St.

Mary’s University
College of Open and Distance Learning
Microeconomic II
(For Degree Program)
Assignment
(2012-I)
Student’s Name: Saleamlak Zerihun
ID. No. DMN143987/11
Department Management
Term: Three(3)
Center: A.A
Program: Degree

Instruction:

 This is the only assignment of this course.

 This assignment is to be completed and submitted to the office of your
center. Do not attempt the assignment until you are certain that you have
understood the units it covers and have revised your self-test exercises and
learning activities, and other necessary references.
 If you have any question about the units and activities, state the item/s
clearly on a separate sheet of paper and attach to your assignment paper.
 Due Date: This assignment must be submitted to the office of your center
ON OR BEFORE THE TUTORIAL PROGRAM. Please strictly follow the
deadline indicated
Part I: True or False Item (1 pt. each)
Write ‘True’ if the statement is correct and ‘Fals’ if it is incorrect on the space provided
True1.In monopolistically competitive cash entry and exit of firms result in a normal (zero)
profit in the long run.
True 2. Collusive oligopolistic maximize joint profits by behaving like pure monopolists
False 3.Both allocative and production efficiency ae realized in oligopolistic markets.
False 4.A zero gini coefficient indicates perfect inequality,
True 5.Limit pricing refers to the strategy of establishing a price, this prevents the entry of new
firms in to the market.

Part II: Multiple Choices

Choose the correct answer among the given alternatives and write the letter your choice on
the space provided. (1 pt. each)
B 1.A situation in which firms act together and in agreement to fix prices and divide a market is
known as______________.
A. monopoly
C. perfect
competition
B. collusion
D. collective
bargaining
A 2.The economy is in general equilibrium production with
MRTS xLK =MRTS LK
y
A.
B. MRS xyA =MRS xy
B

= MRS xyA ?MRS _xy^A = MRS Bxy

❑
C. MRT xy
D. MRS xyA = MRT Bxy
B 3. Natural barrier to entry refers to the
A. existence of government restriction that prohibits entry
B. existence of economics of scale in production & distribution that allows for
a single or few firms to operate
C. existence of many established competitive firms that as discourage from
entering
D. none of the above

St. Mary’s University 1 Microeconomic II (Degree)

C 4.The increase is total revenue resulting from the use of each additional variable input to
known as ____________.
A. marginal product C. marginal revenue product
B. marginal product D. marginal benefit
B 5. If leisure is a normal good, the income effect of a wage increase will lead to __________
consumption of leisure.
A. The decreased C. The constant
B. The increased D. none of the above
A 6.The price of an exhaustible natural resource is expected to rise at a rate to the
A. Interest rate C. land rent rate
B. Wage rate D. all of the above
B 7.Which of the following is not true about price leadership?
A. Is do type of unwritten agreement between oligopolistic firms
B. Is a practice where a price set by leading firms followed by others
C. The dominate firm in this case act like a monopolist
D. Involves coordinating price behavior without engaging t out light collusion
C 8 if an oligopolistic uses a formula to estimate cost per unit of output and mark up to applied to
the cost to determine prices, then the firm is using _____________pricing system.
A. Marginal cost C. Cost plus
B. Economic cost D. Monopoly cost
D 9.One of the following is not the assumption of an oligopolistic market structure?
A. Firm are interdependent in their interaction
B. The firms sell differentiated products
C. The firms sell homogenous products
D. There is as entry to a barrier
B 10.The slop of an isoquant measures _____________
A. The productivity of inputs
B. The marginal rate of technical substitution between inputs
C. The allocation of resources between inputs
D. None of the above

St. Mary’s University 2 Microeconomic II (Degree)

Part III: Discussion Question
Discuss the following question briefly on the space provided. (3 pts. each)
1. Briefly mention the assumptions of Walrasian Modal
Ans:#The income and testes of consumer are given and constant.
# factors of productions are perfectly mobile.
# All the units of production or service are homogeneous.
# Production technology is unchanged.
# Factory's of production are fully employed.
# There is a perfect competition in both marketers,the product market and the factor market.

2. Discuss the concept product differentiation

Ans:is by which monopolistically competitive firms can offset the long run tendency for the
economic profit to approximately zero.through product developments and advertising a firm
may structure to increase the demand for its product more than non price competition
increase its cost.
Product differentiation the consumer a greater variety of a products at any time in a point and
improved products over time.
It weather these features fully compensate for the inefficiency of monopolistic competition is
complex and unresolved question.
Or means that at any time in a point the consumer will be afforded a wide ranges of
types,styles brands and quality gradations of any given production.

3. Distinguish between overt & convert cartel

St. Mary’s University 3 Microeconomic II (Degree)

Ans:The most comprehensive form of is carted which typically formal written agreement which
respect to both price and production.but cover cartel are illegally in united and hence
collusion has been covert or secret.
Is a form of collusion consising a group of firm that get together to act cooperatively,jointly
determining,price and out put.

4. What are the features of monopolistic competition

Ans:like a perfect competition their is a large number of sellers so that the action of one
producer has significant rivals,
The products are characterized and perceived differences and by varing conditions
surrounding their sells so that economic rivalry entails both prices and non price competition.
Like monopoly and oligopoly in that each sellers faces a negatively sloped demand curve, for
a distinctive product and each seller possess some market power depending on elasticity of
demand.
Entry to the industry is relatively easy.
5. What factors lead to an increase in demand for labor?
Ans:factors that can shift the demand curve for labor includes:
⨳The firm output labor price increase.
⨳The new technology increase marginal product of labor.
⨳The prices of the substitute input decrease provided the substitution effect the output
effect.
⨳ a change in a quantity demand of the product that the labor products;a change in a
production process that uses more less labor, change in "government policy"that affect the
quantity of labor that firms wish to hive at a given wages.

St. Mary’s University 4 Microeconomic II (Degree)