1. The perfect information assumption of perfect ...api.ning.com/.../ECO402FinaltermQuizandpapersinonefileall.pdf · 1. The "perfect information" assumption of perfect competition

1. The "perfect information" assumption of perfect competition includes all of the following except one. Which one?

Consumers know their preferences. Consumers know their income levels.Consumers know the prices available. Consumers can anticipate price changes.

2. Incremental cost is the same concept as ______________ cost.

Average Marginal Fixed Variable

3. A production function assumes a given: Technology. Set of input prices.Ratio of input prices. Amount of output. 4. Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ______ of the good and the income effect results in the person buying ______ of the good.

More, more More, less Less, more Less, less

5. Producer surplus for the whole market can be thought of as:Total profit.Variable operating profit plus factor rents. Total profit minus factor rents earned by lower cost firms. Total profit plus factor rents earned by lower cost firms.

6. Baba Burgers has discovered there are economies of scope available to the restaurant. Which is most likely to be a response to this discovery?Baba expands burger production, focusing on that one good. Baba contracts burger production. Baba adds grilled chicken sandwiches to the menu. Baba cuts back on the diversity of the menu.

7. The endpoints (horizontal and vertical intercepts) of the budget line:

Measure its slope. Measure the rate at which one good can be substituted for another. Measure the rate at which a consumer is willing to trade one good for another. Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

8. The "perfect information" assumption of perfect competition includes all of the following except one. Which one? Consumers know their preferences.Consumers know their income levels. Consumers know the prices available.Consumers can anticipate price changes.

9. The difference between the economic and accounting costs of a firm are:The accountant's fees. The corporate taxes on profits. The opportunity costs of the factors of production that the firm owns. The sunk costs incurred by the firm.

10. lastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect: The price of steel to fall. The demand curve for steel to shift to the right. The demand curve for plastic to shift to the left. The demand curve for steel to shift to the left.

11. Cost-output elasticity can be written and calculated as:

MC/AC. AC/MC (AC)(MC) (AC)2(MC)

12. Fixed costs are fixed with respect to changes in:

Output. Capital expenditure. Wages. Time.

13. The presence of a learning curve may induce a decision maker in a startup firm to choose:

Low levels of output to exploit economies of scale. High levels of output to exploit economies of scale. Low levels of output to shift the average cost curve down over time. High levels of output to shift the average cost curve down over time.

14. Which of the following is true regarding the relationship between returns to scale and economies of scope?

A firm experiencing economies of scope must also experience increasing returns to scale. Economies of scale and economies of scope must occur together.A firm experiencing increasing returns to scale must also experience economies of scope. There is no definite relationship between returns to scale and economies of scope.

15.Salman would prefer a certain income of $20,000 to a gamble with a 0.5

probability of $10,000 and a 0.5 probability of $30,000. Based on this information:

We can infer that Salman is risk neutral. We can infer that Salman is risk averse.We can infer that Salman is risk loving. We cannot infer Salman’s risk preferences.

16. When the average product is decreasing, marginal product:

Equals average product. Is increasing. Exceeds average product. Is less than average product? 17. Government intervention can increase total welfare when:

There are costs or benefits that are external to the market. Consumers do not have perfect information about product quality. A high price makes the product unaffordable for most consumers. There are costs or benefits that are external to the market and consumers do not have perfect information about product quality.

18. If a competitive firm's marginal cost curve is U-shaped then:

Its short run supply curve is U-shaped too. Its short run supply curve is the downward-sloping portion of the marginal cost curve. Its short run supply curve is the upward-sloping portion of the marginal cost curve. Its short run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short run average variable cost curve.

19. Economies of scope refer to:

Changes in technology. The very long run. Multiproduct firms. Single product firms that utilize multiple plants.

20. Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

The extent to which any firm can influence the price of the product. The size of the firms in the market. The annual sales made by the largest firms in the market.The presence of government intervention.

21. Indifference curves that are convex to the origin reflect:

An increasing marginal rate of substitution. A decreasing marginal rate of substitution. A constant marginal rate of substitution. A marginal rate of substitution that first decreases, then increases.


Measure its slope. Measure the rate at which one good can be substituted for another. Measure the rate at which a consumer is willing to trade one good for another. Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

23. Consider the following statements when answering this question: I. "In the long run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production." II. "In the long run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus."

I and II are true. I is true, and II is false. I is false, and II is true. I and II are false.

24. Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis:

The budget line will become steeper. The budget line will become flatter. The slope of the budget line will not change. The slope of the budget line will change, but in an indeterminate way.

25. A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans? Select correct option: An import quota on coffee beans. An acreage limitation program which provides coffee bean farmers financial incentives to leave some of their acreage idle. An import tariff on coffee beans. All of the given options.

26. Which of the following is NOT a generally accepted measure of the riskiness of an investment? Select correct option: Standard deviation.Expected value. Variance. None of the given options.

27. Which of the following is a positive statement? Select correct option:When the price of a good goes up, consumers buy less of it. When the price of a good goes up, firms produce more of it. When the Federal government sells bonds, interest rates rise and private investment is reduced. All of the given options.

28. Rabia knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information? Select correct option: Average fixed cost Fixed cost Variable cost Rabia can determine all of the above costs given the information

provided.

29.Which of the following is NOT true about price floors? Select correct option: Consumer surplus is always lower than it would be in the competitive equilibrium. Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium. Producer surplus could be negative as the result of a price floor. Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.

30. A production function in which the inputs are perfectly substitutable would have isoquants that are: Select correct option:

Convex to the origin. L shaped. Linear. Concave to the origin.

31. For an inferior good: Select correct option:

The price elasticity of demand is negative; the income elasticity of demand is negative. The price elasticity of demand is positive; the income elasticity of demand is negative. The price elasticity of demand is negative; the income elasticity of demand is positive. The price elasticity of demand is positive; the income elasticity of demand is positive

32. When a product transformation curve is bowed outward, there are_______________ in production. Economies of scope Economies of scaleDiseconomies of scope Diseconomies of scale

33. The marginal rate of technical substitution is equal to the: Slope of the total product curve. Change in output minus the change in labor. Change in output divided by the change in labor. Ratio of the marginal products of the inputs.

34. Consider two goods X and Y available for consumption. Assume that the price of X changes whilethe price of Y remains fixed. For these two goods, the price-consumption curve illustrates the:

Relationship between the price of X and consumption of Y. Utility-maximizing combinations of X and Y for each price of X. Relationship between the price of Y and the consumption of X. Utility-maximizing combinations of X and Y for each quantity of X.

35. Assume that two investment opportunities have identical expected values of $100,000. Investment Ahas a variance of 25,000, while investment

B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:

A because it has less risk. A because it provides higher potential earnings. B because it has less risk. B because of its higher potential earnings.

36. The law of diminishing returns refers to diminishing: Total returns.Marginal returns. Average returns. All of the given option

37. If the isoquants are straight lines, then:

Inputs have fixed costs at all use rates. The marginal rate of technical substitution of inputs is constant. Only one combination of inputs is possible.There are constant returns to scale.

38. The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. Whatis the variable cost?

200 5Q 5 5 + (200/Q)

39. The demand curve facing a perfectly competitive firm is:

The same as the market demand curve. Downward-sloping and less flat than the market demand curve. Perfectly horizontal. Perfectly vertical.

40. The cost-output elasticity is used to measure:Economies of scope.Economies of scale. The curvature in the fixed cost curve. Steepness of the production function.

41.The budget line in portfolio analysis shows that:

The expected return on a portfolio increases as the standard deviation of that return increases. The expected return on a portfolio increases as the standard deviation of that return decreases. The expected return on a portfolio is constant. The standard deviation of a portfolio is constant.

42.A Rolling Stones song goes: “You can’t always get what you want.” This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Consumers must make the best purchasing decisions they can, given their limited incomes. Workers do not have as much leisure as they would like, given their wages and working conditions. Workers in planned economies, such as

North Korea, do not have much choice over jobs. Firms in market economies have limited financial resources.

43. Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, willleave the country as a whole:

Worse off than a comparable tariff. Not as bad off as a comparable tariff.About the same as a comparable tariff. Any of the above can be true.

44. Any combination of products inside the production possibility frontier is:

Allocatively inefficient Consumer inefficient Productively inefficient None of the given option.

45 .In the long run, which of the following is considered a variable cost?

Expenditures for wages. Expenditures for raw materials. Expenditures for capital machinery and equipment. All of the given options.

46. Two firms, each producing different goods, can achieve a greater output than one firm producingboth goods with the same inputs. We can conclude that the production process involves:

Diseconomies of scope. Economies of scale. Decreasing returns to scale.Increasing returns to scale.

2nd Quiz

BC100401155 : Atiq U Rehman

Quiz Start Time: 04:24 PM

Time Left 13sec(s)

Question # 1 of 10 ( Start time: 04:24:51 PM ) Total Marks: 1

In the long run, new firms can enter into industry and so the elasticity of supply tends to be:

Select correct option:

Perfectly elastic.

Perfectly inelastic.

Less elastic in long-run than in the short-run.

More elastic in long-run than in the short-run.

Click here to Save Answer & Move to Next Question



Time Left 9sec(s)


A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:


Transitivity.

Completeness.

Diminishing MRS.

Assumption of rationality.




Time Left 10sec(s)


The difference between the economic and accounting costs of a firm are:


The accountant's fees.

The corporate taxes on profits.

The opportunity costs of the factors of production th

The sunk costs incurred by the firm.




Time Left 51sec(s)


Which of the following is considered as tools of reducing risk?


Insurance

Diversification

Obtaining more information

All of the given options.

Correct




Time Left 7sec(s)


If the percentage change in quantity demanded for bread is more than the percentage change in price of bread then the price elasticity of demand for bread is:


Elastic.

Inelastic.

Perfectly elastic.

Unitary elastic.




Time Left 32sec(s)


The factor(s) which cause a shift in budget line is/are:


Price.

Income.

Income and price.

Utility and income.




Time Left 14sec(s)


When we study behavior of an individual of any society that means we are doing study of ________ Economics.


Macro

Micro

Correct

Financial

Managerial




Time Left 7sec(s)


When the total utility increases then marginal utility:


Increases.

Decreases.

Remains Constant.

First decrease then increase.




Time Left 36sec(s)


If a person spend all of his income to acquire 40 units of a good having price 2. What will be his income?


20

38

42

80

Correct


3rd Quiz file

ECO402 Microeconomics Important Solved MCQs for final Term Examshared by Syeda Sheeza [email protected]

1. Which of the following strategies are used by business firms to capture consumersurplus?

1. price discrimination.2. bundling.3. two-part tariffs.4. d. all of the above.

2. Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

1. is trying to reduce its costs and therefore increase its profit.

2. is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.

3. is attempting to convert producer surplus into consumer surplus.

4. d. is attempting to convert consumer surplus into producer surplus.

5. both (a) and (c) are correct.

3. An electric power company uses block pricing for electricity sales. Block pricing is an example of

1. first-degree price discrimination.

2. second-degree price discrimination.

3. third-degree price discrimination.

4. Block pricing is not a type of price discrimination.

4. When a firm charges each customer the maximum price that the customer is willing to pay, the firm

1. engages in a discrete pricing strategy.

2. charges the average reservation price.

3. engages in second-degree price discrimination.

4. d. engages in first-degree price discrimination.

5. The maximum price that a consumer is willing to pay for each unit bought is the ______________ price.

1. market

2. b. reservation

3. consumer surplus

4. auction

5. choke

6. Second-degree price discrimination is the practice of charging

1. the reservation price to each customer.

2. b. different prices for different blocks of the same good or service.

3. different groups of customers different prices for the same products.

4. each customer the maximum price that he or she is willing to pay.

7. A firm is charging a different price for each unit purchased by a consumer. This is called

1. a. first-degree price discrimination.



4. fourth-degree price discrimination.

5. fifth-degree price discrimination.

100% CORRECT ANSWERS.....

8. A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing



3. c. third-degree price discrimination.



9. Discrimination based upon the quantity consumed is referred to as ______________ price discrimination.

1. first-degree

2. b. second degree

3. third-degree

4. group

10. A doctor sizes up patients' income and charges wealthy patients more than poorer ones. This pricing scheme represents a form of




4. pricing at each consumer’s reservation price.

11. Third-degree price discrimination involves

1. charging each consumer the same two part tariff.

2. charging lower prices the greater the quantity purchased.

3. the use of increasing block rate pricing.

4. d. charging different prices to different groups based upon differences in elasticity of demand.

12. The maximum price that a consumer is willing to pay for a good is called:

1. a. the reservation price.

2. the market price.

3. the first-degree price.

4. the block price.

5. the choke price.

13. McDonald's restaurant located near the high school offered a Tuesday special for high school students. If high school students showed their student ID cards, they would be given 50 cents off any special meal. This practice is an example of:

1. collusion.

2. b. price discrimination.

3. two-part tariff.

4. bundling.

5. tying.

14. In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of:

1. collusion.


3. two-part tariff.

4. bundling.

5. tying.

15. Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of:

1. intertemporal price discrimination.

2. b. third degree price discrimination.

3. a two-part tariff.

4. bundling.

5. none of the above.

16. Which of the following is NOT a condition for third degree price discrimination?

1. Monopoly power.

2. Different own price elasticities of demand.

3. c. Economies of scale.

4. Separate markets.

17. A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). Having sold all of its output it discovers that the marginal revenue in the local market is $20 while its marginal revenue on the internet auction site is $30. To maximize profits the firm should

1. have sold more output in the local market and less at the internet auction site.

2. do nothing until it acquires more information on costs.

3. have sold less output in the local market and more on the internet auction site.

4. sell less in both markets until marginal revenue is zero.

5. sell more in both markets until marginal cost is zero.

18. Suppose that the marginal cost of an additional ton of steel produced by the Japanese is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?

1. The Japanese will sell more steel abroad than they will sell in Japan.

2. The Japanese will sell more steel in Japan than they will sell abroad.

3. c. The Japanese will sell steel at a lower price abroad than they will charge domestic users.

4. The Japanese will sell steel at a higher price abroad than they will charge domestic users.

5. Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

19. You are the producer of stereo components. There are two markets, foreign and domestic. The two groups of consumers cannot trade with one another. If your firm practices third-degree price discrimination, when you have maximized profits, the marginal revenue

1. in the foreign market will equal the marginal cost.

2. in the domestic market will equal the marginal cost.

3. in the domestic market will equal the marginal revenue in the domestic market.

4. d. all of the above.

5. none of the above

20. You are the producer of stereo components. There are two markets, foreign and domestic. The two groups of consumers cannot trade with one another. You will charge the higher price in the market with the

1. a. lower own price elasticity of demand (more inelastic demand).

2. higher own price elasticity of demand (more elastic demand).

3. larger teenage population.

4. greater consumer incomes.

21. For a perfect first-degree price discriminator, incremental revenue is

1. greater than price if the demand curve is downward sloping.

2. the same as the marginal revenue curve if the firm is a non-discriminating monopolist.

3. c. equal to the price paid for each unit of output.

4. less than the marginal revenue for a non-discriminating monopolist.

22. In third-degree price discrimination a firm faces two markets. In the first market the firm charges $30 per unit, and in the second market it charges $22 per unit.Which of the following represents the ratio of elasticities of demand in the two markets?

1. E2 = (21/29)E1.

2. E2 = (29/21)E1

3. E2 = E1.

4. E2 = (22/30)E1.

5. e. none of these.

23. A firm sells an identical product to two groups of consumers, A and B.The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

1. PA = PB = MC.

2. MRA = MRB.

3. c. MRA = MRB = MC.

4. (MRA - MRB) = (1 - MC).

24. Bindy, an 18 year old high school graduate, and Luciana, a 40 year old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of:

1. collusion.

2. price discrimination.

3. two-part tariff.

4. bundling.

5. e. none of the above.

25. Under perfect price discrimination, marginal profit at each level of output equal

1. 0

2. P-AC.

3. c. P-MC.

4. P-AR.

26. Under perfect price discrimination, consumer surplus

1. is less than zero.

2. is greater than zero.

3. c. equals zero.

4. is maximized.

27. When a monopolist engages in perfect price discrimination,

1. the marginal revenue curve lies below the demand curve.

2. b. the demand curve and the marginal revenue curve are identical.

3. marginal cost becomes zero.

4. the marginal revenue curve becomes horizontal.

28. The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this her

1. profits are maximized.

2. costs are minimized given her level of output.

3. c. revenues are maximized given her level of output.

4. all of the above.

29. When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of



3. c. intertemporal price discrimination.


30. Club Med, which runs a number of vacation resorts, offers vacation packages at a lower price in the winter, the "off season," than in the summer. This practice is an example of:

1. peak-load pricing.


3. two-part tariff.

4. bundling.

5. e. both (a) and (b) are correct.

31. In peak load pricing,

1. marginal revenue is equal in both periods.

2. b. marginal revenue in the peak period is greater than in the off-peak period.

3. marginal revenue in the peak period is less than in the off-peak period.

4. the sum of the marginal revenues is greater than the sum of the marginal costs.

32. When the movie "Jurassic Park" debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of




4. tying.


33. The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of

1. bundling.



4. tying.


34. A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of

1. a. peak-load pricing.



4. tying.


35. A local theater prices every ticket in the theater at $5.00 for matinees.During the evening, ticket prices are much higher. This is an example of




4. bundling.


36. An amusement park charges an entrance fee of $75 per person, then $2.50 per ride. This is an example of


2. b. a two-part tariff.


4. bundling.

5. tying.

37. When people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made, we would say that the telephone company is using

1. limit pricing.



4. two stage price discrimination.

38. A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a

1. tying contract.

2. b. two-part tariff.

3. form of perfect price discrimination.

4. none of these.

39. A national chain of bookstores has initiated a frequent buyer program. If you buy a frequent buyer card for $10, you are entitled to a 10 percent discount on all purchases for 1 year. This practice is an example of:



3. c. two-part tariff.

4. bundling.

5. both (a) and (b) are correct.

40. A firm setting a two-part tariff with only one customer should set the entry fee equal to

1. marginal cost.

2. b. consumer surplus.

3. marginal revenue.

4. price.

