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題 目 卷 ( A )
I. Production and Cost
1. Pete owns a shoe-shine business. Which of the following costs would be implicit costs?
(i)
shoe polish
(ii)
rent on the shoe stand
(iii)
wages Pete could earn delivering newspapers
(iv)
interest that Pete’s money was earning before he spent his savings to set up the shoe­shine business
A.
(i) and (ii) only
B.
(iv) only
C.
2. Economic profit
A. will never exceed accounting profit.
C. is always at least as large as accounting profit.
B.
D.
(iii) and (iv) only
D. (i), (ii), (iii), and (iv)
is most often equal to accounting profit.
is a less complete measure of profitability than accounting profit.
3. If a firm uses labor to produce output, the firm’s production function depicts the relationship between
A. the number of workers and the quantity of output.
B. marginal product and marginal cost.
C. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor.
D. fixed inputs and variable inputs in the short run.
4. The marginal product of an input in the production process is the increase in
A. total revenue obtained from an additional unit of that input.
C. total revenue obtained from an additional unit of that output.
B.
D.
profit obtained from an additional unit of that input.
quantity of output obtained from an additional unit of that input.
5. Which of the following statements is not correct?
A. In the long run, there are no fixed costs.
C. Economies of scale is a short-run concept.
B.
D.
Marginal cost is independent of fixed costs.
Diminishing marginal product explains increasing marginal cost.
6. If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits
A. diminishing profitability.
B. increasing returns to scale.
C. increasing marginal product.
D. decreasing marginal product.
7. David’s firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David’s firm
A. gets flatter as output increases.
B. gets steeper as output increases.
C. is constant for all ranges of output.
D. is unrelated to the production function.
8. The total cost to the firm of producing zero units of output is
A. zero in both the short run and the long run.
B. its fixed cost in the short run and zero in the long run.
C. its fixed cost in both the short run and the long run.
D. its variable cost in both the short run and the long run.
9. When comparing short-run average total cost with long-run average total cost at a given level of output,
A. short-run average total cost is typically above long-run average total cost.
B. short-run average total cost is typically the same as long-run average total cost.
C. short-run average total cost is typically below long-run average total cost.
D. the relationship between short-run and long-run average total cost follows no clear pattern.
10. Which of the following statements is correct?
A. For all firms, marginal revenue equals the price of the good.
B. Only for competitive firms does average revenue equal the price of the good.
C. Marginal revenue can be calculated as total revenue divided by the quantity sold.
D. Only for competitive firms does average revenue equal marginal revenue.
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11. Refer to Table 1. What is the marginal revenue from selling the 4rd unit?
A. $120
B.
$257
C.
$317
D. $480
Table 1
The following table presents cost and revenue information for a firm operating in a competitive industry.
COSTS
Quantity Produced
REVENUES
Total Cost
0
$100
1
Marginal Cost
--
Quantity Demanded
Price
0
$120
$150
1
$120
2
$202
2
$120
3
$257
3
$120
4
$317
4
$120
5
$385
5
$120
6
$465
6
$120
7
$562
7
$120
8
$682
8
$120
Total Revenue
Marginal Revenue
--
12. Refer to Table 1. What is the firm’s profit­maximizing decision for the quantity units are sold?
A. 4
B. 6
C. 7
D. 8
13. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its
output to 200 units, the average revenue of the 200th unit will be
A. less than $12.
B. more than $12.
C. $12.
D. Any of the above may be correct depending on the price elasticity of demand for the product.
14. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct?
(i) Marginal revenue equals $3.
(ii) Average revenue equals $600.
(iii) Average revenue exceeds marginal revenue, but we don’t know by how much.
A.
C.
(i) only
(i) and (ii) only
B.
D.
(iii) only
(i), (ii), and (iii)
15. Which of the following statements is Not to express a firm’s profit­maximizing decision rule?
A. If marginal revenue is greater than marginal cost, the firm should increase its output.
B. If marginal cost is less than marginal revenue, the firm should decrease its output.
C. If marginal cost equals marginal revenue, the firm should continue producing its current level of output.
D. If marginal revenue is less than marginal cost, the firm should decrease its output.
16. Mrs. Smith operates a business in a competitive market. The current market price is $7.50. At her profit- maximizing level of production, the average
variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should
A. shut down her business in the short run but continue to operate in the long run.
B. continue to operate in the short run but shut down in the long run.
C. continue to operate in both the short run and long run.
D. shut down in both the short run and long run.
17. Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect
A. new firms to enter the market.
B. the market price to rise.
C. its profits to rise.
D. Both b and c are correct.
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II. Market
18. Microsoft faces very little competition from other firms for its Windows software. Why isn’t the price of the software $1,000 per copy?
