Principles of Economics Multi-Choice Quiz with Correct Answers | ECON 2005, Quizzes of Microeconomics

Download Principles of Economics Multi-Choice Quiz with Correct Answers | ECON 2005 and more Quizzes Microeconomics in PDF only on Docsity! MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Market power refers to a firm's ability to A) monopolize a market completely. B) sell any amount of output it desires at the market-determined price. C) raise price without losing all demand for its product. D) charge any price it likes. 2) From society's point of view, a monopolist produces too little because price A) is less than average cost. B) exceeds marginal cost. C) is less than marginal cost. D) exceeds average cost. Refer to the information provided in Figure 12.8 below to answer the questions that follow. Figure 12.8 3) Refer to Figure 12.8. For Armstrong Cable the profit-maximizing number of subscribers is A) 800. B) 2,200. C) 1,000. D) 2,500. 4) Which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry? A) The only locally owned and operated bank in Severn, Md. B) Ohio Bell Telephone Company C) A Burger King in Pittsburgh, Pa. D) A wheat farmer in Kansas 5) Which of the following made tying contracts illegal and banned price discrimination? A) the Federal Trade Commission Act B) the Cellar-Kefauver Act C) the Sherman Act D) the Clayton Act 6) A profit-maximizing monopolist will produce output where A) marginal revenue is zero. B) marginal revenue equals marginal cost. C) price equals marginal cost. D) marginal cost is minimized. Refer to the information provided in Figure 12.5 below to answer the questions that follow. Figure 12.5 7) Refer to Figure 12.5. The profit-maximizing price for this firm is A) $11. B) $5. C) $7. D) $9. 8) In a monopoly, the market demand curve is A) the same as the demand curve facing the firm. B) the marginal cost curve above minimum average variable cost. C) the summation of all the individual firm's demand curves. D) nonexistent. Refer to the information provided in Figure 12.6 below to answer the question that follows. Figure 12.6 9) Refer to Figure 12.6. The Silver Exchange has a monopoly over the sale of solid silver walking sticks. The Silver Exchange has hired you as an economic consultant. You should advise this monopolist to A) produce in the short run but exit the industry in the long run. B) shut down in the short run but expand capacity in the long run. C) produce in the short run and expand capacity in the long run. D) shut down in the short run and exit the industry in the long run. 10) The notion that the government becomes the tool of the rent seeker and makes the allocation of resources even less efficient than before is known as A) public choice theory. B) collusion. C) government failure. D) conspiracy theory. 11) XYZ Computer Company has a monopoly on the sale of a specialized color printer. If it sells two of these printers its total revenue is $1,000, and if it sells three-color printers its total revenue is $1,600. The marginal revenue of the third color printer sold is A) $600. B) $1,300. C) $200. D) $300. 12) The Specialty Cake Store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. At that production level ATC is $20, AVC is $15, AFC is $10, and both MR and MC are $8. This firm should A) increase output to the point where price equals marginal cost. B) continue to produce 200 cakes, as price is greater than AFC. C) produce zero cakes and just pay fixed costs. D) decrease output to the point where marginal cost equals average cost. Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7 13) Refer to Figure 13.7. Six firms with identical cost structures that produce chewing gum have formed a cartel. If the cartel produces the profit maximizing output level each firm should produce A) 6,000 packs of chewing gum. B) 2,000 packs of chewing gum. C) 12,000 packs of chewing gum. D) output levels that are indeterminate from this information. Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4 14) Refer to Figure 13.4. Assume The Custom Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should produce __________ personalized sweatshirts. A) 0 B) 50 C) 75 D) 70 15) If firms in a monopolistically competitive industry are incurring losses, in the long run A) firms will leave this industry until the firms that remain are earning an economic profit. B) firms will leave this industry until the remaining firms earning a profit equal to zero. C) the government will subsidize the losses incurred by these firms so as to maintain competition in the industry. D) investment in this industry will increase to reduce production costs. 31) If there are external costs of production and perfectly competitive firms do not account for these costs, at the equilibrium level of output A) P > MC and P = MSC. B) P = MC and P < MSC. C) P = MC and P > MSC. D) P = MC = MSC. 32) Assuming no externalities exist, if a good's price is less than its marginal cost, then the benefits consumers derive are A) greater than the cost of resources needed to produce it and less should be produced. B) less than the cost of resources needed to produce it and more should be produced. C) less than the cost of resources needed to produce it and less should be produced. D) greater than the cost of resources needed to produce it and more should be produced. Refer to the information provided in Figure 14.4 below to answer the questions that follow. Figure 14.4 33) Refer Figure 14.4. At 20 units of output there are external A) benefits of $5 per unit. B) costs of $5 per unit. C) benefits of $2 per unit. D) costs of $2 per unit. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) C 2) B 3) C 4) D 5) D 6) B 7) A 8) A 9) D 10) C 11) A 12) C 13) B 14) B 15) B 16) C 17) A 18) D 19) B 20) B 21) B 22) C 23) B 24) C 25) D 26) B 27) C 28) A 29) A 30) D 31) B 32) C 33) D