41. The local cable TV company charges a "hook-up" fee of $30 per month.Customer can then watch programs on a "pay-per-view" basis (a fee is charged for every program watched). This is an example of



3. c. a two-part tariff.



42. The pricing technique known as tying

1. permits a firm to meter demand.

2. permits a firm to practice price discrimination.

3. enables a firm to extend its monopoly power to new markets.


43. Season ticket holders for the St. Louis Rams received a surprise when they received their applications to renew their season tickets. In order to get your season ticket to the Rams' home games, you had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of:



3. two-part tariff.

4. d. bundling.


44. A local restaurant sells strawberry pie for $3.00 per slice. However, if you order the prime rib dinner, you can get a slice of pie for only a dollar. This is an example of

1. a. bundling.



4. tying.


45. A local restaurant offers an "all-you-can-eat" salad bar for $3.49.However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of




4. tying.


46. Bundling products makes sense for the seller when

1. consumers have heterogeneous demands.

2. the products are complementary in nature.

3. firms cannot price discriminate.

4. d. both (a) and (c).

47. Bundling is effective when demands are ____________ and ____________ correlated.

1. a. different; negatively

2. different; positively

3. similar; negatively

4. similar; positively

5. identical; perfectly

48. Bundling raises higher revenues than selling the goods separately when

1. demands for two goods are highly positively correlated.

2. demands for two products are mildly positively correlated.

3. c. demands for two products are negatively correlated.

4. there is a perfect positive correlation between the demands for two goods.

5. the goods are complementary in nature.

49. Mixed bundling is more profitable than pure bundling when

1. the marginal cost of each good being sold is positive.

2. the consumers’ reservation values of each good being sold are not perfectly negatively correlated with one or another.

3. c. both (a) and (b) apply.

4. the marginal cost of one good is zero.

50. One Guy's Pizza advertising expenditures are $1,200 and sales are $30,000. When advertising increases to $1,400, sales increase to $32,000. The arc advertising elasticity of demand is approximately

1. 0

2. 0.1

3. c. 0.4

4. 2.5

5. 12.5

51. A 10 percent decrease in advertising results in a 5 percent sales decrease.The advertising elasticity of demand is

1. -2.0

2. -0.5

3. c. 0.5

4. 2


52. Use the following statements to answer this question.

I. To maximize profit, a firm will increase its advertising expenditures until the last dollar of advertising just brings forth an additional dollar of revenue.

II. The full marginal cost of advertising is the sum of the dollar spent directly on advertising and the marginal production cost that results form the increased sales that advertising brings about.

1. Both I and II are true.

2. I is true, and II is false.

3. c. I is false, and II is true.

4. Both I and II are false.

`


I. To maximize profit, a firm will advertise more when the advertising elasticity is larger.

II. To maximize profit, a firm will advertise more when the price elasticity of demand is smaller.

1. a. Both I and II are true.


3. I is false, and II is true.


54. The price elasticity of demand for nursery products is -10. The advertising elasticity of demand is 0.4. Using the "Rule of Thumb for Advertising," the level of advertising will be set at _____ of sales.

1. 0.25 percent

2. 0.4 percent

3. c. 4 percent

4. 40 percent

55. Grocery store chains advertise more than convenience stores because:

1. the advertising elasticity of demand is smaller for grocery store chains than for convenience stores.

2. convenience stores have more elastic demand for their products then grocery store chains.

3. c. the advertising elasticity of demand for convenience stores is near zero and is much smaller than for grocery store chains.



56. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries is called:

1. the shadow price.

2. b. the transfer price.


4. the non-market price.


57. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. There are many other firms that extract and sell crude oil so that the market for crude oil is regarded by Acme Oil as competitive. The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries:

1. a. equals the market price for crude oil.

2. equals the market price for crude oil less a discount because Acme Oil does not to profit from itself.

3. is unrelated to the market price of crude oil.

4. is greater than the marginal cost of extracting crude oil.

58. What is net marginal revenue?

1. The same as marginal profit.

2. b. The additional revenue the firm earns from an extra unit of an internally produced intermediate input.

3. The additional revenue the firm earns from producing one more unit of output.

4. The additional revenue the firm earns from selling one more unit of output.

59. What is the profit maximizing condition for a vertically integrated firm?

1. Net marginal revenue equals the sum of the marginal costs of the intermediate inputs.

2. Marginal revenue equals the marginal cost of the final output.

3. c. Net marginal revenue equals the marginal cost of each intermediate good.

4. The sum of net marginal revenues equals the marginal cost of the final output

4th Quiz File


Consumers know their preferences.Consumers know their income levels.Consumers know the prices available.Consumers can anticipate price changes.

2. Incremental cost is the same concept as ______________ cost.

AverageMarginalFixedVariable

3. A production function assumes a given:

Technology.Set of input prices.

Ratio of input prices.Amount of output.

4. Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ______ of the good and the income effect results in the person buying ______ of the good.


5. Producer surplus for the whole market can be thought of as:

Total profit.Variable operating profit plus factor rents.Total profit minus factor rents earned by lower cost firms.Total profit plus factor rents earned by lower cost firms.

6. Baba Burgers has discovered there are economies of scope available to the restaurant. Which is most likely to be a response to this discovery?

Baba expands burger production, focusing on that one good.Baba contracts burger production.Baba adds grilled chicken sandwiches to the menu.Baba cuts back on the diversity of the menu.


Measure its slope.Measure the rate at which one good can be substituted for another.Measure the rate at which a consumer is willing to trade one good for another.Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.



9. The difference between the economic and accounting costs of a firm are:

The accountant's fees.The corporate taxes on profits.The opportunity costs of the factors of production that the firm owns.The sunk costs incurred by the firm.

10.Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect:

The price of steel to fall.The demand curve for steel to shift to the right.The demand curve for plastic to shift to the left.The demand curve for steel to shift to the left.

11.Cost-output elasticity can be written and calculated as:

MC/AC.AC/MC(AC)(MC)(AC)2(MC)

12.Fixed costs are fixed with respect to changes in:

Output.Capital expenditure.Wages.Time.

13.The presence of a learning curve may induce a decision maker in a startup firm to choose:

Low levels of output to exploit economies of scale.High levels of output to exploit economies of scale.

Low levels of output to shift the average cost curve down over time.High levels of output to shift the average cost curve down over time.

14.Which of the following is true regarding the relationship between returns to scale and economies of scope?

A firm experiencing economies of scope must also experience increasing returns to scale.Economies of scale and economies of scope must occur together.A firm experiencing increasing returns to scale must also experience economies of scope.There is no definite relationship between returns to scale and economies of scope.

15.Salman would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:

We can infer that Salman is risk neutral.We can infer that Salman is risk averse.We can infer that Salman is risk loving.We cannot infer Salman 's risk preferences.

16.When the average product is decreasing, marginal product:

Equals average product.Is increasing.Exceeds average product.Is less than average product.

17.Government intervention can increase total welfare when:

There are costs or benefits that are external to the market.Consumers do not have perfect information about product quality.A high price makes the product unaffordable for most consumers.There are costs or benefits that are external to the market and consumers do not have perfect information about product quality.

18. If a competitive firm's marginal cost curve is U-shaped then:

Its short run supply curve is U-shaped too.Its short run supply curve is the downward-sloping portion of the marginal cost curve.Its short run supply curve is the upward-sloping portion of the marginal cost curve.

Its short run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short run average variable cost curve.

19.Economies of scope refer to:

Changes in technology.The very long run.Multiproduct firms.Single product firms that utilize multiple plants.

20.Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

The extent to which any firm can influence the price of the product.The size of the firms in the market.The annual sales made by the largest firms in the market.The presence of government intervention.

21. Indifference curves that are convex to the origin reflect:

An increasing marginal rate of substitution

A decreasing marginal rate of substitution. A constant marginal rate of substitution. A marginal rate of substitution that first decreases, then increases.

22.The endpoints (horizontal and vertical intercepts) of the budget line:

Measure its slope.Measure the rate at which one good can be substituted for another.Measure the rate at which a consumer is willing to trade one good for another.Represent the quantity of each good that could be purchased if all of the budget were allocated to that good.

23.Consider the following statements when answering this question: I. "In the long run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production." II. "In the long run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus."

I and II are true.I is true, and II is false.I is false, and II is true.

I and II are false.

24.Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along the horizontal axis:

The budget line will become steeper.The budget line will become flatter.The slope of the budget line will not change.The slope of the budget line will change, but in an indeterminate way.

3

25.A country's government would like to raise the price of one its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans?


An import quota on coffee beans.An acreage limitation program which provides coffee bean farmers financial incentives to leave some of their acreage idle.An import tariff on coffee beans.All of the given options.

26.Which of the following is NOT a generally accepted measure of the riskiness of an investment?


Standard deviation. Expected value.Variance.None of the given options.

27.Which of the following is a positive statement? Select correct option:

When the price of a good goes up, consumers buy less of it.When the price of a good goes up, firms produce more of it.When the Federal government sells bonds, interest rates rise and private investment is reduced.All of the given options.

28.Rabia knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?


Average fixed costFixed costVariable costRabia can determine all of the above costs given the information provided.

29.Which of the following is NOT true about price floors? Select correct option:

Consumer surplus is always lower than it would be in the competitive equilibrium.Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.

Producer surplus could be negative as the result of a price floor.Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.

30.A production function in which the inputs are perfectly substitutable would have isoquants that are:


Convex to the origin.L shaped.Linear.Concave to the origin.

31.For an inferior good:


The price elasticity of demand is negative; the income elasticity of demand is negative.The price elasticity of demand is positive; the income elasticity of demand is negative.The price elasticity of demand is negative; the income elasticity of demand is positive.The price elasticity of demand is positive; the income elasticity of demand is positive.

32.The short run is: Select correct option:

Less than a year.Three years.However long it takes to produce the planned output.A time period in which at least one input is fixed.

33.Any combination of products inside the production possibility frontier

is: Select correct option:

Allocatively inefficientConsumer inefficientProductively inefficientNone of the given option.

34.Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?


Preferences are complete.Preferences are transitive.Consumers prefer more of a good to less.None of the given options.

35. In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true?


These price controls caused a chronic excess supply of natural gas.Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium.Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium.This episode of price controls was unusual, because it resulted in no deadweight loss to society. (Not sure)

36.A production function defines the output that can be produced: Select correct option:

At the lowest cost, given the inputs available.With the fewest amount of inputs.If the firm is technically efficient.In a given time period if no additional inputs are hired.

37.A firm never operates: Select correct option:

At the minimum of its ATC curve.At the minimum of its AVC curve.On the downward-sloping portion of its ATC curve.On the downward-sloping portion of its AVC curve.

38.Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves:


Diseconomies of scope.

Economies of scale.Decreasing returns to scale.Increasing returns to scale.

39. In long-run competitive equilibrium, a firm that owns factors of production will have an:


Economic profit = $0 and accounting profit > $0.Economic and accounting profit = $0.Economic and accounting profit > $0.Economic and accounting profit can take any value.

4

40.When a product transformation curve is bowed outward, there are _______________ in production.

Economies of scopeEconomies of scaleDiseconomies of scopeDiseconomies of scale

41.The marginal rate of technical substitution is equal to the:Slope of the total product curve.Change in output minus the change in labor.Change in output divided by the change in labor.Ratio of the marginal products of the inputs.

42.Consider two goods X and Y available for consumption. Assume that the price of X changes while the price of Y remains fixed. For these two goods, the price-consumption curve illustrates the:

Relationship between the price of X and consumption of Y.Utility-maximizing combinations of X and Y for each price of X.Relationship between the price of Y and the consumption of X.Utility-maximizing combinations of X and Y for each quantity of X.

43.Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors(who dislike risk) to prefer investment opportunity:

A because it has less risk.A because it provides higher potential earnings.B because it has less risk.B because of its higher potential earnings.

44.The law of diminishing returns refers to diminishing:

: Total returns.Marginal returns.Average returns.All of the given option

45.: If the isoquants are straight lines, then:

: Inputs have fixed costs at all use rates.The marginal rate of technical substitution of inputs is constant.Only one combination of inputs is possible.There are constant returns to scale.

H99s1: 4th46.: The total cost (TC) of producing computer software diskettes (Q) is

given as: TC = 200 + 5Q. What is the variable cost?

: 2005Q55 + (200/Q)

47.The demand curve facing a perfectly competitive firm is:

The same as the market demand curve.Downward-sloping and less flat than the market demand curve.Perfectly horizontal.Perfectly vertical.

48.: The cost-output elasticity is used to measure:

Economies of scope.Economies of scale.The curvature in the fixed cost curve.Steepness of the production function.

:

49.The budget line in portfolio analysis shows that:

The expected return on a portfolio increases as the standard deviation of that return increases.The expected return on a portfolio increases as the standard deviation of that return decreases.The expected return on a portfolio is constant.The standard deviation of a portfolio is constant.

50.A Rolling Stones song goes: “You can’t always get what you want.” This echoes an important theme from microeconomics. Which of the following statements is the best example of this theme?

Consumers must make the best purchasing decisions they can, given their limited incomes.Workers do not have as much leisure as they would like, given their wages and working conditions.Workers in planned economies, such as North Korea, do not have much choice over jobs.Firms in market economies have limited financial resources.

51.Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, will leave the country as a whole:

Worse off than a comparable tariff.Not as bad off as a comparable tariff.About the same as a comparable tariff.Any of the above can be true.

52.Any combination of products inside the production possibility frontier is:

Allocatively inefficientConsumer inefficientProductively inefficientNone of the given option.

53.: In the long run, which of the following is considered a variable cost?

Expenditures for wages.Expenditures for raw materials.Expenditures for capital machinery and equipment.All of the given options.

54.Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves:

: Diseconomies of scope.Economies of scale.Decreasing returns to scale.Increasing returns to scale.

5

55.The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the ______________ effect.


GeffenReal priceIncomeSubstitution

56. If a competitive firm's marginal cost always increases with output, then at the profit maximizing output level, producer surplus is:


Zero because marginal costs equal marginal revenue.Zero because price equals marginal costs.Positive because price exceeds average variable costs.Positive because price exceeds average total costs.

57.The concept of a risk premium applies to a person that is: Select correct option:

Risk averse. Risk neutral.Risk loving.All of the given options.

58.Governments may successfully intervene in competitive markets in order to achieve economic efficiency:


At no time; competitive markets are always efficient without government intervention.In cases of positive externalities only.In cases of negative externalities only.In cases of both positive and negative externalities.

59.What happens in a perfectly competitive industry when economic profit is greater than zero?


Existing firms may get larger.New firms may enter the industry.Firms may move along their LRAC curves to new outputs.All of the given options.

60.Which of the following is NOT true about price floors? Select correct option:

Consumer surplus is always lower than it would be in the competitive equilibrium.Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.Producer surplus could be negative as the result of a price floor.Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.

61. Indifference curves that are convex to the origin reflect: Select correct option:

An increasing marginal rate of substitution. A decreasing marginal rate of substitution. A constant marginal rate of substitution. A marginal rate of substitution that first decreases then increases.

62.Which of the following statements is true regarding the differences between economic and accounting costs?


Accounting costs include all implicit and explicit costs.Economic costs include implied costs only.Accountants consider only implicit costs when calculating costs.Accounting costs include only explicit costs.

63.Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:


$20,000.$19,000.$18,000.$17,500.

64.A decreasing-cost industry has a downward-sloping: Select correct option:

Long-run marginal cost curve.Short-run average cost curve.Short-run marginal cost curve.Long-run industry supply curve.

65.Producer surplus is measured as the: Select correct option:

Area under the demand curve above market price.Entire area under the supply curve.Area under the demand curve above the supply curve.Area above the supply curve up to the market price.

66. In a constant-cost industry, an increase in demand will be followed by: Select correct option:

No increase in supply.An increase in supply that will not change price from the higher level that occurs after the demand shift.An increase in supply that will bring price down to the level it was before the demand shift.

An increase in supply that will bring price down below the level it was before the demand shift.

67.The "perfect information" assumption of perfect competition includes all of the following except one. Which one?



68.A Giffen good: Select correct option:

Is always the same as an inferior good.Is the special subset of inferior goods in which the substitution effect dominates the income effect.Is the special subset of inferior goods in which the income effect dominates the substitution effect.Must have a downward sloping demand curve

69.The object of diversification is: Select correct option:

To reduce risk and fluctuations in income.To reduce risk, but not to reduce fluctuations in income.To reduce fluctuations in income, but not to reduce risk.Neither to reduce risk, nor to reduce fluctuations in income.

70.A price support may be pictured by: Select correct option:

Shifting the demand curve to the right by the amount of the government purchase.Shifting the demand curve to the left by the amount of the government purchase.Shifting the supply curve to the right by the amount of the government purchase.Shifting the supply curve to the left by the amount of the government purchase.

71.Ali and Sarah decide to go into business together as economic consultants. Ali believes they have a 50-50 chance of earning $200,000

a year, and that if they don't, they'll earn $0. Sarah believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000. Refer to the scenario, the probabilities discussed in the information above are:


Objective because they are single numbers rather than ranges.Objective because they have been explicitly articulated by the individuals involved.Subjective because the event hasn't happened yet.Subjective because they are estimates made by individuals based upon personal judgment or experience.

72.The law of diminishing returns refers to diminishing: Select correct option:

Total returns.Marginal returns.Average returns.All of the given options.

73.The marginal rate of technical substitution is equal to the: Select correct option:

Slope of the total product curve.Change in output minus the change in labor.Change in output divided by the change in labor.Ratio of the marginal products of the inputs.

74.Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is not perfectly competitive because:


Each company has annual sales over $10 billion. Each company can significantly affect prices.Airbus cannot sell aircraft to the United States government.All of the given options.

75. In a short run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is:


Below average total cost.

Above average total cost.Between the average variable and average total cost curves.Below average fixed cost.

76. In the short run, a perfectly competitive profit maximizing firm that has not shut down:


Is operating on the downward-sloping portion of its AVC curve.Is operating at the minimum of its AVC curve.Is operating on the upward-sloping portion of its AVC curve.Is not operating on its AVC curve.

77.When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus:


Are negative.Are positive, but more than offset by the cost to consumers and the government.Are positive, and not offset by the cost to consumers and the government.None of the given options.