A. because the government would not allow such a high price
B. because stockholders would not allow such a high price
C. because the company would sell so few copies that they would earn higher profits by selling at a lower price
D. All of the above are correct.
19. Which of the following are necessary characteristics of a monopoly?
(i)
The firm is the sole seller of its product.
(ii) The firm's product does not have close substitutes.
(iii) The firm generates a large economic profit.
A.
(i) and (ii) only
B.
(iv) The firm is located in a small geographic market.
(i) and (iii) only
C.
(i), (ii), and (iii) only
D. (i), (ii), (iii), and (iv)
C.
$20.
D. $25.
20. Refer to Table 2. To maximize profit, the monopolist sets price at
A.
$10.
B.
$15.
Table 2
Consider the following demand and cost information for a monopoly.
Quantity
0
1
2
3
4
Price
$30
$25
$20
$15
$10
Total Cost
$3
$7
$12
$18
$25
21. Which of the following statements is not correct?
A.
C.
The competitive firm produces where P = MC.
The competitive firm produces where MR = MC.
B. The monopolist produces where P = MC.
D. The monopolist produces where MR = MC.
22. The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly
A.
quantity is lower than the socially-optimal quantity.
B. price equals marginal revenue.
C.
price is the same as average revenue.
D. earns positive profits.
23. Refer to Figure 1. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to
A. $0.
Figure 1
B. $1,562.50.
C. $3,125.
D. $6,250.
24. Which of the following is an example of a monopolistically competitive industry?
tennis balls
C.
movies
25. A monopolistically competitive market is characterized by
A.
free entry, but not differentiated products.
C.
long run profits, but not many firms.
B.
D.
differentiated products, but not long run profits.
many firms, but not free entry.
A.
computer operating systems
B.
D. cable television
26. For a profit-maximizing monopolistically competitive firm, marginal revenue exceeds marginal cost in
A.
the short run but not in the long run.
B. the long run but not in the short run.
C.
both the short run and the long run.
D. neither the short run nor the long run.
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27. When a market is monopolistically competitive, the typical firm in the market is likely to experience a
A.
positive profit in the short run and in the long run.
B.
positive or negative profit in the short run and a zero profit in the long run.
C.
zero profit in the short run and a positive or negative profit in the long run.
D.
zero profit in the short run and in the long run.
28. Refer to Figure 2. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?
Figure 2
A. panel a
B. panel b
C. panel c
D. panel d
29. If advertising reduces a consumer's price sensitivity between identical goods, it is likely to
A.
increase the elasticity of demand for differentiated products.
B. enhance competition and encourage more product diversity.
C.
reduce competition and reduce social welfare.
D. encourage the consumption of all homogenous goods.
30. If two firms comprise the entire soft drink market, the market would be a(n)
A.
C.
Nash equilibrium.
oligopolistically competitive market.
B.
D.
monopolistically competitive market.
duopoly.
31. If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production
with the aim of
A. increasing prices.
B. increasing profits for the group of firms as a whole.
C. increasing profits for itself, regardless of the impact on profits for the group of firms as a whole.
D. decreasing costs of production.
32. Other things the same, in which case is the quantity produced the highest?
A.
There is one firm.
B.
There are two firms that successfully collude.
C.
There are two firms in Nash equilibrium.
D.
There are a very large number of firms.
B.
D.
benefits of avoiding cooperation.
ease with which oligopoly firms maintain high prices.
33. The prisoners' dilemma provides insights into the
A.
difficulty of maintaining cooperation.
C.
benefits of government ownership of monopoly.
34. An equilibrium occurs in a game when
A.
price equals marginal cost.
B.
quantity supplied equals quantity demanded.
C.
all independent strategies counterbalance all dominant strategies.
D.
all players follow a strategy that they have no incentive to change.
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