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題 目 卷
I. Production and Cost
1. The short run is the time frame
A. during which the quantities of all resources are fixed.
B. that is less than a year.
C. during which the quantities of some resources are fixed.
D. during which the quantities of all resources are variable
2. Increasing marginal returns always occurs when the
A. marginal product of an additional worker exceeds the marginal product of the previous worker.
B. average product of an additional worker exceeds the average product of the previous worker.
C. marginal product of an additional worker is less than the marginal product of the previous worker.
D. average product of an additional worker is less than the average product of the previous worker.
3. Which of the following is correct about marginal and average products?
A. When the marginal product is increasing, the average product must be increasing.
B. When the marginal product exceeds the average product, the average product must be increasing.
C. When the average product is increasing, the marginal product must be decreasing.
D. When the marginal product is decreasing, the average product must be decreasing.
4. When
A.
B.
C.
D.
the average product is at its maximum,
the marginal product is increasing as output increases.
he marginal product is negative.
it is equal to the marginal product.
total product is also at its maximum.
5. The average fixed cost curve
A.
is horizontal.
C.
has an upside-down U shape.
B. is U-shaped.
D. is always negatively sloped.
6. The total product is 10 units. The average total cost is $30 and the average fixed cost is $10. What is the amount of the total variable cost?
A. $20
B. $200
C. $300
D. $10
7. If average variable costs increase as output increases, then
A.
marginal cost must be greater than average variable cost.
C.
total cost must be constant.
B.
D.
total fixed cost must be increasing also.
output must be zero.
8. Which of the following statements is true?
A. In the long run, the average cost curve is always downward sloping.
B. In the long run, the quantities of all inputs are fixed.
C. In the long run, the firms' fixed costs are greater than its variable costs.
D. In the long run, all costs are variable costs.
9. As output increases, economies of scale occur when the
A. long-run average cost increases.
C. short-run average total cost decreases.
B.
D.
long-run average cost decreases.
long-run average cost stays constant.
10. The statement, "price distributes goods and services to those that value them the most" refers to the ______ function of price.
A. rationing
B. multiplicative
C. store of value
D. allocative
11. For entry into a particular perfectly competitive industry to occur, which of the following must be true?
A.
Accounting profits are equal to zero
B. Accounting profits equal economic profits
C.
Economic profits are greater than zero
D. Economic profits are equal to zero
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( A )
12. The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions.
Assume that the market is currently as shown in the graph on the left (i.e., price of $8). What is true of the number of firms?
A. There are currently 30 firms in the industry, and that number will remain stable until there is a change in demand or in technology.
B. There are currently ten firms in this industry, and that number will remain stable until there is a change in demand or in technology.
C. It is impossible to tell how many firms currently exist in this industry, but you can tell that the number of firms is likely to increase in the
near future.
D. There are currently ten firms in this industry, and that number is likely to increase in the near future.
13. Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product?
The market demand function will shift to the right, causing the market:
A. price to increase, and a new stable equilibrium to be established at a higher price and higher quantity.
B. price to increase, and all firms in the industry will earn higher profits for the foreseeable future.
C. price to increase. Increased profits will encourage new firms to enter, shifting the market supply function to the right. Long-run market
equilibrium will be at a higher quantity than before the surge in popularity.
D. price and quantity supplied to increase. Increased profits will encourage new firms to enter shifting the market supply function upward.
Long-run market equilibrium will be at a lower quantity and higher price than before the surge in popularity.
14. Refer to the figure on the right. Suppose S2 is the industry supply
curve and all firms are producing at the profit maximizing quantity.
What will happen to the supply curve in the long run?
A. Quantity supplied will increase but stay on the S2 curve.
B. Supply will shift to S1
C. Supply will shift to S.
D. Quantity supplied will decrease but stay on S2 curve.
15. Economic rent is:
A. the amount you pay for an apartment in a free market.
B. the payment made to suppliers of an input.
C. the difference between the payment made to the supplier of an input and the supplier's reservation price.
D. the same as the input supplier's reservation price.
16. The main source of economies of scale is
A. better management.
B. constant returns to plant size.
C. specialization.
D. increases in the labor force not matched by increases in the plant size.
17. The marginal product of labor is
A. total product divided by labor.
B. the change in total product divided by the increase in labor.
C. total product minus the quantity of labor.
D. output that does not meet quality specifications.
II. Market
18. Price-setters face:
A. perfectly elastic demand.
C. perfectly inelastic demand.
B.
D.
2
more than perfectly elastic demand.
less than perfectly elastic demand.
19. In exchange for a share in the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and
in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell
its products on campus or at university events.