78.Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:


$20,000.$19,000.$18,000.$17,500.

79.Marginal utility measures: Select correct option:

The slope of the indifference curve.The additional satisfaction from consuming one more unit of a good.The slope of the budget line.The marginal rate of substitution.

80.The endpoints (horizontal and vertical intercepts) of the budget line:


Measure its slope.Measure the rate at which one good can be substituted for another.Measure the rate at which a consumer is willing to trade one good for another.Represent the quantity of each good that could be purchased if all of the budget

were allocated to that good.

81.Deadweight loss refers to:


Losses in consumer surplus associated with excess government regulations.Situations where market prices fail to capture all of the costs and benefits of a policy.Net losses in total surplus.Losses due to the policies of labor unions.

82.the marginal product of an input is:


Total product divided by the amount of the input used to produce this amount of output.The addition to total output that adds nothing to profit.The addition to total output due to the addition of one unit of all other inputs.The addition to total output due to the addition of the last unit of an input, holding

all other inputs constant.

83. If the isoquants are straight lines, then: Select correct option:

Inputs have fixed costs at all use rates.The marginal rate of technical substitution of inputs is constant.Only one combination of inputs is possible.There are constant returns to scale.

84.Consider the following statements when answering this question: I. "In the long run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production." II. "In the long run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus."


I and II are true.I is true, and II is false.I is false, and II is true.I and II are false.

85.The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:


The market price is determined (through regulation) by the government.The firm supplies a different good than its rivals.The firm's output is a small fraction of the entire industry's output.The short run market price is determined solely by the firm's technology.

86.Producer surplus is measured as the: Select correct option:

Area under the demand curve above market price.Entire area under the supply curve.Area under the demand curve above the supply curve.Area above the supply curve up to the market price.

87.price ceilings: Select correct option:

Always increase consumer surplus.May decrease consumer surplus if demand is sufficiently elastic.May decrease consumer surplus if demand is sufficiently inelastic.Always decrease consumer surplus.

88.An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket?


MRSxy is at a maximum.Px/Py = money income.

MRSxy = money income.MRSxy = Px/Py.

89. In the long run, a firm’s producer surplus is equal to the:


Economic rent it enjoys from its scarce inputs.Revenue it earns in the long run.Positive economic profit it earns in the long run.Difference between total revenue and total variable costs.

90.The marginal product of an input is: Select correct option:

Total product divided by the amount of the input used to produce this amount of output.The addition to total output that adds nothing to profit.The addition to total output due to the addition of one unit of all other inputs.The addition to total output due to the addition of the last unit of an input, holding

all other inputs constant.

91.Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:


A because it has less risk.A because it provides higher potential earnings.B because it has less risk.B because of its higher potential earnings.

92.The price elasticity of demand for a demand curve that has a zero slope is:


Zero.One.Negative but approaches zero as consumption increases.Infinity.

93.A firm's producer surplus equals its economic profit when: Select correct option:

Average variable costs are minimized.Marginal costs equal marginal revenue.

Fixed costs are zero.Total revenues equal total variable costs.

94.The long run supply curve in a constant-cost industry is linear and: Select correct option:

Upward-sloping.Downward-sloping.Horizontal.Vertical.

95.Prospective sunk costs:Select correct option:

Are relevant to economic decision-making.Are considered as investment decisions.Rise as output rises.Do not occur when output equals zero. 4th

96.An isoquant:Select correct option:

Must be linear.Cannot have a negative slope.Is a curve that shows all the combinations of inputs that yield the same total output.Is a curve that shows the maximum total output as a function of the level of labor input.3rd

97.Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.

Select correct option:I only.II only.III only.II and III only.

2nd

98. If price is between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is:

Select correct option:Raise prices.Lower prices to gain revenue from extra volume.Shut down immediately, but not liquidate the business.Continue operating, but plan to go out of business.

1st

99.The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:

Select correct option:The market price is determined (through regulation) by the government.The firm supplies a different good than its rivals.The firm's output is a small fraction of the entire industry's output.The short run market price is determined solely by the firm's technology.

1st

100. The law of diminishing returns applies to:Select correct option:

The short run only.The long run only.Both the short and the long run.Neither the short nor the long run.

3rd

101. In an unregulated, competitive market consumer surplus exists because some:

Select correct option:Sellers are willing to take a lower price than the equilibrium price.Consumers are willing to pay more than the equilibrium price.Sellers will only sell at prices above equilibrium price (or actual price).Consumers are willing to make purchases only if the price is below the

actual price.

102. Which of the following is a positive statement?Select correct option:

The minimum wage should not be increased, because to do so would increase unemployment.

Smoking should be restricted on all airline flights.All automobile passengers should be required to wear seatbelts in order to

protect them against injury.None of the given options.

103. Which of the following is true concerning the income effect of a decrease in price?


It will lead to an increase in consumption only for a normal good.It always will lead to an increase in consumption.It will lead to an increase in consumption only for an inferior good.It will lead to an increase in consumption only for a Giffen good.

104. Generally, long-run elasticities of supply are:Select correct option:

Greater than short-run elasticities, because existing inventories can be exploited during shortages.

Greater than short-run elasticities, because consumers have time to find substitutes for the good.

Greater than short-run elasticities, because firms can make alterations to plant size and input combinations to be more flexible in production.

Smaller than short-run elasticities, because the firm has made long-term commitments it cannot easily modify.

4th105. The marginal product of an input is:


Total product divided by the amount of the input used to produce this amount of output.The addition to total output that adds nothing to profit.The addition to total output due to the addition of one unit of all other inputs.The addition to total output due to the addition of the last unit of an input, holding all

other inputs constant.

106. Which of the following would cause a shift to the right of the supply curve for

gasoline? I. A large increase in the price of public transportation. II. A large decreasein the price of automobiles. III. A large reduction in the costs of producing gasoline.


107. Incremental cost is the same concept as ______________ cost.Select correct option:AverageMarginalFixedVariable

108. Which of the following assets is almost riskless?Select correct option:Common stocksLong-term corporate bondsU.S. treasury billsLong-term government bonds

109. Consider the following statements when answering this question: I. "In the long run, if a

firm wants to remain in a competitive industry then it needs to own resources that are inlimited supply." II. "In this competitive market our firm's long run survival depends onlyon the efficiency of our production process."

Select correct option:I and II are true.I is true, and II is false.I is false, and II is true.I and II are false.

110. Above-normal profits are guaranteed for:Select correct option:A monopoly, but not a perfectly competitive firm.A perfectly competitive firm, but not a monopoly.

Both a monopoly and a perfectly competitive firm.Neither a monopoly nor a perfectly competitive firm.

111. The benefit of a subsidy accrues mostly to consumers:Select correct option:In every instance.If Ed/Es is large.If Ed/Es is small.If Ed and Es are equal.

112. The cost-output elasticity is used to measure:Select correct option:Economies of scope.Economies of scale.The curvature in the fixed cost curve.Steepness of the production function.

113. A firm maximizes profit by operating at the level of output where:Select correct option:Average revenue equals average cost.Average revenue equals average variable cost.Total costs are minimized.Marginal revenue equals marginal cost.

114. A firm's producer surplus equals its economic profit when:Select correct option:Average variable costs are minimized.Marginal costs equal marginal revenue.Fixed costs are zero.Total revenues equal total variable costs.

115. The price of good A goes up. As a result the demand for good B shifts to the left. From

this we can infer that:Select correct optionGood A is used to produce good B.Good B is used to produce good A.Goods A and B are substitutes.Goods A and B are complements.

116. Deadweight loss refers to:Select correct option:Losses in consumer surplus associated with excess government regulations.Situations where market prices fail to capture all of the costs and benefits of a policy.

Net losses in total surplus.Losses due to the policies of labor unions.

117. Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and

capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental costof capital is $25 per hour, the slope of the isocost curve will be:

Select correct option:50025/500- 4/525/20 or ¼

118. Which of the following is true regarding income along a price consumption curve?

Select correct option:Income is increasing.Income is decreasing.Income is constant.The level of income depends on the level of utility.

Quiz 2

119. Government intervention can increase total welfare when:


There are costs or benefits that are external to the market.

Consumers do not have perfect information about product quality.

A high price makes the product unaffordable for most consumers.

There are costs or benefits that are external to the market and consumers do not have perfect information about product quality.

120. What does it mean when the CPI is higher this year than last?


The rate of inflation has increased.

There has been inflation since last year.

Real prices have increased.

Real prices have decreased.

121. Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.


I only.

II only.

III only.

II and III only.



Output.

Capital expenditure.

Wages.

Time.

123. Which of the following is NOT true regarding monopoly?


Monopoly is the sole producer in the market.

Monopoly price is determined from the demand curve.

Monopolist can charge as high a price as it likes.

Monopoly demand curve is downward sloping.

124. Jane is trying to decide which courses to take next semester. She has narrowed down her choice to two courses Microeconomics and Macroeconomics. Now she is having trouble. She just cannot decide which of the two courses to take. It’s not that she is indifferentbetween the two courses, she just cannot decide. An economist would say that this is an example of preferences that:


Are not transitive.

Are incomplete.

Violate the assumption that more is preferred to less.


125. Technological improvement:


Can hide the presence of diminishing returns.

Can be shown as a shift in the total product curve.

Allows more output to be produced with the same combination of inputs.

126. All of the given options are true. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, which of the following is true?


Rabia has a higher expected expense than Samina for the car.

Rabia has a lower expected expense than Samina for the car.

Rabia and Samina have the same expected expense for the car, and it is somewhat less than $20,000.

It is not possible to calculate the expected expense for the car until the true probabilities are known.

127. A firm never operates:


At the minimum of its ATC curve.

At the minimum of its AVC curve.

On the downward-sloping portion of its ATC curve.

On the downward-sloping portion of its AVC curve.

128. Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3; the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is:


$85.

$60.

$110.

$35.

129. Good A is a normal good. The demand curve for good A:


Slopes downward.

Usually slopes downward, but could slope upward.

Slopes upward.

Usually slopes upward, but could slope downward.

130. The function which shows combinations of inputs that yield the same output is called a(n):


Isoquant curve.

Isocost curve.

Production function.

Production possibilities frontier.

131. The snob effect corresponds best to a:


Negative network externality.

Giffen good.

Positive network externality.

Bandwagon effect.

132. In the long run, which of the following is considered a variable cost?


Expenditures for wages.

Expenditures for raw materials.

Expenditures for capital machinery and equipment.


133. When people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made, we would say that the telephone company is using:


Limit pricing.

A two-part tariff.

Second-degree price discrimination.

Two stage price discrimination.

Quiz 3

134. The price elasticity of demand for a demand curve that has a zero slope is:


Zero.

One.

Negative but approaches zero as consumption increases.

Infinity.

135. The concept of a risk premium applies to a person that is:


Risk averse.

Risk neutral.

Risk loving.


136. Price ceilings:


Always increase consumer surplus.

May decrease consumer surplus if demand is sufficiently elastic.

May decrease consumer surplus if demand is sufficiently inelastic.

Always decrease consumer surplus.

137. The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P Refer to the above scenario, if P=$15, which of the following is true?


There is a surplus equal to 30.

There is a shortage equal to 30.

There is a surplus, but it is impossible to determine how large.

There is a shortage, but it is impossible to determine how large

138. A firm maximizes profit by operating at the level of output where:


Average revenue equals average cost.

Average revenue equals average variable cost.

Total costs are minimized.

Marginal revenue equals marginal cost.

139. If Px = Py, then when the consumer maximizes utility:


X must equal Y.

MU(X) must equal MU(Y).

MU(X) may equal MU(Y), but it is not necessarily so.

X and Y must be substitutes.

140. Consider the following statements when answering this question: I. "In the long run, if a firm wants to remain in a competitive industry then it needs to own resources that are in limited supply." II. "In this competitive market our firm's long run survival depends only on the efficiency of our production process."


I and II are true.

I is true, and II is false.

I is false, and II is true. (Not Sure)

I and II are false.

141. An investment opportunity is a sure thing; it will pay off $100 regardless of which of the three possible outcomes comes to pass. The variance of this investment opportunity:


Is 0.

Is 1.

Is 2.

Is -1.

142. If X and Y are perfect substitutes, which of the following assumptions about indifference curves is not satisfied?


Completeness.

Transitivity.

More is preferred to less.

Diminishing marginal rate of substitution.

143. If the market price for a competitive firm's output doubles then:


The profit maximizing output will double.

The marginal revenue doubles.

At the new profit maximizing output, price has increased more than marginal cost.

At the new profit maximizing output, price has risen more than marginal revenue.

144. The long run supply curve in a constant-cost industry is linear and:


Upward-sloping.

Downward-sloping.

Horizontal.

Vertical.

145. Marginal revenue, graphically, is:


The slope of a line from the origin to a point on the total revenue curve.

The slope of a line from the origin to the end of the total revenue curve.

The slope of the total revenue curve at a given point.

The vertical intercept of a line tangent to the total revenue curve at a given point.

146. Elasticity measures:


The slope of a demand curve.

The inverse of the slope of a demand curve.

The percentage change in one variable in response to a one percent increase in another variable.

Sensitivity of price to a change in quantity.

Which of the following is a positive statement?



Smoking should be restricted on all airline flights.

All automobile passengers should be required to wear seatbelts in order to protect them against injury.

None of the given options.



Consumers know their preferences.

Consumers know their income levels.

Consumers know the prices available.

Consumers can anticipate price changes.

Quiz 4

148. In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true? Select correct option:

These price controls caused a chronic excess supply of natural gas.Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium. Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium. This episode of price controls was unusual, because it resulted in no deadweight loss to society.

149. Our economy is characterized by: Select correct option:

Unlimited wants and needs Unlimited material resources No energy resources Abundant productive labor

150. A Rolling Stones song goes: “You can’t always get what you want.” This echoes an important theme from microeconomics. Which of thefollowing statements is the best example of this theme? Select correct option:

Consumers must make the best purchasing decisions they can, given their limited incomes. Workers do not have as much leisure as they would like, given their wages and working conditions. Workers in planned economies, such as North Korea, do not have much choice over jobs. Firms in market economies have limited financial resources.

151. The slope of the total product curve is the: Select correct option:

Average product. Slope of a line from the origin to the point. Marginal product. Marginal rate of technical substitution.

152. A firm never operates: Select correct option:

At the minimum of its ATC curve.At the minimum of its AVC curve. On the downward-sloping portion of its ATC curve. On the downward-sloping portion of its AVC curve.

153. Indifference curves that are convex to the origin reflect: Select correct option:


154. What does it mean when the CPI is higher this year than last? Select correct option:

The rate of inflation has increased. There has been inflation since last year. Real prices have increased.Real prices have decreased.

155. The presence of a learning curve may induce a decision maker in a startup firm to choose: Select correct option:


156. Assume that beer is an inferior good. If the price of beer falls, then the substitution effect results in the person buying ____ of the good and the income effect results in the person buying ____ of the good. Select correct option:

More, more More, less Less, moreLess, less

157. The change in the price of one good has no effect on the quantity demanded of another good. These goods are: Select correct option:

Complements.Substitutes. Both inferior. None of the given options.

158. A person with a diminishing marginal utility of income: Select correct option:

Will be risk averse. Will be risk neutral. Will be risk loving. Cannot decide without more information.

159. If indifference curves cross, then: Figure Based on figure given above, it can be inferred that: Select correct option:

The assumption of a diminishing marginal rate of substitution is violated.The assumption of transitivity is violated. The assumption of completeness is violated. Consumers minimize their satisfaction.

160. Prospective sunk costs: Select correct option:

Are relevant to economic decision-making. Are considered as investment decisions. Rise as output rises. Do not occur when output equals zero.

161. The variance of an investment opportunity: Select correct option:

Cannot be negative. Has the same unit of measure as the variable from which it is derived. Is a measure of central tendency.Is unrelated to the standard deviation.

Quiz 5

162. The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as:

Revenue exceeds producer surplus.Producer surplus is positive.Producer surplus exceeds fixed cost.Producer surplus exceeds variable cos

163. me: In an unregulated, competitive market consumer surplus exists because some:

Sellers are willing to take a lower price than the equilibrium price.Consumers are willing to pay more than the equilibrium price.Sellers will only sell at prices above equilibrium price (or actual price).Consumers are willing to make purchases only if the price is below the actual price.

164. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:

$20,000.$19,000.$18,000.$17,500.

An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket?MRSxy is at a maximum.Px/Py = money income.MRSxy = money income.MRSxy = Px/Py.

165. When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture:

Increases.Decreases.Does not change.Insufficient information for judgement

166. The profit maximizing rule MC = MR is followed by: A monopoly, but not a perfectly competitive firm.A perfectly competitive firm, but not a monopoly.Both a monopoly and a perfectly competitive firm.Neither a monopoly nor a perfectly competitive firm.

167. To find the profit maximizing level of output, a firm finds the output level where:

Price equals marginal cost.Marginal revenue and average total cost.Price equals marginal revenue.None of the given options.

168. Which of the following statements is true regarding the differences between economic and accounting costs?


169. Which of the following is true concerning the income effect of a decrease in price?

It will lead to an increase in consumption only for a normal good.It always will lead to an increase in consumption.It will lead to an increase in consumption only for an inferior good.It will lead to an increase in consumption only for a Giffen good.

170. If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

They are more likely to become takeover targets of profit-maximizing firms.They are less likely to be replaced by stockholders.They are less likely to be replaced by the board of directors.

They are more likely to have higher profit than if they had pursued that policy explicitly.

171. Economies of scope refer to:Changes in technology.The very long run.Multiproduct firms.Single product firms that utilize multiple plants.1

172. Suppose that the price of labor (PL ) is $10 and the price of capital (PK ) is $20. What is the equation of the isocost line corresponding to a total cost of $100?Select correct option:

PL + 20PK100 = 10L + 20K100 = 30(L+K)None of the given options

173. A monopoly is a market structure characterized by: A single buyer.A product with many close substitutes.A large number of small firms.Limited entry and exit.

174. me: Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

The extent to which any firm can influence the price of the product. The size of the firms in the market. The annual sales made by the largest firms in the market. The presence of government intervention.The extent to which any firm can influence the price of the product.


me: Revenue exceeds producer surplus. Producer surplus is positive. Producer surplus exceeds fixed cost. Producer surplus exceeds variable cost.

