Question

1. Ture of False. Write "For "T" in the following table. (20 points totally, and 2 for cach) (1) Perfect competition occurs in a market where there are a few firms producing identical goods. (2) For a monopoly, the industry demand curve is the firm's marginal revenue curve. (3) Sam's production possibility frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he can increase production of both goods with no increase in resources (4) The costs of a firm that are paid directly in money are called its explicit costs. (5) A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues. (6) Monopolistically competitive firms maximize their profits by charging a price that equals to marginal cost. (7) Taxes on labor tend to increase the number of hours that people choose to work. (8) "The government should not restrict employers from outsourcing work to foreign countries" is a normative statement. (9) In the prisoners' dilemma game, one prisoner is always better off confessing, no matter what the other prisoner does. (10) Price elasticity of demand along a linear, downward-sloping demand curve increases as price rises.

Answer 1

Answer to Q#1 - First question in the list: FALSE Reason: In a consumer market, perfect competition is said to exist if: --> there are many buyers and many sellers of identical goods or services; --> there is an easy way for firms to enter in to and exit from the market; --> sellers' capacity is price takers due to heavy competition. It is clear from the above explanation that there must be many buyers and many sellers in a perfect competition but it is given in the satatement that there are few firms producing idential goods (= sellers) and so it is false.