A small nation of ten

A small nation of ten people idolizes the TV show American Idol. All they produce and consume are karaoke machines and CDs, in the following amounts:

a. Using a method similar to the consumer price index, compute the percentage change in the overall price level. Use 2011 as the base year, and fix the basket at 1 karaoke machine and 3 CDs.
b. Using a method similar to the GDP deflator, compute the percentage change of the overall price level. Also use 2011 as the base year.

c. Is the inflation rate in 2012 the same using the two methods? Explain why or why not.

In the long-run, profit maximizing monopolists

A. Price where MC and price are equal

B. Never make positive economic profits

C. Produce where average total costs are minimized

D. Will produce with the same size operation as a perfectly competitive firm would use in the long run

If a profit maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce at:

A. lowest point of marginal revenue curve

B. elasticity of demand equals 1

C. lowest point of marginal profit curve

D. all of the choices are correct

If a profit maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce where demand elasticity is __________________ if it will produce at all.

A. Inelastic B. Elastic C. 1 D. Information is inadequate to answer the question

If a firm could perfectly price discriminate

A. The marginal revenue curve would be the same as the demand curve

B. The marginal revenue curve would lie below the demand curve

C. The marginal revenue curve would lie above the demand curve

D. There would be no marginal revenue function

If the demand curve for a single price monopolist always is a downward sloping straight line, then marginal revenue

A. Will be a straight line with a negative slope of twice the demand curve slope

B. Will be a straight line with a negative slope of one-half the demand curve slope

C. Will be identical to the demand curve

D. Will be a horizontal line

The demand equation for a single price monopolist is P = 50 - Q. The marginal revenue equation for this monopolist is

A. 25 - Q

B. 50 - 2Q

C. 50 - Q

D. 100 - Q