176. In a short run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is:

Below average total cost. Above average total cost.

Between the average variable and average total cost curves.Below average fixed cost.2nd , because jab producer surplus positive hai, toh producer will stay in market

177. An investment opportunity has two possible outcomes, and the value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the probability of the other outcome? Select correct option:

0 0.25 0.5 0.75

178. me: The slope of the total product curve is the: Average product. Slope of a line from the origin to the point. Marginal product. Marginal rate of technical substitution.

179. me: The Clinton administration has recommended an increase in the tax on yachts to help pay for government programs. Which of the following is true? Select correct option:

The burden of this tax will fall entirely on yacht manufacturers. The sales of yachts will decrease. The profit of yacht manufacturers will increase. Employment of workers in the yacht industry will increase.

180. Price ceilings can result in a net loss in consumer surplus when the ____________ curve is ____________.

181. Demand; very elastic Demand; very inelastic Moving down a typical isoquant, the slope of the isoquant :Select correct option:Becomes flatter.Becomes steeper.Remains constant.Becomes linear.

182. When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus:Select correct option:Are negative.Are positive, but more than offset by the cost to consumers and the government. Are positive, and not offset by the cost to consumers and the government.None of the given options.

183. One reason individuals are willing to pay for information in uncertain situations is that information:Select correct option:Can reduce uncertainty.Is a way to diversify.Is a method of insurance.Always reduces the difference between the probabilities of possible outcomes.

184. A firm produces leather handbags and leather shoes. If there are economies of scope, the product transformation curve between handbags and shoes will be: Select correct option:A straight line.Bowed outward (concave).Bowed inward (convex).A rectangle.

185. The area below the demand curve and above the price line measures:Select correct option:Consumer surplus.Economic profit.Elasticity of demand.The total value obtained from consuming the good or service.

186. The supply curve for a competitive firm is:Select correct option:Its entire MC curve.The upward-sloping portion of its MC curve.

Its MC curve above the minimum point of the AVC curve.Its MC curve above the minimum point of the ATC curve.

5th File of Quiz

Eco 402 final term quiz file 2

1. The marginal product of an input is:Select correct option:

Total product divided by the amount of the input used to produce this amount of output.The addition to total output that adds nothing to profit.The addition to total output due to the addition of one unit of all other inputs.The addition to total output due to the addition of the last unit of an input, holding allother inputs constant.

2. Which of the following would cause a shift to the right of the supply curve forgasoline? I. A large increase in the price of public transportation. II. A large decreasein the price of automobiles. III. A large reduction in the costs of producing gasoline.


3. Incremental cost is the same concept as ______________ cost.Select correct option:AverageMarginalFixedVariable

4. Which of the following assets is almost riskless?Select correct option:Common stocksLong-term corporate bondsU.S. treasury billsLong-term government bonds

5. Consider the following statements when answering this question: I. "In the long run, if a

firm wants to remain in a competitive industry then it needs to own resources that are inlimited supply." II. "In this competitive market our firm's long run survival depends onlyon the efficiency of our production process."

Select correct option:I and II are true.I is true, and II is false.I is false, and II is true.

I and II are false.

6. Above-normal profits are guaranteed for:Select correct option:A monopoly, but not a perfectly competitive firm.A perfectly competitive firm, but not a monopoly.Both a monopoly and a perfectly competitive firm.Neither a monopoly nor a perfectly competitive firm.

7. The benefit of a subsidy accrues mostly to consumers:Select correct option:In every instance.If Ed/Es is large.If Ed/Es is small.If Ed and Es are equal.

8. The cost-output elasticity is used to measure:Select correct option:Economies of scope.Economies of scale.The curvature in the fixed cost curve.Steepness of the production function.

9. A firm maximizes profit by operating at the level of output where:Select correct option:Average revenue equals average cost.Average revenue equals average variable cost.Total costs are minimized.Marginal revenue equals marginal cost.

10. A firm's producer surplus equals its economic profit when:Select correct option:Average variable costs are minimized.Marginal costs equal marginal revenue.Fixed costs are zero.Total revenues equal total variable costs.

11. The price of good A goes up. As a result the demand for good B shifts to the left. From

this we can infer that:Select correct option:Good A is used to produce good B.Good B is used to produce good A.Goods A and B are substitutes.Goods A and B are complements.

12. Deadweight loss refers to:Select correct option:Losses in consumer surplus associated with excess government regulations.

Situations where market prices fail to capture all of the costs and benefits of a policy.Net losses in total surplus.Losses due to the policies of labor unions.

13. Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and

capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental costof capital is $25 per hour, the slope of the isocost curve will be:

Select correct option:50025/500- 4/525/20 or ¼

14. Which of the following is true regarding income along a price consumption curve?Select correct option:Income is increasing.Income is decreasing.Income is constant.The level of income depends on the level of utility.

Quiz 2

15. Government intervention can increase total welfare when:


There are costs or benefits that are external to the market.

Consumers do not have perfect information about product quality.

A high price makes the product unaffordable for most consumers.

There are costs or benefits that are external to the market and consumers do not have perfect information about product quality.

16. What does it mean when the CPI is higher this year than last?


The rate of inflation has increased.

There has been inflation since last year.

Real prices have increased.

Real prices have decreased.

17. Which of the following would cause a shift to the right of the supply curve for gasoline? I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline.


I only.

II only.

III only.

II and III only.


Select correct option: http://www.vustudents.net

Output.

Capital expenditure.

Wages.

Time.



Monopoly is the sole producer in the market.

Monopoly price is determined from the demand curve.

Monopolist can charge as high a price as it likes.

Monopoly demand curve is downward sloping.

20. Jane is trying to decide which courses to take next semester. She has narrowed down her choice to two courses Microeconomics and Macroeconomics. Now she is having trouble. She just cannot decide which of the two courses to take. It’s not that she is indifferent between the two courses, she just cannot decide. An economist would say that this is an example of preferences that:


Are not transitive.

Are incomplete.

Violate the assumption that more is preferred to less.


21. Technological improvement:


Can hide the presence of diminishing returns.

Can be shown as a shift in the total product curve.

Allows more output to be produced with the same combination of inputs.

All of the given options are true.

22. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, which of the following is true?


Rabia has a higher expected expense than Samina for the car.

Rabia has a lower expected expense than Samina for the car.

Rabia and Samina have the same expected expense for the car, and it is somewhat less than $20,000.

It is not possible to calculate the expected expense for the car until the true probabilities are known.

23. A firm never operates:


At the minimum of its ATC curve.

At the minimum of its AVC curve.

On the downward-sloping portion of its ATC curve.

On the downward-sloping portion of its AVC curve.

24. Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3; the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is:


$85.

$60.

$110.

$35.

25. Good A is a normal good. The demand curve for good A:


Slopes downward.

Usually slopes downward, but could slope upward.

Slopes upward.

Usually slopes upward, but could slope downward.

26. The function which shows combinations of inputs that yield the same output is called a(n):


Isoquant curve.

Isocost curve.

Production function.

Production possibilities frontier.

27. The snob effect corresponds best to a:


Negative network externality.

Giffen good.

Positive network externality.

Bandwagon effect.

28. In the long run, which of the following is considered a variable cost?

Select correct option: http://www.vustudents.net

Expenditures for wages.

Expenditures for raw materials.

Expenditures for capital machinery and equipment.


29. When people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made, we would say that the telephone company is using:


Limit pricing.

A two-part tariff.

Second-degree price discrimination.

Two stage price discrimination.

Quiz 3

30. The price elasticity of demand for a demand curve that has a zero slope is:


Zero.

One.

Negative but approaches zero as consumption increases.

Infinity.

31. The concept of a risk premium applies to a person that is:


Risk averse.

Risk neutral.

Risk loving.


32. Price ceilings:


Always increase consumer surplus.

May decrease consumer surplus if demand is sufficiently elastic.

May decrease consumer surplus if demand is sufficiently inelastic.

Always decrease consumer surplus.

33. The demand for books is: Qd = 120 - P The supply of books is: Qs = 5P Refer to theabove scenario, if P=$15, which of the following is true?


There is a surplus equal to 30.

There is a shortage equal to 30.

There is a surplus, but it is impossible to determine how large.

There is a shortage, but it is impossible to determine how large

34. A firm maximizes profit by operating at the level of output where:


Average revenue equals average cost.

Average revenue equals average variable cost.

Total costs are minimized.

Marginal revenue equals marginal cost.

35. If Px = Py, then when the consumer maximizes utility:


X must equal Y.

MU(X) must equal MU(Y).

MU(X) may equal MU(Y), but it is not necessarily so.

X and Y must be substitutes.

36. Consider the following statements when answering this question: I. "In the long run, if a firm wants to remain in a competitive industry then it needs to own resources that are in limited supply." II. "In this competitive market our firm's long run survival depends only on the efficiency of our production process." http://www.vustudents.net


I and II are true.

I is true, and II is false.

I is false, and II is true. (Not Sure)

I and II are false.

37. An investment opportunity is a sure thing; it will pay off $100 regardless of which of the three possible outcomes comes to pass. The variance of this investment opportunity:


Is 0.

Is 1.

Is 2.

Is -1.

38. If X and Y are perfect substitutes, which of the following assumptions about indifference curves is not satisfied?


Completeness.

Transitivity.

More is preferred to less.

Diminishing marginal rate of substitution.

39. If the market price for a competitive firm's output doubles then:


The profit maximizing output will double.

The marginal revenue doubles.

At the new profit maximizing output, price has increased more than marginal cost.

At the new profit maximizing output, price has risen more than marginal revenue.

40. The long run supply curve in a constant-cost industry is linear and:


Upward-sloping.

Downward-sloping.

Horizontal.

Vertical.

41. Marginal revenue, graphically, is:


The slope of a line from the origin to a point on the total revenue curve.

The slope of a line from the origin to the end of the total revenue curve.

The slope of the total revenue curve at a given point.

The vertical intercept of a line tangent to the total revenue curve at a given point.

42. Elasticity measures:


The slope of a demand curve.

The inverse of the slope of a demand curve.

The percentage change in one variable in response to a one percent increase in another variable.

Sensitivity of price to a change in quantity.

Which of the following is a positive statement?



Smoking should be restricted on all airline flights.

All automobile passengers should be required to wear seatbelts in order to protect them against injury.

None of the given options.



Consumers know their preferences.

Consumers know their income levels.

Consumers know the prices available.

Consumers can anticipate price changes.

Quiz 4

44. In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true?Select correct option:

These price controls caused a chronic excess supply of natural gas. Consumers gained from the price controls, because consumer surplus was larger than it would have been under free market equilibrium. Producers gained from the price controls because producer surplus was larger than it would have been under free market equilibrium. This episode of price controls was unusual, because it resulted in no deadweight loss to society.

10:09 PM me: a

45. Our economy is characterized by: Select correct option:

Unlimited wants and needs Unlimited material resources No energy resources Abundant productive labor

me: a46. 10:10 PM A Rolling Stones song goes: “You can’t always get what you want.” This

echoes an important theme from microeconomics. Which of the following statements is the best example of this theme? Select correct option:

Consumers must make the best purchasing decisions they can, given their limited incomes. Workers do not have as much leisure as they would like, given their wages and working conditions. Workers in planned economies, such as North Korea, do not have much choice over jobs. Firms in market economies have limited financial resources.

me: a47. 10:11 PM The slope of the total product curve is the:


Average product. Slope of a line from the origin to the point. Marginal product. Marginal rate of technical substitution.

me: d ?

48. 10:12 PM A firm never operates: Select correct option:

At the minimum of its ATC curve. At the minimum of its AVC curve. On the downward-sloping portion of its ATC curve. On the downward-sloping portion of its AVC curve.

me: a49. 10:13 PM Indifference curves that are convex to the origin reflect:



me: b50. What does it mean when the CPI is higher this year than last?


The rate of inflation has increased. There has been inflation since last year. Real prices have increased. Real prices have decreased.

me: c51. The presence of a learning curve may induce a decision maker in a startup firm to

choose: Select correct option:


10:15 PM me: d52. Assume that beer is an inferior good. If the price of beer falls, then the substitution

effect results in the person buying ____ of the good and the income effect results in the person buying ____ of the good. http://www.vustudents.netSelect correct option:


10:16 PM me: c53. The change in the price of one good has no effect on the quantity demanded of

another good. These goods are: Select correct option:

Complements. Substitutes.

Both inferior. None of the given options.

10:17 PM me: a54. A person with a diminishing marginal utility of income:


Will be risk averse. Will be risk neutral. Will be risk loving. Cannot decide without more information.

10:18 PM me: a55. If indifference curves cross, then: Figure Based on figure given above, it can be

inferred that: Select correct option:

The assumption of a diminishing marginal rate of substitution is violated. The assumption of transitivity is violated. The assumption of completeness is violated. Consumers minimize their satisfaction.

10:19 PM me: a56. Prospective sunk costs:


Are relevant to economic decision-making. Are considered as investment decisions. Rise as output rises. Do not occur when output equals zero.

me: a57. The variance of an investment opportunity:


Cannot be negative. Has the same unit of measure as the variable from which it is derived. Is a measure of central tendency. Is unrelated to the standard deviation.

Quiz 5


Revenue exceeds producer surplus.Producer surplus is positive.Producer surplus exceeds fixed cost.Producer surplus exceeds variable cos6:26 PM 2

59. me: In an unregulated, competitive market consumer surplus exists because some: Sellers are willing to take a lower price than the equilibrium price.Consumers are willing to pay more than the equilibrium price.

Sellers will only sell at prices above equilibrium price (or actual price).Consumers are willing to make purchases only if the price is below the actual price.

60. 6:28 PM me: Rabia and Samina are shopping for new cars (one each). Rabia expectsto pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:

$20,000.$19,000.$18,000.$17,500.me: An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing market basket?me: MRSxy is at a maximum.

Px/Py = money income.MRSxy = money income.MRSxy = Px/Py.6:30 PM3 4

61. me: When the price of wood (which is an input in the production of furniture) falls, the consumer surplus associated with the consumption of furniture:

Increases.Decreases.Does not change.Insufficient information for judgement1

62. me: The profit maximizing rule MC = MR is followed by: A monopoly, but not a perfectly competitive firm.A perfectly competitive firm, but not a monopoly.Both a monopoly and a perfectly competitive firm.Neither a monopoly nor a perfectly competitive firm.2

63. me: To find the profit maximizing level of output, a firm finds the output level where:

6:34 PM Price equals marginal cost.Marginal revenue and average total cost.Price equals marginal revenue.None of the given options.1

64. me: Which of the following statements is true regarding the differences between economic and accounting costs?


65. me: Which of the following is true concerning the income effect of a decrease in price?

1

It will lead to an increase in consumption only for a normal good.It always will lead to an increase in consumption.It will lead to an increase in consumption only for an inferior good.It will lead to an increase in consumption only for a Giffen good.6:37 PM 1

66. me: If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

They are more likely to become takeover targets of profit-maximizing firms.They are less likely to be replaced by stockholders.They are less likely to be replaced by the board of directors.They are more likely to have higher profit than if they had pursued that policy explicitly.

67. me: Economies of scope refer to:me: Changes in technology.

The very long run.Multiproduct firms.Single product firms that utilize multiple plants.1

68. me: Suppose that the price of labor (PL ) is $10 and the price of capital (PK ) is $20. What is the equation of the isocost line corresponding to a total cost of $100?Select correct option:

PL + 20PK100 = 10L + 20K100 = 30(L+K)None of the given options6:41 PMg 2

69. me: A monopoly is a market structure characterized by: A single buyer.A product with many close substitutes.A large number of small firms.Limited entry and exit.6:45 PM me: Limited entry and exit.monopolug

70. me: Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:

The extent to which any firm can influence the price of the product. The size of the firms in the market. The annual sales made by the largest firms in the market. The presence of government intervention.The extent to which any firm can influence the price of the product.

71. 6:47 PM me: The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as:

me: Revenue exceeds producer surplus. Producer surplus is positive. Producer surplus exceeds fixed cost. Producer surplus exceeds variable cost.

72. me: In a short run production process, the marginal cost is rising and the average total cost is falling as output is increased. Thus, marginal cost is:

Below average total cost. Above average total cost. Between the average variable and average total cost curves. Below average fixed cost.2nd , because jab producer surplus positive hai, toh producer will stay in market

73. me: An investment opportunity has two possible outcomes, and the value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the probability of the other outcome? Select correct option:

0 0.25 0.5 0.75

74. me: The slope of the total product curve is the: Average product. Slope of a line from the origin to the point. Marginal product. Marginal rate of technical substitution.4

75. me: The Clinton administration has recommended an increase in the tax on yachts to help pay for government programs. Which of the following is true? Select correct option:

The burden of this tax will fall entirely on yacht manufacturers. The sales of yachts will decrease. The profit of yacht manufacturers will increase. Employment of workers in the yacht industry will increase.

76. Price ceilings can result in a net loss in consumer surplus when the ____________curve is ____________.

Demand; very elastic Demand; very inelastic Supply; very inelastic None of the given options; price ceilings always increase consumer surplus.1

77. For any given level of output:Select correct option:Marginal cost must be greater than average cost.Average fixed cost must be greater than average variable cost.Fixed cost must be greater than variable cost.None of the given options is necessarily correct

78. In the short run, a perfectly competitive firm earning positive economic profit is:Select correct option:On the downward-sloping portion of its ATC.At the minimum of its ATC.On the upward-sloping portion of its ATC.Above its ATC.

279. if price is between AVC and ATC, the best and most practical thing for a perfectly

competitive firm to do is:Select correct option:Raise prices.Lower prices to gain revenue from extra volume.Shut down immediately, but not liquidate the business.Continue operating, but plan to go out of business.

me: a

80. Moving down a typical isoquant, the slope of the isoquant :Select correct option:Becomes flatter.Becomes steeper.Remains constant.Becomes linear.

81. When the federal government installs a price support program that requires the government to purchase all of a good not bought in the private economy at the support price, changes in producer surplus:Select correct option:Are negative.Are positive, but more than offset by the cost to consumers and the government. Are positive, and not offset by the cost to consumers and the government.None of the given options.

