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1 BUSINESS AND INDUSTRIAL ECONOMICS Exam simulation, April 28 th , 2016 You have 1 hour and 30 minutes to answer all the questions . PART 1 Multiple-choice questions 1. Given the following production function (where Y is the output, and L and K the two inputs): /g1851 = /g1838 + /g1837/g2870 a. Returns to scale are constant b. Returns to scale are increasing BONUS c. Returns to scale are decreasing d. We cannot state whether returns to scale are constant, increasing or decreasing MALUS 2. Under perfect competition, in the short run, the single firm supply curve corresponds to: a. The increasing part of the average variable cost curve MALUS b. The increasing part of the marginal cost curve c. The increasing part of the marginal cost curve above the average variable cost curve BONUS d. The increasing part of the marginal cost curve above the average cost curve 3. Consider a market with six firms, two having a market share of 30% and four having a market share of 10%. Two of the four firms with a 10% market share want to merge. What is the value of the concentration ratio (C K) before and after the merge? a. If K=3, C is equal to 0.7 before the merge and 0.8 after the merge. BONUS b. If K=4, C does not change before and after the merge. c. If K=5, C does not change before and after the merge. d. If K=6, C is equal to 1 before the merge and 1.1 after the merge. MALUS 4. The municipal council of Faraway city is going to decide whether or not to open competition in the local business of electricity service delivery. At this scope it has commissioned to the famous consultancy firm A&G a study aiming at investigating whether the service could be considered a local natural monopoly or not. You are enrolled in the work group that will conduct the analysis. Which move do you…