Download Practice Quiz 10

Chapter 10: Practice Quiz
The Partial Equilibrium Competitive Model
1.
The market demand curve for any good is
a.
independent of individuals’ demand curves for the good.
b.
the vertical summation of individuals’ demand curves.
c.
the horizontal summation of individuals’ demand curves.
d.
derived from the firm’s marginal cost of production.
2.
An increase in the price of good x will be accompanied by
a.
a shift in the market demand curve for good x.
b.
a shift in the market demand curve for good y (a substitute for good x).
c.
a movement along the market demand curve for good x.
d.
both b and c.
3.
A change in the distribution of income that leaves total income constant will not shift the
market demand curve for a product providing
a.
everyone has an income elasticity of demand of zero for the product.
b.
everyone has the same income elasticity of demand for the product.
c.
individuals have differing income elasticities for the product, but the average
income elasticity for income gainers is equal to the average income elasticity for
income losers.
d.
any of the above conditions occur.
4.
In the very short run
a.
new firms may enter an industry.
b.
existing firms may change the quantity they are supplying.
c.
price and quantity supplied are absolutely fixed.
d.
quantity supplied is absolutely fixed.
5.
The short-run market supply curve is
a.
the horizontal summation of each firm’s short-run supply curve.
b.
the vertical summation of each firm’s short-run supply curve.
c.
the horizontal summation of each firm’s short-run average cost curve.
d.
the vertical summation of each firm’s short-run average cost curve.
6.
A demand curve will shift out for any of the following reasons except
a.
preference for a good increases.
b.
price of a substitute falls.
c.
income rises.
d.
price of a complement falls.
7.
If a 1 percent increase in price leads to a .7 percent increase in quantity supplied, the
short-run supply curve is
a.
elastic.
b.
inelastic.
c.
unit elastic.
d.
perfectly inelastic.
8.
If the market for hula-hoops is characterized by a very inelastic supply curve and a very
elastic demand curve, an inward shift in the supply curve would be reflected primarily in
the form of
a.
higher prices.
b.
higher output.
c.
lower prices.
d.
lower output.
9.
If the market for bottled spring water is characterized by a very elastic supply curve and a
very inelastic demand curve, an outward shift in the supply curve would be reflected
primarily in the form of
a.
higher prices.
b.
higher output.
c.
lower prices.
d.
lower output.
10.
Suppose that the price elasticity of demand for a product is –1 and that the price elasticity
of supply is +1. Assume also that the income elasticity of demand is +2. Then an
increase in income of 10% will raise equilibrium price by
a.
10%.
b.
5%.
c.
20%.
d.
an annual amount that cannot be determined.
11.
Under perfect competition, if an industry is characterized by positive economic profits in
the short run,
a.
firms will leave the market in the long run and the short-run supply curve will
shift outward.
b.
firms will enter the market in the long run and the short-run supply curve will
shift outward.
c.
firms will enter the market in the long run and the short-run supply curve will
shift inward.
d.
firms will leave the market in the long run and the short-run supply curve will
shift inward.
12.
For an increasing cost industry, the long-run supply curve has a(n) _____________
elasticity of supply
a.
infinite.
b.
negative.
c.
positive.
Chapter 14/Traditional Models of Imperfect Competition 
d.
3
zero.
13.
Long-run elasticity of supply is defined as
a.
percentage change in quantity demanded in the long run divided by percentage
change in price.
b.
percentage change in price divided by percentage change in quantity demanded in
the long run.
c.
percentage change in quantity supplied in the long run divided by percentage
change in price.
d.
percentage change in price divided by percentage change in quantity demanded in
the long run.
14.
Long-run producer surplus in a perfectly competitive industry accrues mainly to
a.
suppliers of inputs with inelastic supply curves.
b.
suppliers of inputs with elastic supply curves.
c.
firms’ owners.
d.
marginal consumers.
The following two questions refer to a market with 1000 firms in the short run in which every
firm’s cost function is given by
C(q) = 400 + q2
And market demand is given by
P(Q) = 6000 – Q/100
15.
The short run equilibrium price will be
a.
100.
b.
200.
c.
5800.
d.
cannot be determined from the information given.
16.
Which of the following statements about long run equilibrium in this market are true?
I.
firms will enter the market in the long run.
II.
the long run equilibrium price will be 20.
III.
each firm will produce 40 units in the long run.
a.
b.
c.
d.
e.
I.
II.
I and II.
I and III.
I, II and III.
The following two questions refer to a market with 300 firms in the short run in which every
firm’s cost function is given by
C(q) = 300 + 3q2
And market demand is given by
P(Q) = 300 – Q/10
17.
The short run equilibrium price will be
a.
10.
b.
50.
c.
60.
d.
cannot be determined from the information given.
18.
Which of the following statements about long run equilibrium in this market are true?
I.
firms will enter the market in the long run.
II.
the long run equilibrium price will be 60.
III.
each firm will produce 10 units in the long run.
a.
b.
c.
d.
e.
I.
II.
I and III.
II and III.
I, II and III.