82. One reason individuals are willing to pay for information in uncertain situations is that information:Select correct option:Can reduce uncertainty.Is a way to diversify.Is a method of insurance.Always reduces the difference between the probabilities of possible outcomes.

83. A firm produces leather handbags and leather shoes. If there are economies of scope, the product transformation curve between handbags and shoes will be: Select correct option:A straight line.Bowed outward (concave).Bowed inward (convex).A rectangle.

84. The area below the demand curve and above the price line measures:Select correct option:Consumer surplus.Economic profit.Elasticity of demand.The total value obtained from consuming the good or service.

http://www.vustudents.net

85. The supply curve for a competitive firm is:Select correct option:Its entire MC curve.The upward-sloping portion of its MC curve.Its MC curve above the minimum point of the AVC curve.Its MC curve above the minimum point of the ATC curve.

----------------------------------------------------------------------------------------------------------------

6th Quiz file

1. Which of the following strategies are used by business firms to capture consumersurplus?

1. price discrimination.2. bundling.3. two-part tariffs.4. d. all of the above.

2. Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:

1. is trying to reduce its costs and therefore increase its profit.

2. is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.

3. is attempting to convert producer surplus into consumer surplus.

4. d. is attempting to convert consumer surplus into producer surplus.

5. both (a) and (c) are correct.

3. An electric power company uses block pricing for electricity sales. Block pricing is an example of




4. Block pricing is not a type of price discrimination.


1. engages in a discrete pricing strategy.

2. charges the average reservation price.

3. engages in second-degree price discrimination.

4. d. engages in first-degree price discrimination.

5. The maximum price that a consumer is willing to pay for each unit bought is the ______________ price.

1. market

2. b. reservation

3. consumer surplus

4. auction

5. choke

6. Second-degree price discrimination is the practice of charging

1. the reservation price to each customer.

2. b. different prices for different blocks of the same good or service.

3. different groups of customers different prices for the same products.

4. each customer the maximum price that he or she is willing to pay.

7. A firm is charging a different price for each unit purchased by a consumer. This is called

1. a. first-degree price discrimination.





100% CORRECT ANSWERS.....

8. A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing






9. Discrimination based upon the quantity consumed is referred to as ______________ price discrimination.

1. first-degree

2. b. second degree

3. third-degree

4. group

10. A doctor sizes up patients' income and charges wealthy patients more than poorer ones. This pricing scheme represents a form of




4. pricing at each consumer’s reservation price.

11. Third-degree price discrimination involves

1. charging each consumer the same two part tariff.

2. charging lower prices the greater the quantity purchased.

3. the use of increasing block rate pricing.

4. d. charging different prices to different groups based upon differences in elasticity of demand.


1. a. the reservation price.


3. the first-degree price.

4. the block price.

5. the choke price.

13. McDonald's restaurant located near the high school offered a Tuesday special for high school students. If high school students showed their student ID cards, they would be given 50 cents off any special meal. This practice is an example of:

1. collusion.


3. two-part tariff.

4. bundling.

5. tying.

14. In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of:

1. collusion.


3. two-part tariff.

4. bundling.

5. tying.

15. Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of:


2. b. third degree price discrimination.


4. bundling.


16. Which of the following is NOT a condition for third degree price discrimination?

1. Monopoly power.

2. Different own price elasticities of demand.

3. c. Economies of scale.

4. Separate markets.

17. A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). Having sold all of its output it discovers that the marginal revenue in the local market is $20 while its marginal revenue on the internet auction site is $30. To maximize profits the firm should

1. have sold more output in the local market and less at the internet auction site.

2. do nothing until it acquires more information on costs.

3. have sold less output in the local market and more on the internet auction site.

4. sell less in both markets until marginal revenue is zero.

5. sell more in both markets until marginal cost is zero.

18. Suppose that the marginal cost of an additional ton of steel produced by the Japanese is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan,which of the following will be correct?

1. The Japanese will sell more steel abroad than they will sell in Japan.

2. The Japanese will sell more steel in Japan than they will sell abroad.

3. c. The Japanese will sell steel at a lower price abroad than they will charge domestic users.

4. The Japanese will sell steel at a higher price abroad than they will charge domestic users.

5. Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.

19. You are the producer of stereo components. There are two markets, foreign and domestic. The two groups of consumers cannot trade with one another. If your firm practices third-degree price discrimination, when you have maximized profits, the marginal revenue

1. in the foreign market will equal the marginal cost.

2. in the domestic market will equal the marginal cost.

3. in the domestic market will equal the marginal revenue in the domestic market.



20. You are the producer of stereo components. There are two markets, foreign and domestic. The two groups of consumers cannot trade with one another. You will charge the higher price in the market with the

1. a. lower own price elasticity of demand (more inelastic demand).

2. higher own price elasticity of demand (more elastic demand).

3. larger teenage population.

4. greater consumer incomes.

21. For a perfect first-degree price discriminator, incremental revenue is

1. greater than price if the demand curve is downward sloping.

2. the same as the marginal revenue curve if the firm is a non-discriminating monopolist.

3. c. equal to the price paid for each unit of output.

4. less than the marginal revenue for a non-discriminating monopolist.

22. In third-degree price discrimination a firm faces two markets. In the first market the firm charges $30 per unit, and in the second market it charges $22 per unit.Which of the following represents the ratio of elasticities of demand in the two markets?

1. E2 = (21/29)E1.

2. E2 = (29/21)E1

3. E2 = E1.

4. E2 = (22/30)E1.

5. e. none of these.

23. A firm sells an identical product to two groups of consumers, A and B.The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

1. PA = PB = MC.

2. MRA = MRB.

3. c. MRA = MRB = MC.

4. (MRA - MRB) = (1 - MC).

24. Bindy, an 18 year old high school graduate, and Luciana, a 40 year old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of:

1. collusion.

2. price discrimination.

3. two-part tariff.

4. bundling.


25. Under perfect price discrimination, marginal profit at each level of output equal

1. 0

2. P-AC.

3. c. P-MC.

4. P-AR.

26. Under perfect price discrimination, consumer surplus

1. is less than zero.

2. is greater than zero.

3. c. equals zero.

4. is maximized.

27. When a monopolist engages in perfect price discrimination,

1. the marginal revenue curve lies below the demand curve.

2. b. the demand curve and the marginal revenue curve are identical.

3. marginal cost becomes zero.

4. the marginal revenue curve becomes horizontal.

28. The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this her

1. profits are maximized.

2. costs are minimized given her level of output.

3. c. revenues are maximized given her level of output.


29. When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of



3. c. intertemporal price discrimination.


30. Club Med, which runs a number of vacation resorts, offers vacation packages at a lower price in the winter, the "off season," than in the summer. This practice is an example of:



3. two-part tariff.

4. bundling.

5. e. both (a) and (b) are correct.

31. In peak load pricing,

1. marginal revenue is equal in both periods.

2. b. marginal revenue in the peak period is greater than in the off-peak period.

3. marginal revenue in the peak period is less than in the off-peak period.

4. the sum of the marginal revenues is greater than the sum of the marginal costs.

32. When the movie "Jurassic Park" debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of




4. tying.


33. The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of

1. bundling.



4. tying.


34. A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of




4. tying.


35. A local theater prices every ticket in the theater at $5.00 for matinees.During the evening, ticket prices are much higher. This is an example of




4. bundling.


36. An amusement park charges an entrance fee of $75 per person, then $2.50 per ride. This is an example of




4. bundling.

5. tying.

37. When people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made, we would say that the telephone company is using

1. limit pricing.



4. two stage price discrimination.

38. A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a

1. tying contract.

2. b. two-part tariff.

3. form of perfect price discrimination.

4. none of these.

39. A national chain of bookstores has initiated a frequent buyer program. If you buy a frequent buyer card for $10, you are entitled to a 10 percent discount on all purchases for 1 year. This practice is an example of:



3. c. two-part tariff.

4. bundling.


40. A firm setting a two-part tariff with only one customer should set the entry fee equal to

1. marginal cost.

2. b. consumer surplus.

3. marginal revenue.

4. price.

41. The local cable TV company charges a "hook-up" fee of $30 per month.Customer can then watch programs on a "pay-per-view" basis (a fee is charged for every program watched). This is an example of



3. c. a two-part tariff.




1. permits a firm to meter demand.

2. permits a firm to practice price discrimination.

3. enables a firm to extend its monopoly power to new markets.


43. Season ticket holders for the St. Louis Rams received a surprise when they received their applications to renew their season tickets. In order to get your season ticket to the Rams' home games, you had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of:



3. two-part tariff.

4. d. bundling.


44. A local restaurant sells strawberry pie for $3.00 per slice. However, if you order the prime rib dinner, you can get a slice of pie for only a dollar. This is an example of

1. a. bundling.



4. tying.


45. A local restaurant offers an "all-you-can-eat" salad bar for $3.49.However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of




4. tying.


46. Bundling products makes sense for the seller when

1. consumers have heterogeneous demands.

2. the products are complementary in nature.

3. firms cannot price discriminate.

4. d. both (a) and (c).

47. Bundling is effective when demands are ____________ and ____________ correlated.

1. a. different; negatively

2. different; positively

3. similar; negatively

4. similar; positively

5. identical; perfectly

48. Bundling raises higher revenues than selling the goods separately when

1. demands for two goods are highly positively correlated.

2. demands for two products are mildly positively correlated.

3. c. demands for two products are negatively correlated.

4. there is a perfect positive correlation between the demands for two goods.

5. the goods are complementary in nature.

49. Mixed bundling is more profitable than pure bundling when

1. the marginal cost of each good being sold is positive.

2. the consumers’ reservation values of each good being sold are not perfectly negatively correlated with one or another.

3. c. both (a) and (b) apply.

4. the marginal cost of one good is zero.

50. One Guy's Pizza advertising expenditures are $1,200 and sales are $30,000. When advertising increases to $1,400, sales increase to $32,000. The arc advertising elasticity of demand is approximately

1. 0

2. 0.1

3. c. 0.4

4. 2.5

5. 12.5

51. A 10 percent decrease in advertising results in a 5 percent sales decrease.The advertising elasticity of demand is

1. -2.0

2. -0.5

3. c. 0.5

4. 2



I. To maximize profit, a firm will increase its advertising expenditures until the last dollar of advertising just brings forth an additional dollar of revenue.

II. The full marginal cost of advertising is the sum of the dollar spent directly on advertising and the marginal production cost that results form the increased sales that advertising brings about.



3. c. I is false, and II is true.


`


I. To maximize profit, a firm will advertise more when the advertising elasticity is larger.

II. To maximize profit, a firm will advertise more when the price elasticity of demand is smaller.

1. a. Both I and II are true.


3. I is false, and II is true.


54. The price elasticity of demand for nursery products is -10. The advertising elasticity of demand is 0.4. Using the "Rule of Thumb for Advertising," the level of advertising will be set at _____ of sales.

1. 0.25 percent

2. 0.4 percent

3. c. 4 percent

4. 40 percent

55. Grocery store chains advertise more than convenience stores because:

1. the advertising elasticity of demand is smaller for grocery store chains than for convenience stores.

2. convenience stores have more elastic demand for their products then grocery store chains.

3. c. the advertising elasticity of demand for convenience stores is near zero and is much smaller than for grocery store chains.



56. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries is called:

1. the shadow price.

2. b. the transfer price.


4. the non-market price.


57. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers. There are many other firms that extract and sell crude oil so that the market for crude oil is regarded by Acme Oil as competitive. The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries:

1. a. equals the market price for crude oil.

2. equals the market price for crude oil less a discount because Acme Oil does not to profit from itself.

3. is unrelated to the market price of crude oil.

4. is greater than the marginal cost of extracting crude oil.

58. What is net marginal revenue?

1. The same as marginal profit.

2. b. The additional revenue the firm earns from an extra unit of an internally produced intermediate input.

3. The additional revenue the firm earns from producing one more unit of output.

4. The additional revenue the firm earns from selling one more unit of output.

59. What is the profit maximizing condition for a vertically integrated firm?

1. Net marginal revenue equals the sum of the marginal costs of the intermediate inputs.

2. Marginal revenue equals the marginal cost of the final output.

3. c. Net marginal revenue equals the marginal cost of each intermediate good.

4. The sum of net marginal revenues equals the marginal cost of the final output.

7th Quiz File

I solved these questions on Emails, MDb etc… I asked not in exact question form that in quiz and exams. I suggest you that if you put a quiz question on MDb on same as quiz question that teacher not reply. BUT if you post a quiz question not the same manner that in quiz then teacher reply must. I apply this technique.

Which of the following is NOT regarded as a source of inefficiency in monopolisticcompetition?

• The fact that price exceeds marginal cost. • Excess capacity.• Product diversity • The fact that long-run average cost is not minimized.

Which would not increase the productivity of labor?

• An increase in the size of labor force.• An increase in the quality of capital.• An increase in the quantity of capital.• An increase in the technology.

The cost-output elasticity is used to measure:

• Economies of scope.• Economies of scale.

If the market supply of labor increased relative to demand (baby boomers or female entry), a surplus of labor would exist and the wage rate would:

FallRiseNo effectAll of the given options

Opportunity cost, most broadly defined, is:

The additional cost of producing an additional unit of output, What we forgo, or give up, when we make a choice or a decision, A cost that cannot be avoided, regardless of what is done in the future. The additional cost of buying an additional unit of a product,

The monopolistic producer:

is not concerned with the cost of production since higher cost can be passed on to consumers tries to maximize total revenue usually produces in the inelastic range of the demand curve tries to minimize the cost of producing a given level of output

If total cost (TC) of producing a good (Q) is given as: TC = 200 + 5Q. then what is the marginal cost?

5(Correct)

5Q

0

A firm's producer surplus equals its economic profit when:


Average variable costs are minimized.

Marginal costs equal marginal revenue.

Fixed costs are zero.

Total revenues equal total variable costs.

There is no relationship between economies of scope and returns to scale?

If Px = Py, then when the consumer maximizes utility?

When the Mux will be equal to Muy

63. Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to the above scenario, Rabia's expected expense for his car is:Select correct option:

• $20,000.• $19,000.• $18,000.• $17,500

If a competitive firm's marginal cost always increases with output, then at the profit maximizing output level, producer surplus is:Select correct option:

• Zero because marginal costs equal marginal revenue.• Zero because price equals marginal costs.• Positive because price exceeds average variable costs.• Positive because price exceeds average total costs.

The concept of a risk premium applies to a person that is:

Select correct option:• Risk averse.• Risk neutral.• Risk loving.• All of the given options.

In long-run competitive equilibrium, a firm that owns factors of production will have an:

Select correct option:• Economic profit = $0 and accounting profit > $0.• Economic and accounting profit = $0.• Economic and accounting profit > $0.• Economic and accounting profit can take any value.

The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the ______________ effect.Select correct option:

• Giffen• Real price• Income• Substitution

Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves:Select correct option:

• Diseconomies of scope.• Economies of scale.• Decreasing returns to scale.• Increasing returns to scale.

A firm never operates:Select correct option:

• At the minimum of its ATC curve.• At the minimum of its AVC curve. Doubt• on the downward-sloping portion of its ATC curve.• On the downward-sloping portion of its AVC curve.

A production function defines the output that can be produced:


• At the lowest cost, given the inputs available.• With the fewest amount of inputs.• If the firm is technically efficient. Doubt• In a given time period if no additional inputs are hired.

In 1970s the federal government imposed price controls on natural gas. Which of the following statements is true?Select correct option:

• These price controls caused a chronic excess supply of natural gas.• Consumers gained from the price controls, because consumer surplus was larger than

it would have been under free market equilibrium.• Producers gained from the price controls because producer surplus was larger than it

would have been under free market equilibrium.• This episode of price controls was unusual, because it resulted in no deadweight loss

to society.

Any combination of products inside the production possibility frontier is:


• Allocatively inefficient• Consumer inefficient

• Productively inefficient• None of the given option.

For normal goods income effect is positive.

For inferior good it is negative.

The telecommunication industry of Pakistan is fall under which type of market structure.

Perfectly competitive, Monopolistic, Monopolistic Competitive or oligopoly Oligopoly structure.

Because Small number of firms, Product differentiation may or may not exist and Barriers to entry is there...

A tax on the accounting profits of corporations. Tell the term name

Corporation tax is a tax on the profits of corporations. Each company has to pay corporation tax within 12 months of its financial year.

Real exchange rate: The relative price of domestic goods in terms of foreign goods is called real exchange rate. Real exchange rate =E= e * P / P*

Who give the theory regarding the tradeoff between unemployment and inflation?

William Phillips in 1958 gave a theory regarding the trade off between inflation and unemployment.

Examples of leakage. Savings, imports, taxes.Leakage is the amount of money which flows out of the circular flow of income.

When the long run aggregate supply curve will shift to the right

Long run aggregate supply curve changes due to following factors;

change in factors of production, change in technology,

Change in price of something needed for production like oil etc.

8th File Quize

Another new quiz file of ECO4021. When the demand curve is downward sloping, marginal revenue is

1. equal to price.2. equal to average revenue.3. less than price.4. more than price.

2. For the monopolist shown below, the profit maximizing level of output is:

1. a. Q1.2. Q2.3. Q3.4. Q4.5. Q5.

3. How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1?

1. 0CDQ1.2. 0BEQ1.3. 0AFQ1.4. ACDF.5. e. BCDE.


1. Monopoly is the sole producer in the market.2. Monopoly price is determined from the demand curve.3. c. Monopolist can charge as high a price as it likes.4. Monopoly demand curve is downward sloping.

5. Which of the following is true at the output level where P=MC?

1. The monopolist is maximizing profit.2. The monopolist is not maximizing profit and should increase output.3. c. The monopolist is not maximizing profit and should decrease output.4. The monopolist is earning a positive profit.

6. Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ______________ price and sell a ______________ quantity.

1. higher; larger2. lower; larger3. c. higher; smaller4. lower; smaller5. none of these

7. Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the

1. firm is maximizing profit.2. b. firm's output is smaller than the profit maximizing quantity.3. firm's output is larger than the profit maximizing quantity.4. firm's output does not maximize profit, but we cannot conclude whether the output is too large or

too small.

