources, the relative abundance of
various types of labor and capital, technology and know-how, and external economies – reductions in a firm’s
costs t
hat result from an expansion in the size of the industry.
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Part IV. Case Study (10 points per each, in total 20 points)
1. A music show is set to take place in a big stadium in Shanghai. The stadium can host 10,000 people. The
organizer had carefully calculated the cost. A few pop music stars will show up. With the celebrity
endorsements, at least 6000 tickets will be sold out. The revenue from 4800 tickets is sufficient to cover the
cost and to break even. So the show is certainly to have profit.
What is the marginal revenue? What is the marginal cost? What is the optimal level of audience?
Answer: Marginal revenue is the income from an extra ticket sold. Marginal cost is zero, provided that the
stadium is not full yet. The optimal level of audience is 10,000, the maximum capacity of the stadium.
2. Price floor in labor markets. The minimum wage.
The US congress has set a national minimum wage of 5.15 per hour for most occupations. It is illegal for an
employer to pay less than this wage in those occupations. For most workers, the minimum wage is irrelevant
because it is well below the wage that employers are voluntarily willing to pay them. But for low-skilled
workers (such as workers in fast-food restaurants), the minimum wage is above the wage they would otherwise
receive. What is the effect of the minimum wage on employment on the market for low-skilled labor?
Answer: Because the minimum wage is higher than the equilibrium wage, the quantity of low-skilled
workers demanded employers declines while the quantity of workers supplied increases, leading to surplus of
workers unable to find jobs; that is, the unemployment increases. This makes a reduction in consumer surplus.
3. When to close a laundry?
A person quit his job at Microsoft and bought a laundry shop by paying the previous owner $80,000. The
lease had six years remaining and required a monthly payment of $3,300. Unfortunately, the person had
difficulty operating the laundry at a profit. His explicit costs were $4,000 more than his revenue.
He tried to sell the laundry but was unable to do so. He considered closing the laundry, but as a sole
proprietor he would be responsible for the remainder of the lease. At $3,300 per month for six years, he would
be responsible for paying almost $200,000 out of his personal savings. Closing the laundry would still seem to
be the better choice, because his $3,300 per month in sunk costs were less than $4,000 per month plus the
opportunity cost of his time, which he was losing from operating the laundry.
In the end he reorganized his business and hired a professional manager. This change allowed him to return
to Microsoft and still reduce his losses to $2,000 per m
onth. Because this amount is less than the $3,300 per
month he would lose by shutting down, it made sense for him to continue to operate the laundry.
What have we learned from this case?
Answer: If a firm is
experiencing a loss, it will shut down if Total Revenue <Variable Cost; that is, P<AVC.
In this case, Total Revenue =-2000>Variable Cost=-3300, which can make up part of fixed cost. This means
that keeping the laundry open even when suffering losses can sometimes be the best decision in the short run.
4. Gemstones (宝石) include diamond (钻石), sapphire (蓝宝石), emerald (祖母绿), amethyst (紫水晶) and
other precious stones. All these precious stones share many similarities. The DeBeers Company of South
Africa controls 80% of world diamond production and consequently has great market power. Nevertheless, the
company advertises a lot. A young copywriter, Frances Gerety made the famous advertising line "A Diamond
is Forever" in 1947. In the year 2000, Advertising Age magazine named "A Diamond Is Forever" the best
advertising slogan of the twentieth century. In the advertisements, the DeBeers Company tries to emphasize
and exaggerate diamond’s unique characteristics such as beauty and hardness, even though other precious
stones (such as sapphire, emerald, and amethyst) also have these characteristics to some extent.
The DeBeers Company has dominant position to manipulate the international diamond market. Why does it
still pay so much money for advertisement?
Answer: The market power of DeBeers depends on whether diamond has substitutes. If people believe that
sapphire, emerald, and amethyst are good substitutes of diamond, the DeBeers loses its market power. If
DeBeers increases the price of diamond, consumers would turn to other precious stones. But, if people believe
that diamond are different from other precious stones, then DeBeers can have a greater control over the market.
DeBeers advertises so that consumers would distinguish diamond from other precious stones and consequently
DeBeers would have greater market power.