Questions:
1) In a perfectly competitive market, the firm hires labor up to the point at which
a) The marginal revenue product of labor is zero
b) The marginal revenue product of labor equals the wage rate
c) The marginal factor cost of labor is zero
d) None of the above
2) For the individual worker, the opportunity cost of leisure is
a) The forgone wages
b) The expense incurred in pursuing leisure activities
c) The risk she will eventually become unemployed
d) Zero
3) When the price of product increases, the marginal revenue product curve in a perfectly competitive market
a) Shifts to the left
b) Shits to the right
c) Does not change
d) Becomes flatter
4) If a firm employs a new worker, the additional product he generates is
a) The diminished return
b) The marginal physical product of labor
c) The outside edge
d) Total product
5) Which of the following is TRUE
a) In the model of price leadership, the dominant firm consistently charges the lowest price
b) Opportunistic behavior is discouraged by the desire to have repeat transactions
c) The strategic dependence that characterizes oligopoly means that no firms can earn positive accounting profits
d) Price wars are most common in perfect competition
6) A monopolist will not make a profit if
a) MR = MC
b) P < ATC
c) P> ATC
d) P> MR
7) Economies of scale may be a barrier to entry as
a) only small-scale production can meet the constantly changing market demand
b) only small-scale production can lower the per-unit cost of production
c) only large-scale production can lower the per-unit cost of production
d) large-scale production is inefficient
8) The time frame in which all factors of production can vary is
a) the long run
b) the short run
c) the fiscal year
d) the length of time for which a sole proprietorship is protected with limited liability
9) If a potter can create 10 vases at a total cost $180 and can produce 30 vases for a total cost of $400, then the marginal cost of a vase in the quantity range between 10 and 30 is
a) $40
b) $18
c) $11
d) $13
10) When would a firm's accounting profit differ from its economic profit
a) when the firm's marginal cost is increasing
b) when the firm's total explicit costs differ from the opportunity cost of all inputs used
c) when the firm's total revenue does not cover its fixed costs
d) when the firm has fixed costs
11)LLC's are exempt from minimum wage laws
a) true
b) false
12) To be considered a monopoly, a firm must serve a national market
a) true
b) false
13) markets tend to overallocate resources to the production of a good when
a) there are positive externalities
b) there are negative externalitites
c) there are public goods produced
d) equilibrium occurs
14) A result of a positive externality in the production of a good is that
a) the price system will under-allocate resources to the production of that good or service
b) the market demand will be too high
c) the price system will over-allocate resources to the production of that good or service
d) the market supply will be too high
15) Market failures arise when
a) people look out for their own best interests
b) there is a gap between the social and private costs of producing or consuming a good
c) firms look out for their own best interests
d) society seeks to operate at a point on the production possibilities curve
16) The price system will allocate resources efficiently except when
a) firms seek to maximize profit
b) market failures exist
c) consumers pursue their own best interests
d) markets are perfectly competitive