8. To find the profit maximizing level of output, a firm finds the output level where

1. price equals marginal cost.2. marginal revenue and average total cost.3. price equals marginal revenue.4. all of the above.5. e. none of the above.

9. As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should

1. expand output.2. do nothing without information about your fixed costs.3. c. reduce output until marginal revenue equals marginal cost.4. expand output until marginal revenue equals zero.5. reduce output beyond the level where marginal revenue equals zero.

10. Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?

1. The marginal cost at the first plant must equal marginal revenue.2. The marginal cost at the second plant must equal marginal revenue.3. The marginal cost at the two plants must be equal.4. d. all of the above.5. none of the above.

11. The monopolist has no supply curve because

1. a. the quantity supplied at any particular price depends on the monopolist's demand curve.2. the monopolist's marginal cost curve changes considerably over time.3. the relationship between price and quantity depends on both marginal cost and average cost.4. there is a single seller in the market.5. although there is only a single seller at the current price, it is impossible to know how many sellers

would be in the market at higher prices.

12. When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will

1. always be less than the tax.2. always be more than the tax.3. always be less than if a similar tax were imposed on firms in a competitive market.4. d. not always be less than the tax.

13. The monopoly supply curve is the

1. same as the competitive market supply curve.2. portion of marginal costs curve where marginal costs exceed the minimum value of average

variable costs.3. result of market power and production costs.4. d. none of the above.

14. For a monopolist, changes in demand will lead to changes in

1. price with no change in output.2. output with no change in price.3. c. both price and quantity.4. any of the above can be true.

15. Use the following two statements to answer this question: I. For a monopolist, at every output level, average revenue is equal to price. II. For a monopolist, at every output level, marginal revenue is equal to price.

1. Both I and II are true.2. b. I is true, and II is false.3. I is false, and II is true.4. Both I and II are false.5. Statements I and II could either be true or false depending upon demand.

16. Which of the following is NOT true for monopoly?

1. The profit maximizing output is the one at which marginal revenue and marginal cost are equal.2. Average revenue equals price.3. The profit maximizing output is the one at which the difference between total revenue and total

cost is largest.4. The monopolist's demand curve is the same as the market demand curve.5. e. At the profit maximizing output, price equals marginal cost.

17. If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be:

1. negative.2. b. positive.

3. zero.4. indeterminate from the given information.

18. A monopolist has equated marginal revenue to zero. The firm has:

1. maximized profit.2. b. maximized revenue.3. minimized cost.4. minimized profit.

19. A monopolist has determined that at the current level of output the price elasticity of demand is -0.15. Which of the following statements is true?

1. a. The firm should cut output.2. This is typical for a monopolist; output should not be altered.3. The firm should increase output.4. None of the above is necessarily correct.

20. A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately:

1. $02. $203. c. $404. $105. This problem cannot be answered without knowing the marginal cost.

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows:

21. Refer to Scenario 1. How much output will Barbara produce?

1. 0 2. 223. 56 4. 72 5. none of the above

22. Refer to Scenario 1. The price of her product will be _____.

1. 4 2. b. 22 3. 32 4. 425. 72

23. Refer to Scenario 1. How much profit will she make?

1. -996 2. 0 3. c. 1,2964. 1,5685. none of the above

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:Q = 200 - 2PMR = 100 - QTC = 5QMC = 5

24. Refer to Scenario 2. What level of output maximizes total revenue?

1. 02. 903. 954. d. 1005. none of the above

25. Refer to Scenario 2. What is the profit maximizing level of output?

1. 02. 903. c. 954. 1005. none of the above

26. Refer to Scenario 2. What is the profit maximizing price?

1. $95.00.2. $5.00.3. c. $52.50.4. $10.00.

27. Refer to Scenario 2. How much profit does the monopolist earn?

1. a. $4512.50.2. $4987.50.3. $475.00.4. $5.00.

28. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output?

1. 02. b. 903. 954. 1005. none of the above

29. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing price?

1. $90.00.2. $10.00.3. c. $55.00.4. $52.50.

30. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. How much profit does the monopolist earn?

1. a. $4050.2. $4950.3. $450.4. $5.

31. Refer to Scenario 2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

1. It increases by $1000.2. b. It decreases by $1000.3. It decreases by less than $1000.4. It stays the same.

32. Refer to Scenario 2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?


The demand curve and marginal revenue curve for red herrings are given as follows:Q = 250 - 5PMR = 50 - 0.4Q

33. Refer to Scenario 3. What level of output maximizes revenue?

1. 02. 453. 854. d. 1255. 245

34. Refer to Scenario 3. The marginal cost of red herrings is given as: MC = 0.6Q. What is the profit-maximizing level of output?

1. 02. 253. c. 504. 605. 125

35. Refer to Scenario 3. At the profit-maximizing level of output, demand is

1. completely inelastic.2. inelastic, but not completely inelastic.3. unit elastic.4. d. elastic, but not infinitely elastic.5. infinitely elastic.

36. Refer to Scenario 3. Compared to a competitive red herring industry, the monopolistic red herring industry

1. produces more output at a higher price.2. b. produces less output at a higher price.3. produces more output at a lower price.4. produces less output at a lower price.5. not enough information to relate the monopolistic red herring industry to a competitive industry.

37. Refer to Scenario 3. Suppose that a tax of $5 per unit of output is imposed on red herring producers. The price of red herring will

1. not change.2. b. increase by less than $5.3. increase by $5.4. increase by more than $5.5. decrease.

The demand for tickets to the Meat Loaf concert (Q) is given as follows:Q = 120,000 - 2,000P

The marginal revenue is given as:MR = 60 - .001Q

The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional

concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.

38. Refer to Scenario 4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets?

1. 0, $602. 20,000, $503. 40,000, $404. d. 60,000, $305. 80,000, $20

39. Refer to Scenario 4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would

1. increase by $10.2. b. increase by $5.3. not change.4. decrease by $5.5. decrease by $10.

40. Refer to Scenario 4. A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is $30 while the marginal cost in plant 2 is $20. To maximize profits the firm will

1. produce more output in plant 1 and less in the plant 2.2. do nothing until it acquires more information on revenues.3. c. produce less output in plant 1 and more in plant 2.4. produce less in both plants until marginal revenue is zero.5. shut down plant 1 and only produce at plant 2 in the future.

Scenario 5:A firm produces garden hoses in California and in Ohio. The marginal cost of producing garden hoses in the two states and the marginal revenue from producing garden hoses are given in the following table:California Ohio

Qc MCc Qo MCo Qc+o MR1 2 1 3 1 242 3 2 4 2 203 5 3 6 3 164 9 4 8 4 125 16 5 12 5 86 24 6 17 6 4

41. Refer to Scenario 5. From the perspective of the firm, what is the marginal cost of the 5th garden hose?

1. 42. b. 53. 164. 12

5. 8

42. Refer to Scenario 5. How many garden hoses should be produced in California in order to maximize profits?

1. 12. 23. c. 34. 45. 5

John is the manufacturer of red rubber balls (Q). He has a red rubber ball manufacturing plant in California, Florida and Montana. The total cost of producing red rubber balls at each of the three plants is given by the following table:

California Florida MontanaQc TCc Qf TCf Qm TCm1 5 1 8 1 42 10 2 16 2 83 15 3 24 3 124 20 4 32 4 165 25 5 40 5 206 30 6 48 6 247 35 7 56 7 288 40 8 64 8 329 45 9 72 9 3610 50 10 80 10 4011 infinity 11 infinity 11 infinity

43. Refer to Scenario 6. If red rubber balls can be produced at any of the three plants, what is the marginal cost of 5th red rubber ball?

1. a. 42. 53. 84. 205. none of the above

44. Refer to Scenario 6. If red rubber balls can be produced at any of the three plants, and John decides to produce 1 red rubber ball, at which plant will he produce it?

1. California2. Florida3. c. Montana4. he is indifferent between California and Florida5. he is indifferent between Florida and Montana

45. The demand curve and marginal revenue curve for red rubber balls are given as follows:Q = 16 - P MR = 16 - 2Q What level of output maximizes profit?

1. 02. 43. 5.54. d. 65. (b), (c) and (d) all maximize profit.

46. What is the profit maximizing price?


47. At the profit-maximizing level of output, demand is


48. Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

1. -12. 33. 4.54. d. 55. (b), (c) and (d) are correct

49. After the imposition of a tax of $2 per unit of output, what is the profit maximizing price?


The marginal revenue of green ink pads is given as follows:MR = 2500 - 5Q The marginal cost of green ink pads is 5Q.

50. Refer to Scenario 7. How many ink pads will be produced to maximize revenue?

1. 02. 2503. 3004. 5005. none of the above

51. Refer to Scenario 7. How many ink pads will be produced to maximize profit?


52. Refer to Scenario 7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is

1. inelastic.2. unit elastic.3. c. elastic.4. d. unit elastic.

53. The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:MR = 100 - 2QThe profit maximizing price is

1. $702. $653. $604. d. $555. $50

54. A multiplant firm has equated marginal costs at each plant. By doing this

1. profits are maximized.2. b. costs are minimized given the level of output.3. revenues are maximized given the level of output.4. none of the above.

55. The _____ elastic a firm's demand curve, the greater its _____.

1. a. less; monopoly power2. less; output3. more; monopoly power4. more; costs

56. Monopoly power results from the ability to

1. set price equal to marginal cost.2. equate marginal cost to marginal revenue.3. set price above average variable cost.4. d. set price above marginal cost.

57. What is the value of the Lerner index under perfect competition?

1. 12. b. 03. infinity4. two times the price

58. The more elastic the demand facing a firm,

1. the higher the value of the Lerner index.2. b. the lower the value of the Lerner index.3. the less monopoly power it has.4. the higher its profit.

59. The Lerner index measures

1. a firm's potential monopoly power.2. b. the amount of monopoly power a firm chooses to exercises when maximizing profits.3. a firm's potential profitability.4. an industry's potential market power.

60. Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately

1. a. $20.2. $5.3. $10.4. The answer cannot be determined without additional information.

61. Use the following two statements to answer this question:I. A firm can exert monopoly power if and only if it is the sole producer of a good.II. The degree of monopoly power a firm possesses can be measured using the Lerner Index: L=(P-AC)/AC.


2. I is true, and II is false.3. I is false, and II is true.4. d. Both I and II are false.

62. Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:

1. to decrease the price of rice to the Japanese people.2. b. to decrease the consumer surplus of Japanese rice consumers.3. to decrease the producer surplus of Japanese rice producers.4. a welfare gain for the Japanese people.5. increase the consumption of rice by the Japanese people.

63. Which of the following is NOT associated with a high degree of monopoly power?

1. A relatively inelastic demand curve for the firm.2. A small number of firms in the market.3. c. Significant price competition among firms in the market.4. Significant barriers to entry.

64. Which factors determine the firm's elasticity of demand?

1. Elasticity of market demand and number of firms.2. Number of firms and the nature of interaction among firms.3. c. Elasticity of market demand, number of firms, and the nature of interaction among

firms.4. None of the above.

65. When a drug company develops a new drug it is granted a _____ making it illegal for other firms to enter the market until the _____ expires.

1. franchise; franchise2. copyright; copyright3. government license; government license4. d. patent; patent

66. The firms in a market have decided not to compete with one another and have agreed to limit output and raise price.

1. This practice is known as concentrating and is legal in the United States and Canada.2. b. This practice is known as collusion and is illegal in the United States.3. In this way firms take advantage of economies of scale.4. This is an effective barrier to entry, but is illegal in the United States.

67. Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

1. a. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic.

2. When there are many firms in the market and the demand curve faced by each firm is relatively inelastic.

3. When there are few firms in the market and the demand curve faced by each firm is relatively elastic.

4. When there are many firms in the market and the demand curve faced by each firm is relatively elastic.

Figure 10.1The revenue and cost curves in the diagram above are those of a natural monopoly.

68. Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at _____.

1. P12. b. P23. P34. P45. none of the above

69. Refer to Figure 10.1. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at _____.

1. P12. P23. P34. d. P45. none of the above

70. Refer to Figure 10.1. The minimum feasible price is _____.

1. P12. P23. c. P34. P45. none of the above

71. With respect to monopolies, deadweight loss refers to the

1. socially unproductive amounts of money spent to obtain or acquire a monopoly.2. b. net loss in consumer and producer surplus due to a monopolist’s pricing strategy/policy.3. lost consumer surplus from monopolistic pricing.4. none of the above.

72. The regulatory lag:

1. always benefits the regulated firm.2. b. is likely to occur with rate-of-return regulation.3. promotes economic efficiency.4. all of the above.

73. The monopolist that maximizes profit

1. a. imposes a cost on society because the selling price is above marginal cost.2. imposes a cost on society because the selling price is equal to marginal cost.3. does not impose a cost on society because the selling price is above marginal cost.4. does not impose a cost on society because price is equal to marginal cost.

74. Deadweight loss from monopoly power is expressed on a graph as the area between the

1. competitive price and the average revenue curve bounded by the quantities produced by the competitive and monopoly markets.

2. competitive price line and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

3. competitive price line and the monopoly price line bounded by zero output and the output chosen by the monopolist.

4. d. average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

75. Which of the following is true when the government imposes a price ceiling on a monopolist?

1. Marginal revenue becomes horizontal.2. Marginal revenue is linear.3. c. Marginal revenue is kinked--horizontal and then downward sloping.4. Marginal revenue is kinked--downward sloping and then horizontal.

76. If the regulatory agency sets a price where AR=AC for a natural monopoly, output will be

1. equal to the competitive level.2. equal to the monopoly profit maximizing level.3. c. greater than the monopoly profit maximizing level and less than the competitive level.4. greater than the competitive level.

77. If a monopolist's profits were taxed away and redistributed to its consumers,

1. a. inefficiency would remain because output would be lower than under competitive conditions.

2. inefficiency would remain, but not because output would be lower than under competitive conditions.

3. efficiency would be obtained because output would be increased to the competitive level.4. efficiency would be obtained because output would be increased and profits removed.

78. Which of the following statements about natural monopolies is true?

1. Natural monopolies are in the markets for natural resources (like crude oil and coal).2. b. For natural monopolies, marginal cost is always below average cost.3. For natural monopolies, average cost is always increasing.4. Natural monopolies cannot be regulated.

Figure 10.2

79. Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:

1. a. CDE.2. BDEF.3. ADEG.4. 0DEQm.5. none of the above.

80. Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the monopolist is able to add to producer surplus:

1. the area BCEF.2. b. the area BCEF less the area GFH.3. the area BCEH.4. the area BCEH less the area GFH.5. none of the above.

81. Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the deadweight loss is the area:

1. QmEHQc.2. b. GEH.3. GFH.4. FEH.5. none of the above.

Use the following information to answer the next question: The marginal cost of a monopolist is constant and is $10. The demand curve and marginal revenue curves are given as follows: demand: Q = 100 - P marginal revenue: MR = 100 - 2Q 82. The deadweight loss from monopoly power is

1. $1000.002. b. $1012.503. $1025.004. $1037.505. none of the above

Scenario 8: Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:AC = Q+(10,000/Q) MC = 2Q AR = 30-(Q/2) MR = 30-Q

83. Refer to Scenario 8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

1. She will lose money and will go out of business.2. b. She will break even.3. She will make a profit.4. none of the above.

84. Refer to Scenario 8. The deadweight loss from monopoly is


Scenario 9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows:P = 360 - 4Q MR = 360 - 8Q MC = 4Q

85. Refer to Scenario 9. What level of output maximizes the sum of consumer surplus and producer surplus?




87. Refer to Scenario 9. At the profit maximizing level of output, what is the level of consumer surplus?

1. 02. b. 1,8003. 2,700

4. 3,6005. 4,800

88. Refer to Scenario 9. At the profit maximizing level of output, what is the level of producer surplus?

1. 02. 1,8003. c. 5,4004. 7,2005. 9,600

89. Refer to Scenario 9. At the profit maximizing level of output, what is the deadweight loss?

1. 02. 4503. c. 9004. 1,8005. none of the above6.

90. The situation in which buyers are able to affect the price of a good is referred to as ______________ power.

1. monopoly2. purchasing3. c. monopsony4. countervailing

91. For a competitive buyer, the marginal expenditure per unit of an input

1. exceeds the average expenditure per unit.2. is less than the average expenditure per unit.3. c. equals the average expenditure per unit.4. any of the above could be true.

92. Which of the following is true for a competitive buyer?

1. a. AE=ME.2. AE>ME.3. AE<ME.4. AE greater than or equal to ME.

93. For a monopsony buyer, the marginal expenditure per unit of an input

1. a. exceeds the average expenditure per unit.2. is less than the average expenditure per unit.3. equals the average expenditure per unit.

4. any of the above could be true.

94. A monopsonist will buy _____ units of input than a competitor, and will pay _____ per unit.

1. a. fewer; less2. more; less3. fewer; more4. more; more

95. Unlike a competitive buyer,

1. a monopsonist faces an upward-sloping industry supply curve.2. a monopsonist pays a different price for each unit purchased.3. a monopsonist sets marginal value equal to marginal expenditure.4. d. the price that a monopsonist pays depends on the number of units purchased.

Figure 10.3

The marginal value curve and expenditure curves in the diagram above are those of a monopsony.

96. Refer to Figure 10.3. What quantity will the monopsonist purchase to maximize profit?

1. Q12. Q23. c. Q34. Q45. none of the above

97. Refer to Figure 10.3. What price will the monopsonist pay when maximizing profit?

1. P12. P23. P34. P45. e. P5

98. Refer to Figure 10.3. What quantity will be purchased in a competitive market?

1. Q12. Q23. Q34. d. Q45. none of the above

99. Refer to Figure 10.3. What is the competitive price?

1. P12. P23. P34. d. P45. P5

100. In an oligopsony market:

1. there are many buyers and sellers.2. there are many buyers and a single seller.3. there is a single buyer and many sellers.4. d. there are a few buyers and many sellers.5. there are a few buyers and a few sellers.

Section 10.6 101. In a bilateral monopoly, equilibrium price will

1. favor the seller.2. favor the buyer.3. approximate the competitive equilibrium price.4. d. not be determined by a simple rule.

