Intro to Micro Economics
Questions 1-4 are based on the table 1 above
1. What is Average Product from the 1-6 workers?
a. 0,1,2,3,4,5,6,
b. 1,2,3,4,56,7
c. 3,4,5,5,4.6,3.3
d. 3,8,15,20,23,20
2. What is Marginal Product from the 1-6 workers?
a. 0,3,4,5,5,4.6,3.3
b. 0,1,2,3,4,5,6,
c. 3,8,15,20,23,20
d. 3,5,7,5,3,-3
3. When Marginal product is greater than average product, average product is ...
a. Rising
b. Constant
c. Falling
d. Cannot determine
4. When marginal product is less than average product, average product is..
a. Rising
b. Constant
c. Falling
d. Cannot determine
Questions 5-12 are based on Table 2
5. At zero output TC=80, then what is TFC at zero output?
a. 80
b. 0
c. 100
d. 110
6. What is ATC for the first worker
a. 80
b. 110
c. 190
d. 0
7. At the 5th unit of production ATC is?
a. 350
b. 70
c. 80
d. 100
8. At the 6th unit of production ATC is?
a. 350
b. 70
c. 80
d. 100
9. When output Increase from 5 to 6, Marginal Cost is?
a. 70
b. 80
c. 100
d. 0
10. When output Increase from 0 to 1, Marginal Cost is?
a. 0
b. 80
c. 110
d. Cannot be determined
11. What is AVC for the last unit produced?
a. 72.5
b. 80
c. 0
d. 82.5
12. What is the most efficient level of production?
a. 1-2 units
b. 2-3 units
c. 3-4 units
d. 5-6 units
13. Implicit Costs:
a. Are utilized by accountants to calculate total expenses
b. Are regarded as costs by accountants and by economists
c. Plus explicit costs are equal to economic costs
d. Are an expenditure cost
14. Cash expenditures a firm makes to pay for resources are called:
a. Implicit costs
b. Explicit costs
c. Normal profit
d. Opportunity costs
15. Suppose that you could either prepare your own tax return in 15 hours, or hire a tax specialist to prepare it for you in 2 hours. You value your time at $11.00 an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is:
a. $40
b. $55
c. $22
d. $165
16. Marginal product of labor refers to the
a. Last unit of output produced by labor at the end of each period
b. Increase in output resulting from employing one more unit of labor
c. Total output divided by the number of labor employed
d. Smallest unit of the output produced by labor
17. According to the law of diminishing marginal returns:
a. Output will fall and then rise as additional units of input are employed
b. Employing additional inputs will diminish total output
c. The additional output generated by additional units of an input will diminish
d. The additional inputs necessary to produce an additional unit of output will diminish
18. The total product curve graphically shows the:
a. Minimum level of output that can be produced by a quantity of a variable resource holding constant the quantity of other resources
b. Minimum level of output that can be produced by a quantity of a fixed resource letting other resources vary
c. Maximum level of output that can be produced by a quantity of a fixed resource letting other resources vary
d. Maximum level of output that can be produced by a quantity of a variable resource holding constant the quantity of other resources
19. When the total product curve is falling, the:
a. Marginal product of labor is zero
b. Marginal product of labor is negative
c. Average product of labor is increasing
d. Average product of labor must be negative
20. Over the range of positive, but diminishing, marginal returns for an input, the total product curve:
a. Falls
b. Rises at a constant rate
c. Rises at a decreasing rate
d. Rises at an increasing rate
21. Refer to the above table. With the addition of the second unit of input, the marginal product is:
a. 15 and the average product is 20
b. 25 and the average product is 10
c. 15 and the average product is 10
d. 10 and the average product is 15
22. Refer to the above table. Diminishing marginal returns sets in with the addition of the:
a. First unit of input
b. Second unit of input
c. Third unit of input
d. Fourth unit of input
23. Refer to the above graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed does diminishing marginal returns set in?
a. A
b. B
c. C
d. D
24. Refer to the above graph showing the marginal product (MPL) and the average product of labor (APL). At which quantity of labor employed is total product maximized?
a. A
b. B
c. C
d. D
25. Refer to the above graph. It shows the total product (TP) curve. At which point does diminishing marginal returns set in?
a. Point a
b. Point b
c. Point c
d. Point d
26. Refer to the above table. With diminishing marginal returns, if the firm hires seven units of labor, which of the following numbers would most probably be the total product?
