2. Refer to Figure 4. A movement from CE to BD occurs when

(A) The price of capital increases while the price of labor remains unchanged.
(B)The price of labor decreases while the price of capital remains unchanged.
(C)The price of capital increases while the price of labor decreases.
(D) The price of capital decreases while the price of labor increases.

3. Refer to Figure 4. The price of labor is $50 per unit, then along the isocost AF, the total cost (A) is $500. (B) is $750. (C) is $1,250. (D) cannot be determined without the price of capital.

4. Suppose two firms in a duopoly implicitly collude and charge a high price. How might each firm benefit from advertising that it will match the lowest price offered by its competitor? (A) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact. (B) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion. (C) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same. (D) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.

5. Refer to Table 2. If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss? (A) $0 (it breaks even) (B) loss of $1,000 (C) profit of $440 (D) loss of $440

6. Refer to Table 2. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximizing output level? (A) It must fall. (B) It must rise to offset the increased cost. (C) The firm will shut down. (D) It will remain the same.

7. Refer to Figure 5. The deadweight loss due to the externality is represented by the area (A) abc. (B) abd. (C) \( abf \). (D) ade.

8. Refer to Figure 5. The size of marginal external costs can be determined by (A) \( S_{2} + S_{1} \) at each output level. (B) \( S_{2} - S_{1} \) at each output level. (C) The supply curve \( S_{2} \). (D) The supply curve \( S_{1} \).

9. Refer to Figure 6. Following the entry of Verizon, the subscription price falls from $P_M$ to $P_C$. What is the increase in consumer surplus as a result of this change? (A) The area \( \mathrm{A} + \mathrm{B} + \mathrm{C} \) (B) The area \( \mathbf{B} + \mathbf{C} \) (C) The area \( \mathrm{D} + \mathrm{F} \) (D) The area \( \mathbf{B} + \mathbf{C} + \mathbf{D} \)

10.Refer to Figure 6. What is the size of the deadweight loss prior to Verizon entering the market and wh deadweight loss after Verizon does enter the market ? (A) The deadweight loss of area D is converted to consumer surplus. (B) The deadweight loss of area C+D is converted to consumer surplus. (C) The deadweight loss of area D is converted to producer surplus. (D)The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer su

11. A monopolist union that desired to maximize its total wage bill ($w \times l$) would offer that quantity of labor for which (A) The marginal revenue from providing one more worker to the market is zero. (B) Labor's marginal productivity is zero. (C) Labor's wage falls to zero. (D) The quantity of labor hired is as great as possible given the firm's demand curve.

12. If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula. (A) 0.17 (B) 0.62 (C) 1.62 (D) 5

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