102. In a market with a bilateral monopoly:

1. a. there is a single buyer and a single seller.2. there are many buyers and a single seller.3. there is a single buyer and few sellers.4. there are a few buyers and many sellers.5. there are a few buyers and a few sellers.

103. The degree of monopsony power that a firm enjoys is determined by

1. elasticity of market demand, elasticity of market supply, and number of buyers in the market.2. b. elasticity of market supply, number of buyers in the market, and how buyers interact.3. number of buyers in the market, how buyers interact, and number of sellers of the resource.4. how buyers interact, number of sellers of the resource, and elasticity of market demand.

104. The percentage "markdown" due to monopsony power is equal to

1. (P - MC)/P2. 1/ED3. c. (MV - P)P4. P[1 + (1/ED)]

105. The following diagram shows marginal value and expenditure curves for a monopsony. In moving from the competitive price and quantity to the monopsony price and quantity, the deadweight loss from monopsony power is the area:

1. ACDF2. CDE3. EDG4. d. FDG5. BCDG

106. Which of the following is true of the antitrust laws in the United States? They are

1. designed to make the business environment more equitable.2. b. designed to promote a competitive economy.3. deliberately written in a way to make clear to all what is and what is not allowed.4. deliberately written in a language to promote cooperation among businesses.

107. Predatory pricing is defined to be

1. collusive pricing.2. b. behavior designed to drive out current competition.3. cooperative behavior between two firms with monopoly power.4. collusion.

108. Which of the following is not an important antitrust law?

1. the Sherman Act of 18902. the Clayton Act of 19143. c. the Consumer Protection Act of 19324. the Federal Trade Commission Act of 19145. None of the above are antitrust laws.6. (100% TRUE ANSWERS)

9th File

1. When the demand curve is downward sloping, marginal revenue is

1. equal to price.2. equal to average revenue.3. less than price.4. more than price.

2. For the monopolist shown below, the profit maximizing level of output is:

1. a. Q1.2. Q2.3. Q3.4. Q4.5. Q5.

3. How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1?

1. 0CDQ1.2. 0BEQ1.3. 0AFQ1.4. ACDF.5. e. BCDE.


1. Monopoly is the sole producer in the market.2. Monopoly price is determined from the demand curve.3. c. Monopolist can charge as high a price as it likes.4. Monopoly demand curve is downward sloping.

5. Which of the following is true at the output level where P=MC?

1. The monopolist is maximizing profit.2. The monopolist is not maximizing profit and should increase output.3. c. The monopolist is not maximizing profit and should decrease output.4. The monopolist is earning a positive profit.

6. Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ______________ price and sell a ______________ quantity.

1. higher; larger2. lower; larger3. c. higher; smaller4. lower; smaller5. none of these

7. Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the

1. firm is maximizing profit.2. b. firm's output is smaller than the profit maximizing quantity.3. firm's output is larger than the profit maximizing quantity.4. firm's output does not maximize profit, but we cannot conclude whether the

output is too large or too small.

8. To find the profit maximizing level of output, a firm finds the output level where

1. price equals marginal cost.2. marginal revenue and average total cost.3. price equals marginal revenue.4. all of the above.5. e. none of the above.

9. As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should

1. expand output.2. do nothing without information about your fixed costs.3. c. reduce output until marginal revenue equals marginal cost.4. expand output until marginal revenue equals zero.5. reduce output beyond the level where marginal revenue equals zero.

10. Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?

1. The marginal cost at the first plant must equal marginal revenue.2. The marginal cost at the second plant must equal marginal revenue.3. The marginal cost at the two plants must be equal.4. d. all of the above.5. none of the above.

11. The monopolist has no supply curve because

1. a. the quantity supplied at any particular price depends on the monopolist's demand curve.

2. the monopolist's marginal cost curve changes considerably over time.3. the relationship between price and quantity depends on both marginal cost and

average cost.4. there is a single seller in the market.5. although there is only a single seller at the current price, it is impossible to know

how many sellers would be in the market at higher prices.

12. When a per unit tax is imposed on the sale of a product of a monopolist, the resulting price increase will

1. always be less than the tax.2. always be more than the tax.3. always be less than if a similar tax were imposed on firms in a competitive

market.4. d. not always be less than the tax.

13. The monopoly supply curve is the

1. same as the competitive market supply curve.2. portion of marginal costs curve where marginal costs exceed the minimum value

of average variable costs.3. result of market power and production costs.4. d. none of the above.

14. For a monopolist, changes in demand will lead to changes in

1. price with no change in output.2. output with no change in price.3. c. both price and quantity.4. any of the above can be true.

15. Use the following two statements to answer this question: I. For a monopolist, at every output level, average revenue is equal to price. II. For a monopolist, at every output level, marginal revenue is equal to price.

1. Both I and II are true.2. b. I is true, and II is false.3. I is false, and II is true.4. Both I and II are false.5. Statements I and II could either be true or false depending upon demand.

16. Which of the following is NOT true for monopoly?

1. The profit maximizing output is the one at which marginal revenue and marginal cost are equal.

2. Average revenue equals price.3. The profit maximizing output is the one at which the difference between total

revenue and total cost is largest.4. The monopolist's demand curve is the same as the market demand curve.5. e. At the profit maximizing output, price equals marginal cost.

17. If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be:

1. negative.2. b. positive.3. zero.4. indeterminate from the given information.

18. A monopolist has equated marginal revenue to zero. The firm has:

1. maximized profit.2. b. maximized revenue.3. minimized cost.4. minimized profit.

19. A monopolist has determined that at the current level of output the price elasticity of demand is -0.15. Which of the following statements is true?

1. a. The firm should cut output.2. This is typical for a monopolist; output should not be altered.3. The firm should increase output.4. None of the above is necessarily correct.

20. A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the price elasticity of demand is -2.0. The firm's profit maximizing price is approximately:

1. $02. $203. c. $404. $105. This problem cannot be answered without knowing the marginal cost.

Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows:

21. Refer to Scenario 1. How much output will Barbara produce?

1. 0 2. 223. 56 4. 72 5. none of the above

22. Refer to Scenario 1. The price of her product will be _____.

1. 4 2. b. 22 3. 32 4. 425. 72

23. Refer to Scenario 1. How much profit will she make?

1. -996 2. 0 3. c. 1,2964. 1,5685. none of the above

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:Q = 200 - 2PMR = 100 - QTC = 5QMC = 5

24. Refer to Scenario 2. What level of output maximizes total revenue?

1. 02. 903. 954. d. 1005. none of the above


1. 0

2. 903. c. 954. 1005. none of the above

26. Refer to Scenario 2. What is the profit maximizing price?

1. $95.00.2. $5.00.3. c. $52.50.4. $10.00.

27. Refer to Scenario 2. How much profit does the monopolist earn?

1. a. $4512.50.2. $4987.50.3. $475.00.4. $5.00.

28. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output?


29. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing price?

1. $90.00.2. $10.00.3. c. $55.00.4. $52.50.

30. Refer to Scenario 2. Suppose that a tax of $5 for each unit produced is imposed by state government. How much profit does the monopolist earn?

1. a. $4050.2. $4950.

3. $450.4. $5.

31. Refer to Scenario 2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?

1. It increases by $1000.2. b. It decreases by $1000.3. It decreases by less than $1000.4. It stays the same.

32. Refer to Scenario 2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What is the profit maximizing level of output?


The demand curve and marginal revenue curve for red herrings are given as follows:Q = 250 - 5PMR = 50 - 0.4Q

33. Refer to Scenario 3. What level of output maximizes revenue?

1. 02. 453. 854. d. 1255. 245

34. Refer to Scenario 3. The marginal cost of red herrings is given as: MC = 0.6Q. What is the profit-maximizing level of output?

1. 02. 253. c. 504. 60

5. 125

35. Refer to Scenario 3. At the profit-maximizing level of output, demand is


36. Refer to Scenario 3. Compared to a competitive red herring industry, the monopolistic red herring industry

1. produces more output at a higher price.2. b. produces less output at a higher price.3. produces more output at a lower price.4. produces less output at a lower price.5. not enough information to relate the monopolistic red herring industry to a

competitive industry.

37. Refer to Scenario 3. Suppose that a tax of $5 per unit of output is imposed on red herring producers. The price of red herring will

1. not change.2. b. increase by less than $5.3. increase by $5.4. increase by more than $5.5. decrease.

The demand for tickets to the Meat Loaf concert (Q) is given as follows:Q = 120,000 - 2,000P

The marginal revenue is given as:MR = 60 - .001Q

The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point.

38. Refer to Scenario 4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets?

1. 0, $602. 20,000, $503. 40,000, $404. d. 60,000, $305. 80,000, $20

39. Refer to Scenario 4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would

1. increase by $10.2. b. increase by $5.3. not change.4. decrease by $5.5. decrease by $10.

40. Refer to Scenario 4. A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is $30 while the marginal cost in plant 2 is $20. To maximize profits the firm will

1. produce more output in plant 1 and less in the plant 2.2. do nothing until it acquires more information on revenues.3. c. produce less output in plant 1 and more in plant 2.4. produce less in both plants until marginal revenue is zero.5. shut down plant 1 and only produce at plant 2 in the future.

Scenario 5:A firm produces garden hoses in California and in Ohio. The marginal cost of producing garden hoses in the two states and the marginal revenue from producing garden hoses are given in the following table:CaliforniaOhio

Qc MCcQoMCoQc+oMR1 2 1 3 1 242 3 2 4 2 203 5 3 6 3 164 9 4 8 4 125 16 5 12 5 86 24 6 17 6 4

41. Refer to Scenario 5. From the perspective of the firm, what is the marginal cost of the 5th garden hose?

1. 42. b. 53. 164. 125. 8

42. Refer to Scenario 5. How many garden hoses should be produced in California in order to maximize profits?

1. 12. 23. c. 34. 45. 5

John is the manufacturer of red rubber balls (Q). He has a red rubber ball manufacturing plant in California, Florida and Montana. The total cost of producing red rubber balls at each of the three plants is given by the following table:

California Florida MontanaQc TCc Qf TCf QmTCm1 5 1 8 1 42 10 2 16 2 83 15 3 24 3 124 20 4 32 4 165 25 5 40 5 206 30 6 48 6 247 35 7 56 7 288 40 8 64 8 329 45 9 72 9 3610 50 10 80 10 4011 infinity11 infinity11 infinity

43. Refer to Scenario 6. If red rubber balls can be produced at any of the three plants, what is the marginal cost of 5th red rubber ball?

1. a. 42. 53. 84. 20


44. Refer to Scenario 6. If red rubber balls can be produced at any of the three plants, and John decides to produce 1 red rubber ball, at which plant will he produce it?

1. California2. Florida3. c. Montana4. he is indifferent between California and Florida5. he is indifferent between Florida and Montana

45. The demand curve and marginal revenue curve for red rubber balls are given as follows:Q = 16 - P MR = 16 - 2Q What level of output maximizes profit?

1. 02. 43. 5.54. d. 65. (b), (c) and (d) all maximize profit.

46. What is the profit maximizing price?


47. At the profit-maximizing level of output, demand is


48. Suppose that a tax of $2 per unit of output is imposed on red rubber ball producers. What level of output maximizes profit?

1. -12. 33. 4.54. d. 55. (b), (c) and (d) are correct

49. After the imposition of a tax of $2 per unit of output, what is the profit maximizing price?


The marginal revenue of green ink pads is given as follows:MR = 2500 - 5Q The marginal cost of green ink pads is 5Q.

50. Refer to Scenario 7. How many ink pads will be produced to maximize revenue?

1. 02. 2503. 3004. 5005. none of the above

51. Refer to Scenario 7. How many ink pads will be produced to maximize profit?


52. Refer to Scenario 7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is

1. inelastic.2. unit elastic.3. c. elastic.4. d. unit elastic.

53. The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:MR = 100 - 2QThe profit maximizing price is

1. $702. $653. $604. d. $555. $50

54. A multiplant firm has equated marginal costs at each plant. By doing this

1. profits are maximized.2. b. costs are minimized given the level of output.3. revenues are maximized given the level of output.4. none of the above.

55. The _____ elastic a firm's demand curve, the greater its _____.

1. a. less; monopoly power2. less; output3. more; monopoly power4. more; costs

56. Monopoly power results from the ability to

1. set price equal to marginal cost.2. equate marginal cost to marginal revenue.3. set price above average variable cost.4. d. set price above marginal cost.

57. What is the value of the Lerner index under perfect competition?

1. 12. b. 03. infinity4. two times the price

58. The more elastic the demand facing a firm,

1. the higher the value of the Lerner index.2. b. the lower the value of the Lerner index.3. the less monopoly power it has.4. the higher its profit.

59. The Lerner index measures

1. a firm's potential monopoly power.2. b. the amount of monopoly power a firm chooses to exercises when

maximizing profits.3. a firm's potential profitability.4. an industry's potential market power.

60. Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately

1. a. $20.2. $5.3. $10.4. The answer cannot be determined without additional information.

61. Use the following two statements to answer this question:I. A firm can exert monopoly power if and only if it is the sole producer of a good.II. The degree of monopoly power a firm possesses can be measured using the Lerner Index: L=(P-AC)/AC.

1. Both I and II are true.2. I is true, and II is false.3. I is false, and II is true.4. d. Both I and II are false.

62. Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:

1. to decrease the price of rice to the Japanese people.2. b. to decrease the consumer surplus of Japanese rice consumers.3. to decrease the producer surplus of Japanese rice producers.4. a welfare gain for the Japanese people.5. increase the consumption of rice by the Japanese people.

63. Which of the following is NOT associated with a high degree of monopoly power?

1. A relatively inelastic demand curve for the firm.2. A small number of firms in the market.3. c. Significant price competition among firms in the market.4. Significant barriers to entry.

64. Which factors determine the firm's elasticity of demand?

1. Elasticity of market demand and number of firms.2. Number of firms and the nature of interaction among firms.3. c. Elasticity of market demand, number of firms, and the nature of

interaction among firms.4. None of the above.

65. When a drug company develops a new drug it is granted a _____ making it illegal for other firms to enter the market until the _____ expires.

1. franchise; franchise2. copyright; copyright3. government license; government license4. d. patent; patent

66. The firms in a market have decided not to compete with one another and have agreed to limit output and raise price.

1. This practice is known as concentrating and is legal in the United States and Canada.

2. b. This practice is known as collusion and is illegal in the United States.

3. In this way firms take advantage of economies of scale.4. This is an effective barrier to entry, but is illegal in the United States.

67. Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

1. a. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic.

2. When there are many firms in the market and the demand curve faced by each firm is relatively inelastic.

3. When there are few firms in the market and the demand curve faced by each firm is relatively elastic.

4. When there are many firms in the market and the demand curve faced by each firm is relatively elastic.

Figure 10.1The revenue and cost curves in the diagram above are those of a natural monopoly.

68. Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at _____.

1. P12. b. P23. P34. P45. none of the above

69. Refer to Figure 10.1. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at _____.

1. P12. P23. P34. d. P45. none of the above

70. Refer to Figure 10.1. The minimum feasible price is _____.

1. P12. P23. c. P3

4. P45. none of the above

71. With respect to monopolies, deadweight loss refers to the

1. socially unproductive amounts of money spent to obtain or acquire a monopoly.2. b. net loss in consumer and producer surplus due to a monopolist’s pricing

strategy/policy.3. lost consumer surplus from monopolistic pricing.4. none of the above.

72. The regulatory lag:

1. always benefits the regulated firm.2. b. is likely to occur with rate-of-return regulation.3. promotes economic efficiency.4. all of the above.

73. The monopolist that maximizes profit

1. a. imposes a cost on society because the selling price is above marginal cost.

2. imposes a cost on society because the selling price is equal to marginal cost.3. does not impose a cost on society because the selling price is above marginal cost.4. does not impose a cost on society because price is equal to marginal cost.

74. Deadweight loss from monopoly power is expressed on a graph as the area between the

1. competitive price and the average revenue curve bounded by the quantities produced by the competitive and monopoly markets.

2. competitive price line and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

3. competitive price line and the monopoly price line bounded by zero output and the output chosen by the monopolist.

4. d. average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

75. Which of the following is true when the government imposes a price ceiling on a monopolist?

6. Marginal revenue becomes horizontal.7. Marginal revenue is linear.8. c. Marginal revenue is kinked--horizontal and then downward sloping.9. Marginal revenue is kinked--downward sloping and then horizontal.

76. If the regulatory agency sets a price where AR=AC for a natural monopoly, output will be

5. equal to the competitive level.6. equal to the monopoly profit maximizing level.7. c. greater than the monopoly profit maximizing level and less than the

competitive level.8. greater than the competitive level.

77. If a monopolist's profits were taxed away and redistributed to its consumers,

5. a. inefficiency would remain because output would be lower than under competitive conditions.

6. inefficiency would remain, but not because output would be lower than under competitive conditions.

7. efficiency would be obtained because output would be increased to the competitive level.

8. efficiency would be obtained because output would be increased and profits removed.

78. Which of the following statements about natural monopolies is true?

5. Natural monopolies are in the markets for natural resources (like crude oil and coal).

6. b. For natural monopolies, marginal cost is always below average cost.7. For natural monopolies, average cost is always increasing.8. Natural monopolies cannot be regulated.

Figure 10.2

79. Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:

5. a. CDE.6. BDEF.

7. ADEG.8. 0DEQm.9. none of the above.

80. Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the monopolist is able to add to producer surplus:

5. the area BCEF.6. b. the area BCEF less the area GFH.7. the area BCEH.8. the area BCEH less the area GFH.9. none of the above.

81. Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the deadweight loss is the area:

5. QmEHQc.6. b. GEH.7. GFH.8. FEH.9. none of the above.

Use the following information to answer the next question: The marginal cost of a monopolist is constant and is $10. The demand curve and marginal revenue curves are given as follows: demand: Q = 100 - P marginal revenue: MR = 100 - 2Q 82. The deadweight loss from monopoly power is

5. $1000.006. b. $1012.507. $1025.008. $1037.509. none of the above

Scenario 8: Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:AC = Q+(10,000/Q) MC = 2Q AR = 30-(Q/2) MR = 30-Q

83. Refer to Scenario 8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

5. She will lose money and will go out of business.6. b. She will break even.7. She will make a profit.8. none of the above.