a. 40
b. 39
c. 38
d. 37
27. Variable costs are
a. Sunk costs
b. Costs that change every day
c. Costs that change with the level of production
d. The change in total cost due to the production of an additional unit of output
28. Fixed costs are those costs which are:
a. Zero if the firm produces no output in the short run
b. Unchanging through time
c. Independent of the rate of output
d. Implicit to a competitive firm
29. Refer to the above graph of cost curves. Total fixed cost at output level Q2 is measured by:
a. 0B
b. AC
c. CD
d. DE
30. At any level of output:
a. Average variable cost will exceed average total cost in the short run
b. Marginal cost will exceed average variable cost by the level of average fixed cost
c. Average variable cost will exceed average fixed cost by the level of average total cost
d. Average total cost will exceed average variable cost by the level of average fixed cost
31. Marginal cost can be defined as the:
a. Change in total fixed cost resulting from one more unit of production
b. Change in total cost resulting from one more unit of production
c. Change in average total cost resulting from one more unit of production
d. Change in average variable cost resulting from one more unit of production
32. Which market model assumes the least number of firms in an industry?
a. Monopolistic competition
b. Pure competition
c. Pure monopoly
d. Oligopoly
33. Mutual interdependence would tend to limit control over price in which market model?
a. Monopolistic competition
b. Pure competition
c. Pure monopoly
d. Oligopoly
34. In which two market models would advertising be used most often?
a. Pure competition and monopolistic competition
b. Pure competition and pure monopoly
c. Monopolistic competition and oligopoly
d. Pure monopoly and oligopoly
35. The fast-food restaurant industry would be an example of which market model?
a. Monopolistic competition
b. Pure competition
c. Pure monopoly
d. Oligopoly
36. Which of the following is true under conditions of pure competition?
a. There are differentiated products
b. The market demand curve is perfectly elastic
c. No single firm can influence the market price by changing its output
d. Each individual firm has the ability to set its own price
37. A purely competitive firm does not try to sell more of its product by lowering its price below the market price because:
a. Its competitors would not permit it
b. It can sell all it wants to at the market price
c. This would be considered unethical price chiseling
d. Its demand curve is inelastic, so total revenue will decline
38. Average revenue and marginal revenue are equal at each output level in:
a. Pure competition
b. Monopolistic competition
c. Monopoly
d. Oligopoly
39. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is:
a. Equal to the price
b. Less than the price
c. Greater than the price
d. Equal to the average cost
40. In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if:
a. Marginal cost is greater than average revenue
b. Average total cost is greater than average revenue
c. Average Fixed cost is greater than average revenue
d. Total revenue is less than total variable cost
41. Given the table above, what is the short-run profit-maximizing level of output for the firm?
a. 2 units
b. 3 units
c. 4 units
d. 5 units
42. Refer to the above graph for a purely competitive firm in the short run. The firm would suffer losses if it operates at which of the following range of output?
a. 0A
b. AB
c. BC
d. Any level below C
43. Refer to the above graph for a purely competitive firm in the short run. What minimum output level should the firm produce just for it to break even?
a. A
b. B
c. C
d. Greater than C
44. Refer to the above table. If the firm shuts down in the short run, the total cost will be:
a. $1,350
b. $2,500
c. $2,700
d. $3,100
45. At what quantity would a purely competitive firm cover all of its costs and earn only normal profits?
a. Q=5
b. Q=10
c. Q=15
d. Q=20
46. Let us suppose Harry's, a local supplier of chili and pizza, has the following revenue and cost structure:
a. Harry's should stay open in the long run
b. Harry's should shut down in the short run
c. Harry's should stay open in the short run
d. Harry's should shut down in the short run but reopen in the long run
47. Refer to the above graph. Which of the output levels is the profit-maximizing output level for this firm?
a. Q1
b. Q2
c. Q3
d. Q4
48. Refer to the above table for a purely competitive firm. The market price of the product in the short run is:
a. $40
b. $80
c. $120
d. $160
49. A profit-maximizing firm in the short run will expand output:
a. Until marginal cost begins to rise
b. Until total revenue equals total cost
c. Until marginal cost equals average variable cost
d. As long as marginal revenue is greater than marginal cost
50. A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?
a. Shut down if the minimum possible average variable cost is below $4.50
b. Decrease output if the minimum possible average variable cost is below $4.50
c. Increase output if the minimum possible average variable cost is below $4.50
d. Decrease output if the minimum possible average variable cost is above $4.50
51. T-Shirt Enterprises is selling in a purely competitive market. It is producing 3000 units, selling them for $2.00 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should:
a. Shut down in the short run
b. Decrease output to 2500 units
c. Continue to produce 3000 units
d. Increase output to 3500 units
52. All of the following statements apply to a purely competitive market in the long run, except:
a. In the long run, all inputs are variable in quantity
b. Firms can expand their plant capacities in the long run
c. Total fixed costs remain constant even when output expands in the long run
d. Firms may enter or leave the industry in the long run.