Refer to the information above. Prior to the deal, a 12-ounce can of CheapFizz sold for 75 cents. After the deal you would expect a 12-ounce can of
CheapFizz to sell for:
A. 75 cents because that is the market price.
B. less than 75 cents because CheapFizz will have greater volume and so can sell for a lower price.
C. more than 75 cents because demand for CheapFizz will shift to the left.
D. more than 75 cents because other firms must exit the market.
20. The term "natural monopoly" refers to:
A. government ownership of parks.
C. the desire of all firms to be monopolists.
B.
D.
industries with constant returns to scale.
industries with economies of scale.
21. Consider an industry with two firms producing similar products.
Mega Corp's total costs are TC = $5,000 + 100 × Quantity.
Big Inc's total costs are TC = $4,000 + 200 × Quantity.
Refer to the information given above. When each firm produces 8 units _____ has lower costs, and when each firm produces 12 units _____ has lower costs.
A. Big Inc; Mega Corp
B. Mega Corp; Big Inc
C. Big Inc; Big Inc
D. Mega Corp; Mega Corp
22. Consider an industry with two firms producing similar products.
Mega Corp's total costs are TC = $5,000 + 100 × Quantity.
Big Inc's total costs are TC = $4,000 + 200 × Quantity.
Refer to the information given above. Average total costs for these firms:
A. declines as quantity increases.
B. increases as quantity increases.
C. is constant for all quantities.
D. declines as quantity increases for Mega Corp and increases as quantity increases for Big Inc.
23. The demand curve for a perfectly competitive firm is __________ while the demand curve for a monopolist is __________.
A. perfectly elastic; downward-sloping
B. vertical; downward-sloping
C. perfectly elastic; perfectly inelastic
D. perfectly inelastic; perfectly elastic
24. This graph illustrates the demand faced by a firm.
Refer to the figure on the right. The firm will charge a price of $8 only if:
A. marginal cost is $8.
B. marginal cost is $0.
C. average total cost is $8.
D. marginal cost is less than $8.
25. Refer to the figure on the right. The __________ at the socially efficient level of output will be
__________ at the profit maximizing level of output.
A. loss; smaller than
B. profit; smaller than
C. loss; larger than
D. profit; larger than
3
26. Which of the following is not a characteristic of a perfectly competitive market structure?
A. There are a very large number of firms that are small compared to the market.
B. All firms sell identical products.
C. There are no restrictions to entry by new firms
D. There are restrictions on exit of firms.
27. In perfect competition
A. the market demand curve and the individual's demand are identical.
B. the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic.
C. the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic.
D. the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.
28. All of the following can be used to compute average profit except
A. marginal profit minus marginal cost.
B. total profit divided by quantity.
C. average revenue minus average total cost
D. price minus average total cost.
29. The key characteristics of a monopolistically competitive market structure include
A. many small (relative to the total market) sellers acting independently.
B. all sellers sell a homogeneous product.
C. barriers to entry are strong.
D. sellers have no incentive to advertise their products.
30. A monopolistically competitive firm maximizes profit where
A. price = marginal revenue.
B. price > marginal cost.
C. marginal revenue > average revenue.
D. total revenue > marginal cost.
31. An oligopoly firm is similar to a monopolistically competitive firm in that
A. both firms face the prisoner's dilemma.
B. both operate in a market in which there are entry barriers.
C. both firms have market power.
D. both firms are in industries characterized by an interdependent firm.
32. Price discrimination
A. is the practice of charging different prices to different customers based on a seller's personal preferences and prejudices.
B. is the practice of charging different prices to different customers based on the different costs of supplying the product to different customers.
C. is the practice of charging different prices to different customers when the price differences cannot be attributed to variations in cost.
D. is the practice of giving preferential treatment to certain groups of customers based on their long-standing relationship to the producer.
33. Because a monopoly's demand curve is the same as the market demand curve for its product,
A. the monopoly's marginal revenue equals its price.
B. the monopoly is a price taker.
C. the monopoly must lower its price to sell more of its product.
D. the monopoly's average total cost always falls as it increases its output.
34. Suppose a competitive firm and a monopolist are both charging $5 for their respective outputs. You can infer that:
A. the marginal benefit from an additional unit sold is $5 for both firms.
B. the marginal benefit from an additional unit sold is $5 for the competitive firm and less than $5 for the monopolist.
C. the marginal benefit from an additional unit sold is less than $5 for both firms.
D. the competitive firm is charging too much and the monopolist too little.
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Answers
1
C
9
B
17
B
25
C
33
C
2
A
10
A
18
D
26
D
34
B
3
AB
11
C
19
D
27
D
4
C
12
D
20
D
28
A
5
D
13
C
21
A
29
A
6
B
14
B
22
A
30
B
7
A
15
C
23
A
31
C
8
D
16
C
24
B
32
C
5