84. Refer to Scenario 8. The deadweight loss from monopoly is


Scenario 9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry.The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows:P = 360 - 4Q MR = 360 - 8Q MC = 4Q

85. Refer to Scenario 9. What level of output maximizes the sum of consumer surplus and producer surplus?




87. Refer to Scenario 9. At the profit maximizing level of output, what is the level of consumer surplus?

6. 07. b. 1,8008. 2,7009. 3,60010. 4,800

88. Refer to Scenario 9. At the profit maximizing level of output, what is the level of producer surplus?

5. 06. 1,8007. c. 5,4008. 7,2009. 9,600

89. Refer to Scenario 9. At the profit maximizing level of output, what is the deadweight loss?

6. 07. 4508. c. 9009. 1,80010. none of the above11.

90. The situation in which buyers are able to affect the price of a good is referred to as ______________ power.

6. monopoly7. purchasing8. c. monopsony9. countervailing

91. For a competitive buyer, the marginal expenditure per unit of an input

6. exceeds the average expenditure per unit.7. is less than the average expenditure per unit.8. c. equals the average expenditure per unit.9. any of the above could be true.

92. Which of the following is true for a competitive buyer?

6. a. AE=ME.7. AE>ME.8. AE<ME.9. AE greater than or equal to ME.

93. For a monopsony buyer, the marginal expenditure per unit of an input

6. a. exceeds the average expenditure per unit.7. is less than the average expenditure per unit.8. equals the average expenditure per unit.9. any of the above could be true.

94. A monopsonist will buy _____ units of input than a competitor, and will pay _____ per unit.

7. a. fewer; less8. more; less9. fewer; more10. more; more

95. Unlike a competitive buyer,

5. a monopsonist faces an upward-sloping industry supply curve.6. a monopsonist pays a different price for each unit purchased.7. a monopsonist sets marginal value equal to marginal expenditure.8. d. the price that a monopsonist pays depends on the number of units

purchased.

Figure 10.3

The marginal value curve and expenditure curves in the diagram above are those of a monopsony.

96. Refer to Figure 10.3. What quantity will the monopsonist purchase to maximize profit?

5. Q16. Q27. c. Q38. Q49. none of the above

97. Refer to Figure 10.3. What price will the monopsonist pay when maximizing profit?

5. P16. P27. P38. P49. e. P5

98. Refer to Figure 10.3. What quantity will be purchased in a competitive market?

5. Q16. Q27. Q38. d. Q49. none of the above

99. Refer to Figure 10.3. What is the competitive price?

5. P16. P27. P38. d. P49. P5

100. In an oligopsony market:

5. there are many buyers and sellers.6. there are many buyers and a single seller.7. there is a single buyer and many sellers.8. d. there are a few buyers and many sellers.9. there are a few buyers and a few sellers.

Section 10.6 101. In a bilateral monopoly, equilibrium price will

6. favor the seller.7. favor the buyer.8. approximate the competitive equilibrium price.9. d. not be determined by a simple rule.

102. In a market with a bilateral monopoly:

6. a. there is a single buyer and a single seller.7. there are many buyers and a single seller.8. there is a single buyer and few sellers.9. there are a few buyers and many sellers.10. there are a few buyers and a few sellers.

103. The degree of monopsony power that a firm enjoys is determined by

6. elasticity of market demand, elasticity of market supply, and number of buyers in the market.

7. b. elasticity of market supply, number of buyers in the market, and how buyers interact.

8. number of buyers in the market, how buyers interact, and number of sellers of the resource.

9. how buyers interact, number of sellers of the resource, and elasticity of market demand.

104. The percentage "markdown" due to monopsony power is equal to

6. (P - MC)/P7. 1/ED8. c. (MV - P)P9. P[1 + (1/ED)]

105. The following diagram shows marginal value and expenditure curves for a monopsony. In moving from the competitive price and quantity to the monopsony price and quantity, the deadweight loss from monopsony power is the area:

6. ACDF7. CDE8. EDG9. d. FDG10. BCDG

106. Which of the following is true of the antitrust laws in the United States?They are

5. designed to make the business environment more equitable.

6. b. designed to promote a competitive economy.7. deliberately written in a way to make clear to all what is and what is not allowed.8. deliberately written in a language to promote cooperation among businesses.

107. Predatory pricing is defined to be

6. collusive pricing.7. b. behavior designed to drive out current competition.8. cooperative behavior between two firms with monopoly power.9. collusion.

108. Which of the following is not an important antitrust law?

5. the Sherman Act of 18906. the Clayton Act of 19147. c. the Consumer Protection Act of 19328. the Federal Trade Commission Act of 19149. None of the above are antitrust laws.10. (100% TRUE ANSWERS)

--------------------------------------------------------------------------------------------------------

10th File

1. Which of the following strategies are used by business firms to capture consumersurplus?1. price discrimination.2. bundling.3. two-part tariffs.4. d. all of the above.

2. Rather than charging a single price to all customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm:1. is trying to reduce its costs and therefore increase its profit.2. is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.3. is attempting to convert producer surplus into consumer surplus.4. d. is attempting to convert consumer surplus into producer surplus.5. both (a) and (c) are correct.

3. An electric power company uses block pricing for electricity sales. Block pricing is an example of1. first-degree price discrimination.2. second-degree price discrimination.3. third-degree price discrimination.4. Block pricing is not a type of price discrimination.


1. engages in a discrete pricing strategy.2. charges the average reservation price.3. engages in second-degree price discrimination.4. d. engages in first-degree price discrimination.

5. The maximum price that a consumer is willing to pay for each unit bought is the ______________ price.1. market2. b. reservation3. consumer surplus4. auction5. choke

6. Second-degree price discrimination is the practice of charging1. the reservation price to each customer.2. b. different prices for different blocks of the same good or service.3. different groups of customers different prices for the same products.4. each customer the maximum price that he or she is willing to pay.

7. A firm is charging a different price for each unit purchased by a consumer. This is called1. a. first-degree price discrimination.2. second-degree price discrimination.3. third-degree price discrimination.4. fourth-degree price discrimination.5. fifth-degree price discrimination.100% CORRECT ANSWERS.....

8. A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing1. first-degree price discrimination.2. second-degree price discrimination.3. c. third-degree price discrimination.4. fourth-degree price discrimination.5. fifth-degree price discrimination.

9. Discrimination based upon the quantity consumed is referred to as ______________ price discrimination.1. first-degree2. b. second degree3. third-degree4. group

10. A doctor sizes up patients' income and charges wealthy patients more than poorer ones.This pricing scheme represents a form of1. first-degree price discrimination.2. second-degree price discrimination.3. c. third-degree price discrimination.4. pricing at each consumer’s reservation price.

11. Third-degree price discrimination involves1. charging each consumer the same two part tariff.2. charging lower prices the greater the quantity purchased.3. the use of increasing block rate pricing.4. d. charging different prices to different groups based upon differences in elasticity of demand.


1. a. the reservation price.2. the market price.3. the first-degree price.4. the block price.5. the choke price.

13. McDonald's restaurant located near the high school offered a Tuesday special for high school students. If high school students showed their student ID cards, they would be given 50 cents off any special meal. This practice is an example of:1. collusion.2. b. price discrimination.3. two-part tariff.4. bundling.5. tying.

14. In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland.Residents of southern California were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of:1. collusion.2. b. price discrimination.3. two-part tariff.4. bundling.5. tying.

15. Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of:1. intertemporal price discrimination.2. b. third degree price discrimination.3. a two-part tariff.4. bundling.5. none of the above.

16. Which of the following is NOT a condition for third degree price discrimination?1. Monopoly power.2. Different own price elasticities of demand.3. c. Economies of scale.4. Separate markets.

17. A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). Having sold all of its output it discovers that the marginal revenue in the local market is $20 while its marginal revenue on the internet auction site is $30. To maximize profits the firm should1. have sold more output in the local market and less at the internet auction site.2. do nothing until it acquires more information on costs.3. have sold less output in the local market and more on the internet auction site.4. sell less in both markets until marginal revenue is zero.5. sell more in both markets until marginal cost is zero.

18. Suppose that the marginal cost of an additional ton of steel produced by the Japanese is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?1. The Japanese will sell more steel abroad than they will sell in Japan.2. The Japanese will sell more steel in Japan than they will sell abroad.3. c. The Japanese will sell steel at a lower price abroad than they will charge domestic users.4. The Japanese will sell steel at a higher price abroad than they will charge domestic users.5. Insufficient information exists to determine whether the price or quantity will be higher or lower

abroad.

19. You are the producer of stereo components. There are two markets, foreign and domestic.The two groups of consumers cannot trade with one another. If your firm practices third-degree price discrimination, when you have maximized profits, the marginal revenue1. in the foreign market will equal the marginal cost.2. in the domestic market will equal the marginal cost.3. in the domestic market will equal the marginal revenue in the domestic market.4. d. all of the above.5. none of the above

20. You are the producer of stereo components. There are two markets, foreign and domestic.The two groups of consumers cannot trade with one another. You will charge the higher price in the market with the1. a. lower own price elasticity of demand (more inelastic demand).2. higher own price elasticity of demand (more elastic demand).3. larger teenage population.4. greater consumer incomes.

21. For a perfect first-degree price discriminator, incremental revenue is1. greater than price if the demand curve is downward sloping.2. the same as the marginal revenue curve if the firm is a non-discriminating monopolist.3. c. equal to the price paid for each unit of output.4. less than the marginal revenue for a non-discriminating monopolist.

22. In third-degree price discrimination a firm faces two markets. In the first market the firm charges $30 per unit, and in the second market it charges $22 per unit. Which of the following represents the ratio of elasticities of demand in the two markets?1. E2 = (21/29)E1.2. E2 = (29/21)E13. E2 = E1.4. E2 = (22/30)E1.5. e. none of these.

23. A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits.Which of the following best describes the price and output strategy that will maximize profits?1. PA = PB = MC.2. MRA = MRB.3. c. MRA = MRB = MC.4. (MRA - MRB) = (1 - MC).

24. Bindy, an 18 year old high school graduate, and Luciana, a 40 year old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of:1. collusion.2. price discrimination.3. two-part tariff.4. bundling.5. e. none of the above.

25. Under perfect price discrimination, marginal profit at each level of output equal1. 02. P-AC.3. c. P-MC.4. P-AR.

26. Under perfect price discrimination, consumer surplus1. is less than zero.2. is greater than zero.3. c. equals zero.4. is maximized.

27. When a monopolist engages in perfect price discrimination,1. the marginal revenue curve lies below the demand curve.2. b. the demand curve and the marginal revenue curve are identical.3. marginal cost becomes zero.4. the marginal revenue curve becomes horizontal.

28. The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this her1. profits are maximized.2. costs are minimized given her level of output.3. c. revenues are maximized given her level of output.4. all of the above.

29. When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of1. a two-part tariff.2. second-degree price discrimination.3. c. intertemporal price discrimination.4. first-degree price discrimination.

30. Club Med, which runs a number of vacation resorts, offers vacation packages at a lower price in the winter, the "off season," than in the summer. This practice is an example of:1. peak-load pricing.2. intertemporal price discrimination.3. two-part tariff.4. bundling.5. e. both (a) and (b) are correct.

31. In peak load pricing,1. marginal revenue is equal in both periods.2. b. marginal revenue in the peak period is greater than in the off-peak period.3. marginal revenue in the peak period is less than in the off-peak period.4. the sum of the marginal revenues is greater than the sum of the marginal costs.

32. When the movie "Jurassic Park" debuted in Westwood, California, the price of tickets was $7.50. After several months the ticket price had fallen to $4.00. This is an example of1. peak-load pricing.2. second-degree price discrimination.3. a two-part tariff.4. tying.5. e. none of the above.

33. The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of1. bundling.2. second-degree price discrimination.3. a two-part tariff.

4. tying.5. e. none of the above.

34. A local restaurant offers "early bird" price discounts for dinners ordered from 4:30 to 6:30 PM. This is an example of1. a. peak-load pricing.2. second-degree price discrimination.3. a two-part tariff.4. tying.5. none of the above.

35. A local theater prices every ticket in the theater at $5.00 for matinees. During the evening, ticket prices are much higher. This is an example of1. a. peak-load pricing.2. second-degree price discrimination.3. a two-part tariff.4. bundling.5. none of the above.

36. An amusement park charges an entrance fee of $75 per person, then $2.50 per ride. This is an example of1. first-degree price discrimination.2. b. a two-part tariff.3. second-degree price discrimination.4. bundling.5. tying.

37. When people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made, we would say that the telephone company is using1. limit pricing.2. b. a two-part tariff.3. second-degree price discrimination.4. two stage price discrimination.

38. A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a1. tying contract.2. b. two-part tariff.3. form of perfect price discrimination.4. none of these.

39. A national chain of bookstores has initiated a frequent buyer program. If you buy a frequent buyer card for $10, you are entitled to a 10 percent discount on all purchases for 1 year. This practice is an example of:1. peak-load pricing.2. intertemporal price discrimination.3. c. two-part tariff.4. bundling.5. both (a) and (b) are correct.

40. A firm setting a two-part tariff with only one customer should set the entry fee equal to1. marginal cost.2. b. consumer surplus.3. marginal revenue.4. price.

41. The local cable TV company charges a "hook-up" fee of $30 per month. Customer can then watch programs on a "pay-per-view" basis (a fee is charged for every program watched). This is an example of1. peak-load pricing.2. second-degree price discrimination.3. c. a two-part tariff.4. intertemporal price discrimination.5. none of the above.


1. permits a firm to meter demand.2. permits a firm to practice price discrimination.3. enables a firm to extend its monopoly power to new markets.4. d. all of the above.

43. Season ticket holders for the St. Louis Rams received a surprise when they received their applications to renew their season tickets. In order to get your season ticket to the Rams' home games, you had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of:1. peak-load pricing.2. intertemporal price discrimination.3. two-part tariff.4. d. bundling.5. both (a) and (b) are correct.

44. A local restaurant sells strawberry pie for $3.00 per slice. However, if you order the prime rib dinner, you can get a slice of pie for only a dollar. This is an example of1. a. bundling.2. second-degree price discrimination.3. a two-part tariff.4. tying.5. none of the above.

45. A local restaurant offers an "all-you-can-eat" salad bar for $3.49. However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of1. peak-load pricing.2. second-degree price discrimination.3. a two-part tariff.4. tying.5. e. none of the above.

46. Bundling products makes sense for the seller when1. consumers have heterogeneous demands.2. the products are complementary in nature.3. firms cannot price discriminate.4. d. both (a) and (c).

47. Bundling is effective when demands are ____________ and ____________ correlated.1. a. different; negatively2. different; positively3. similar; negatively4. similar; positively5. identical; perfectly

48. Bundling raises higher revenues than selling the goods separately when1. demands for two goods are highly positively correlated.2. demands for two products are mildly positively correlated.3. c. demands for two products are negatively correlated.4. there is a perfect positive correlation between the demands for two goods.5. the goods are complementary in nature.

49. Mixed bundling is more profitable than pure bundling when1. the marginal cost of each good being sold is positive.2. the consumers’ reservation values of each good being sold are not perfectly negatively correlated with one or another.3. c. both (a) and (b) apply.4. the marginal cost of one good is zero.

50. One Guy's Pizza advertising expenditures are $1,200 and sales are $30,000. When advertising increases to $1,400, sales increase to $32,000. The arc advertising elasticity of demand is approximately1. 02. 0.13. c. 0.44. 2.55. 12.5

51. A 10 percent decrease in advertising results in a 5 percent sales decrease. The advertising elasticity of demand is1. -2.02. -0.53. c. 0.54. 25. none of the above. 52. Use the following statements to answer this question.I. To maximize profit, a firm will increase its advertising expenditures until the last dollar of advertising just brings forth an additional dollar of revenue.II. The full marginal cost of advertising is the sum of the dollar spent directly on advertising and the marginal production cost that results form the increased sales that advertising brings about.

1. Both I and II are true.2. I is true, and II is false.3. c. I is false, and II is true.4. Both I and II are false.` 53. Use the following statements to answer this question.I. To maximize profit, a firm will advertise more when the advertising elasticity is larger.II. To maximize profit, a firm will advertise more when the price elasticity of demand is smaller.1. a. Both I and II are true.2. I is true, and II is false.3. I is false, and II is true.4. Both I and II are false.

54. The price elasticity of demand for nursery products is -10. The advertising elasticity of demand is 0.4. Using the "Rule of Thumb for Advertising," the level of advertising will be set at _____ of sales.1. 0.25 percent

2. 0.4 percent3. c. 4 percent4. 40 percent

55. Grocery store chains advertise more than convenience stores because:1. the advertising elasticity of demand is smaller for grocery store chains than for convenience stores.2. convenience stores have more elastic demand for their products then grocery store chains.3. c. the advertising elasticity of demand for convenience stores is near zero and is much smaller than for grocery store chains.4. all of the above.5. none of the above.

56. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers.The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries is called:1. the shadow price.2. b. the transfer price.3. the market price.4. the non-market price.5. none of the above.

57. The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers.There are many other firms that extract and sell crude oil so that the market for crude oil is regarded by Acme Oil as competitive. The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries:1. a. equals the market price for crude oil.2. equals the market price for crude oil less a discount because Acme Oil does not to profit from itself.3. is unrelated to the market price of crude oil.4. is greater than the marginal cost of extracting crude oil.

58. What is net marginal revenue?1. The same as marginal profit.2. b. The additional revenue the firm earns from an extra unit of an internally produced intermediate input.3. The additional revenue the firm earns from producing one more unit of output.4. The additional revenue the firm earns from selling one more unit of output.

59. What is the profit maximizing condition for a vertically integrated firm?1. Net marginal revenue equals the sum of the marginal costs of the intermediate inputs.2. Marginal revenue equals the marginal cost of the final output.3. c. Net marginal revenue equals the marginal cost of each intermediate good.4. The sum of net marginal revenues equals the marginal cost of the final output.

Documents

1. The perfect information assumption of perfect ...api.ning.com/.../ECO402FinaltermQuizandpapersinonefileall.pdf · 1. The "perfect information" assumption of perfect competition