53. If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then:
a. The firm will produce a low level of output in the short run, and leave the industry in the long run
b. The firm will shut down in the short run, and leave the industry in the long run
c. The firm will produce a low level of output in the short run, but expand its plant in the long run as demand increases soon
d. The firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon
54. Refer to the graphs above for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information:
a. Some firms will exit from this industry
b. More buyers will come to the market
c. New firms will be attracted into the industry
d. Buyers will leave the industry
55. Refer to the graphs above for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will:
a. Shift up
b. Shift down
c. Not shift
d. Slope downward
56. Refer to the above graphs for a competitive market in the short run. Which of the following statements is true?
a. The firm will increase production
b. The firm is experiencing economic losses
c. The firm is breaking even
d. The firm is making economic profits
57. The long-run supply curve (Resource Cost Industry) would be upward-sloping if:
a. Resource prices fall as industry production contracts
b. Resource prices rise as industry production contracts
c. Resource prices are not affected by changes in industry output-level
d. Resource prices are set by the government
58. The long-run market supply curve for a (Resource cost industry) would be downward-sloping if the representative firms:
a. Demand curves shift up as the industry expands
b. ATC curves shift down as the industry expands
c. Supply curves shift left as the industry expands
d. Demand curves shift down as the industry expands
59. Which of the following is a barrier to entry?
a. Patents and licenses
b. Buyers' incomes
c. Close substitutes
d. Diminishing marginal returns
60. A monopoly is most likely to emerge and be sustained when:
a. Output demand is relatively elastic
b. Firms have U-shaped, average-total-cost curves
c. Fixed capital costs are small relative to total costs
d. Economies of scale are large relative to market demand
61. The region of demand in which the monopolist will choose a price-output combination will be:
a. Inelastic because as price declines and output increases, total revenue will increase
b. Inelastic because as price declines and output increases, total revenue will decrease
c. Elastic because as price declines and output increases, total revenue will decrease
d. Elastic because as price declines and output increases, total revenue will increase
62. Refer to the above graph showing the revenue curves for a monopolist. What price should be charged in order to maximize total revenue?
a. P1
b. P2
c. P3
d. P4
63. Refer to the above graph. When the total revenue curve reaches a maximum, marginal revenue is:
a. Positive
b. Negative
c. Zero
d. Greater than price at that level of output
64. The table shows the demand schedule facing Nina, a monopolist sell. Refer to the above table for Nina. What is the change in total revenue if she lowers the price from $20 to $18?
a. $10
b. $20
c. $30
d. $40
65. The table shows the demand schedule facing Nina, a monopolist selling baskets. Refer to the above table for Nina. What is the change in total revenue if she raises the price from $10 to $12?
a. -$300
b. +$300
c. +$120
d. -$120
66. Which of the above shows the correct relationship between demand and marginal revenue?
a. A
b. B
c. C
d. D
67. A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is:
a. -$10
b. -$13
c. +$7
d. +$21
68. Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:
a. Marginal cost = average revenue
b. Marginal revenue = average cost
c. Average total cost = average revenue
d. Marginal cost = marginal revenue
69. Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by:
a. Decreasing price and increasing output
b. Increasing price and decreasing output
c. Decreasing price and leaving output unchanged
d. Decreasing output and leaving prices unchanged
70. The data above relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?
a. P = $12; Q = 5
b. P = $14; Q = 4
c. P = $15; Q = 3
d. P = $18; Q = 2
71. Refer to the above graph for a profit-maximizing monopolist. The firm will set its price at:
a. 0J
b. 0G
c. 0K
d. 0H
72. Refer to the above graph for a profit-maximizing monopolist. The firm will produce the quantity:
a. 0V
b. 0Y
c. 0T
d. 0X
73. Refer to the above graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning:
a. Positive profits
b. Negative profits
c. Zero profits
d. Profits that cannot be determined from the given graph
74. Pure monopolists:
a. Maximize MR
b. Are price takers
c. Operate where P > MC
d. Face demand curves that are perfectly inelastic
75. The following data show the relationship between output, total costs, and total revenue for a pure monopoly. Within which of the following ranges of output will the firm earn maximum economic profits?
a. 50 to 60 units
b. 60 to 70 units
c. 70 to 80 units
d. 80 to 90 units
76. Many economists agree that government should deal with monopolists on a case-by-case basis. Policy options include the following, except:
a. If the monopoly is attained and maintained through anticompetitive behavior, the government can file a suit based on antitrust laws
b. If the firm is a natural monopoly, the government may decide to regulate its prices and operations
c. If the monopoly is maximizing economic profits, the government should subsidize new firms to enter the industry
d. If the monopoly is subject, and vulnerable, to potential competition, the government can decide to leave it alone
77. The economic incentive for price discrimination is based upon:
a. Prejudices of business managers
b. Differences among sellers' costs
c. A desire to evade antitrust legislation
d. Differences among buyers' elasticity's of demand
78. To practice long-run price discrimination, a monopolist must:
a. Be a natural monopoly
b. Charge one price to all buyers
c. Permit the resale of the product by the original buyers
d. Be able to separate buyers into different markets with different price elasticity's
