Download Managerial Economics Multiple Choice Questions Sr. Question

Managerial Economics Multiple Choice Questions
Sr.
Question
Answer
1
c. Firms can exit and enter the
market freely.
7
Which of the following is a characteristic of a perfectly competitive
market?
a. Firms are price setters.
b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.
If a perfectly competitive firm currently produces where price is
greater than marginal cost it
a. will increase its profits by producing more.
b. will increase its profits by producing less.
c. is making positive economic profits.
d. is making negative economic profits.
When a perfectly competitive firm makes a decision to shut down, it
is most likely that
a. price is below the minimum of average variable cost.
b. fixed costs exceed variable costs.
c. average fixed costs are rising.
d. marginal cost is above average variable cost.
In the long run, a profit-maximizing firm will choose to exit a
market when
a. fixed costs exceed sunk costs.
b. average fixed cost is rising.
c. revenue from production is less than total costs.
d. marginal cost exceeds marginal revenue at the current level of
production.
When firms have an incentive to exit a competitive market, their exit
will
a. drive down market prices.
b. drive down profits of existing firms in the market.
c. decrease the quantity of goods supplied in the market.
d. All of the above are correct.
In a perfectly competitive market, the process of entry or exit ends
when
a. firms are operating with excess capacity.
b. firms are making zero economic profit.
c. firms experience decreasing marginal revenue.
d. price is equal to marginal cost.
Equilibrium quantity in markets characterized by oligopoly are
d. higher than in monopoly markets
and lower than in perfectly
competitive markets.
8
a. lower than in monopoly markets and higher than in perfectly
competitive markets.
b. lower than in monopoly markets and lower than in perfectly
competitive markets.
c. higher than in monopoly markets and higher than in perfectly
competitive markets.
d. higher than in monopoly markets and lower than in perfectly
competitive markets.
In a perfectly competitive industry, a firm can:
(a) Make an economic profit in the short-run but not in the long-run
(b) Make an economic loss in the short-run but not in the long-run
(c) Make an accounting profit, but not an economic profit, in the
long-run
(d) All of the above.
2
3
4
5
6
a. will increase its profits by
producing more.
a. price is below the minimum of
average variable cost.
c. revenue from production is less
than total costs.
c. decrease the quantity of goods
supplied in the market.
b. firms are making zero economic
profit.
(d) All of the above.
9
A dominant strategy is one that
(a) beats all others, regardless of the opponent’s choice.
(b) beats all others, given the opponent’s choice.
(c) is beaten by all others, regardless of the opponent’s choice.
(d) is beaten by all others, given the opponent’s choice.
What is the advantage to a particular firm of cheating on an
otherwise effective cartel?
(a) The industry can then act like a monopoly.
(b) It decreases risk.
(c) It enhances credibility.
(d) It pays in the short-run and may pay in the long run.
In a model of monopolistic competition in the long run equilibrium
(b) beats all others, given the
opponent’s choice.
(a) no firms remain in the market.
(b) new firms will want to enter the market.
(c) all firms must be operating at minimum average cost.
(d) there are no economic profits being made.
Con Agra has introduced a lean mixture of barley and ground beef
which is indistinguishable from ground beef but has about the same
amount of fat as chicken. As a result, the
(a) demand for chicken increases.
(b) demand for barley decreases.
(c) quantity demanded of chicken increases.
(d) demand for chicken decreases.
The price of stereo systems has fallen while the quantity purchased
has remained constant. This implies that the demand for stereo
systems has
(d) there are no economic profits
being made.
d) decreased while the supply of
stereo systems has decreased.
14
(a) increased.
(b) increased while the supply of stereo systems has increased.
(c) decreased while the supply of stereo systems has increased.
(d) decreased while the supply of stereo systems has decreased.
The cross price elasticity of demand is defined as the
(b) Percentage change in the
quantity demanded divided by the
percentage change in a different
good’s price.
15
(a) Percentage change in the quantity demanded divided by the
percentage change in the good’s price.
(b) Percentage change in the quantity demanded divided by the
percentage change in a different good’s price.
(c) Percentage change in the good’s price divided by the percentage
change in a different good’s price.
(d) Change in the quantity demanded of a good divided by the
change in its price.
A profit maximising firm sets its price
(d) where marginal profit is
maximised.
16
(a) to maximise sales.
(b) so that the demand is elastic.
(c) to equate average revenue to average cost.
(d) where marginal profit is maximised.
When average total cost is at its minimum
17
(a) average variable cost is declining with increases in output.
(b) Average total cost is equal to average variable cost.
(c) Marginal cost is less than average total cost.
(d) Marginal cost is greater than average total cost.
Oligopoly is a market structure that necessarily has
10
11
12
13
(a) The industry can then act like a
monopoly.
(d) demand for chicken decreases.
18
19
20
21
22
(a) cartels
(b) a large number of firms with homogeneous products.
(c) A small number of firms, but more than one.
(d) A large number of firms with slightly different products.
Your firm is in a duopoly. When you drop your price, your rival is
likely to follow. If you agree to wage rises for your employees, this
is likely to have:
(a) a negative strategic effect
(b) a positive strategic effect
(c) no strategic effect
(e) no effect on profits at all.
If price of substitutes of (X) increases then demand curve of X
will______
Pure public goods are subject to the law of decreasing average cost,
because of the
Features of Long –run market are
(c) A small number of firms, but
more than one.
(b) a positive strategic effect
Shift rightward
economies of scale
It is durable goods market , Supply
can be increased or reduced
according to the demand , Sellers at
least recover minimum price for
their goods
False
23
In case of indivisible goods, which are not priced, the decisions
regarding their demand preferences are taken through price
mechanism.
A monopolist’s product is a unique product.
24
The indivisible goods whose benefits cannot be priced are called
Pure public goods
25
The features of business or trade cycle are
It is a wave like movement , These
fluctuations are recurrent in nature
, Expansion and contraction in
trade cycle are cumulative in effect
26
The profits which must be deducted from the gross profits to arrive
at net profits are
The products sold by different sellers under pure competition are
heterogeneous.
Monopoly Profits
indivisible
29
The goods become ________ only when each individual has an
access to the entire amount of it and its use by the individual does
not reduce its availability to others.
The advantage of cost-benefit analysis are
30
The important determinants of supply are
31
32
If the output rises in the greater proportion than that of the increase
in factor inputs, it is referred to as ________.
A fall in price tends the demand for goods to ________
Answer Always referred to in
relation to price & time ,
Government policy , Availability
of factors of production
increasing returns to scale.
33
Question Perfectly elastic demand curve is ________
27
28
True
False
Maximization of social welfare ,
Objective measurement of the
trade-off , Maximization of
difference between total benefits &
total costs
expand
Horizontal
34
Methods of measurement of elasticity are
35
There are no real exceptions to the law of demand
36
False
38
The divisible goods, whose benefits can be priced, are called pure
public goods.
In the measurement of profit, the differences in the concept of profit
arise due to differences in cost concepts.
The act of manufacturing goods and services is called
39
Price discrimination is possible in perfect competition
False
40
Supply is predominantly determined by ________.
stock
37
Percentage method , Geometric
method , Total outlay method
False
True
production