79. Which case below best represents a case of price discrimination?
a. An insurance company offers discounts to safe drivers
b. A major airline sells tickets to senior citizens at lower prices than to other passengers
c. A professional baseball team pays two players with identical batting averages different salaries
d. A utility company charges less for electricity used during "off-peak" hours, when it does not have to operate its less-efficient generating plants
80. A monopolistically competitive industry is like a purely competitive industry in that:
a. Each industry produces a standardized product
b. Non-price competition is a feature in both industries
c. Neither industry has significant barriers to entry
d. Firms in both industries face a horizontal demand curve
81. Monopolistic competition is characterized by firms:
a. Producing differentiated products
b. Making economic profits in the long run
c. Producing at optimal productive efficiency
d. Producing where price equals marginal cost
82. One difference between monopolistic competition and pure competition is that:
a. Products may be homogeneous in monopolistic competition
b. There is some control over price in monopolistic competition
c. Monopolistic competition has significant barriers to entry
d. Firms differentiate their products in pure competition
83. Which of the following is a measure of the degree of industry concentration?
a. Dow Jones Industrial Index
b. Herfindahl Index
c. Employment Cost Index
d. S&P-500 Index
84. The graph depicts a monopolistically competitive firm.
a. $55 and produce 45 units of output
b. $65 and produce 35 units of output
c. $50 and produce 35 units of output
d. $52 and produce 50 units of output
85. Refer to the above graph. At the profit-maximizing level of short-run output, this monopolistically competitive firm will be making a profit of:
a. $275
b. $350
c. $500
d. $525
86. Refer to the above graph. This monopolistically competitive firm is earning economic profits in the short run and
a. Will continue to have economic profits in the long run
b. Will earn only normal profits in the long run
c. This will cause its demand curve to shift to the right in the long run
d. This will cause its cost curves to rise in the long run
87. A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should:
a. Reduce product price
b. Increase the level of output
c. Decrease the level of output
d. Make no change in the level of output
88. Answer the question based on the demand and cost schedules for a monopolistically competitive firm above. What output quantity will the monopolistically competitive firm produce to maximize profits?
a. 2
b. 3
c. 5
d. 6
89. Refer to the above table. At the profit-maximizing level of output, marginal revenue is:
a. $0
b. $4
c. $5
d. $8
90. Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph:
a. A
b. B
c. C
d. D
91. You are told that the four-firm concentration ratio in an industry is 20. Based on this information you can conclude that:
a. Each of the top four firms has 20 percent of industry sales
b. The four largest firms account for a combined 80 percent of the industry sales
c. The four largest firms account for 20 percent of industry sales
d. Each of the four largest firms accounts for 5 percent of industry sales
92. Industry Y is dominated by five large firms that hold market shares of 20, 25, 15, 10, and 25 percent. The four-firm concentration ratio for this industry is:
a. 70 percent
b. 80 percent
c. 85 percent
d. 90 percent
93. One major problem with concentration ratios is that they fail to take into account:
a. The localized market for products
b. Excess capacity in production
c. Price leadership
d. Mutual interdependence
94. When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of:
a. Inter-industry competition
b. Limit pricing
c. Price leadership
d. Collusion
95. The kinked demand model of oligopoly assumes that:
a. Rivals will ignore price increases but will match price cuts
b. Rivals will ignore price cuts but will match price increases
c. The oligopolistic firms are colluding
d. A firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises price
96. A major prediction of the kinked demand curve model is:
a. Price stability in oligopolies
b. Price instability in oligopolies
c. Stability of production costs in oligopolies
d. Instability of costs in oligopolies
97. On the above graph, if the oligopolist's MC curve shifts from MC1 to MC2, the firm will charge:
a. A higher price than before and total revenue will increase
b. The same price as before and sell more output; total revenue will increase
c. The same price as before and sell the same amount of output; total revenue will remain the same
d. A higher price than before and sell less output; it can't be determined whether total revenue will change
98. Given the oligopolistic firm pictured above, what is the profit-maximizing price?
a. P1
b. P2
c. P4
d. 0
99. The strategy of establishing a price that prevents the entry of new firms is called:
a. Cartel pricing
b. Limit pricing
c. Price leadership
d. Profit maximizing price
100. Which of the following best describes the efficiency results in oligopoly?
a. P > MC and P = minimum ATC
b. P = MC and P > minimum ATC
c. P = MC and P = minimum ATC
d. P > MC and P > minimum ATC
Attachment:- Quiz.rar