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economics mcq homework with A+ answers




Question;1. The demand curve facing the firm in _________ is the same as the whole market demandcurve.perfect competitionmonopolistic competitionoligopolyMonopoly2. In the short-run for a perfectly competitive market, a manufacturer will stop productionwhen:the total revenue is less than total coststhe contribution cannot cover any fixed coststhe price is greater than AVCoperating at a negative economic profit3. Economies of scale exist whenlong-run average cost decreases as output cost decreases as output increases.marginal cost decreases as output increases.fixed cost decreases as output increases.4. Individual cartel producers may find it advantageous to cheat on the agreements byincreasing production,if the other producers obey the agreements.if every member cheats.when the punishment on cheating is severe.when the market demand is inelastic.5. In the perfectly competitive market, a firms marginal revenue (MR) is equal to:its total costits marginal profitthe market priceits total revenue6. The profit-maximizing monopolist facing a negative-sloping demand curve will alwaysproduceat an output greater than the output where average total costs are an output short of that output where average total costs are an output equal to industry output under perfect an output short of that output where the profits are maximized.7. The Lerner index, (P-MC)/P, might be an inappropriate measure for market power amongfirms in IT industry becausethere are too many firms in the industry.most firms charge a high price for their products.all firms marginal costs are very firm has market power.8. In the long-run, afirm in amonopolisticallycompetitive industry willtend to just cover its total cost, maintaining a normcharge a price equal to its marginal cost10. An average variable cost function is estimated asAVC2= 96 2Q + 0.05QWhich of the following cost functions is associated with this estimate?MC = 2Q+ 0.1Q2TVC = 96Q 2Q2 + 0.1Q3TVC = 96Q 4Q2 + 0.15Q3MC = 96 4Q+ 0.15Q211. Refer to the followingtable showing the totalcost schedule for aperfectly competitivefirm:QTC ($)020145265310041455195If market price is $40, howmany units of output will thefirm produce for profitmaximization?2 units of output3 units of output4 units of output.5 units of output.12. Refer to the following table showing the total cost schedule for a perfectly competitivefirm:QTC ($)020145265310041455195If market price is $40, what is the maximum profit the firm can earn?$15$20$25$3013. Refer to the following table showing the total cost schedule for a perfectly competitivefirm:QTC ($)020145265310041455195If market price is $20, how many units of output will the firm produce?0, the firm shuts down.12314. Refer to the followingtable showing the totalcost schedule for aperfectly competitivefirm:QTC ($)020145265310041455195If the firm shoutsdown, its short-run loss will be$65.$45.$20.unavailable because of insufficient inform15. Which of the following is NOT a market characteristic for monopoly?One firm is the only supplier of a product.Entry into the market is blocked.The firm can influence market price though output decision-making.The firms product has fewclose substitutes.16. Which of the flowing isthe most complicatedmarket structure becauseno single model canexplain the firmsbehavior thoroughly?OligopolyMonopolistic competitionPerfect competitionMonopoly17. Which of the following is the best definition of fixed costs?The costs associated with capital input.The long-run total costs paid by an operating firm.The short-run costs paid for labor input.The short-run total costs paid by a shutting-down firm.18. The following table shows the demand schedule for round-trip flights between Houstonand Tokyo for business travelers:Demand Schedule of BusinessTravelersPriceQD$2,000500$1,5001,000$1,0001,500$5002,000Suppose an airline marginal cost per seat for the round-trip fight is $500. For profitmaximization, the airline should charge $_____ per round-trip (Hint: Apply the half-way ruleof MR in graph).5001,0001,5002,00019. Which of the following profit-maximizing equilibrium condition is correct for amonopoly with positive profit?P = ATC = MR = MCP > ATC > MR > MCP > ATC > MR = MCP = ATC > MR > MC20. The Prisoners Dilemma 2X2 game can be used to explain why oligopoliststend easily to achieve collusion in games.choose the best strategy to benefit the whole industry.are suspicious that other players may double cross them.can rely on cooperative behavior by all parties.21. A firm is using 20 units of capital and 100 units of labor to produce 1,000 units of output.Capital costs $150 per unit and labor $20 per unit. The last unit of capital added 50 unitsof output, while the last unit of labor added 10 units of output. The firmis using the costminimizing combination of capital and labor.should use more of both inputs in equal proportions.should use less of labor and more of capital for cost minimization.could produce the same level of output at a lower cost by using more labor and less capital.22. In the short-run cost analysis, if a firms marginal cost (MC) is unavailable, the bestalternative of MC is itsaverage total cost (ATC)average fixed cost (AFC)total variable cost (TVC)average variable cost (AVC)23. When we use the Lerner index to define the market power for two firms which are allprice searchers, one firm charging at a price in which the demand is more elasticcompared with another firms implies that the firm hasno market power.less market power.greater market power.the same market power as the another.24. A monopolys _______ changes with the shift of demand curve, when all the otherfactors cost (TC) curvemarginal cost (MC) curveaverage cost (AC) curvemarginal revenue (MR) curve25. Use the following figure to answer the next 2 questions (25~26).The figure shows the demand and cost curves facing a monopoly.The maximum profit for the monopoly is$80.$100.$120.$140.26. The figure shows the demand and cost curves facing a monopoly.The total fixed cost for the monopoly should be$40$60$80unavailable from the figure27. A production function using K (capital) and L (labor) inputs, Q=2K+3L, exhibitsincreasing return to scale.decreasing return to scale.constant return to scale.economies of scale.28. Suppose that Intel and AMD are the only sellers of computer CPU in the United States.They are deciding how much to charge for similar products. The two choices are Lowand High. The payoff (profit as million) 2X2 matrix is as follows:If Intel is both the price leader and the first mover, then the Nash equilibrium in the game will be(Intel-High, AMD-High)(Intel-High, AMD-Low)(Intel-Low, AMD-High)(Intel-Low, AMD-Low)29. A firm will shutdown in the short-run ifit makes a negative profit.the market price is lower than its average total cost (ATC).the market price is lower than its average variable cost (AVC).the fixed cost can be only covered partially.30. A firm can choose the optimal usage of input to maximize the profit by employing theamount of input wherethe input price equals the marginal revenue product (MRP).the input price equals the marginal revenue (MR).the input price equals the marginal cost (MC).the input price equals the average total cost (ATC).31. When a manager of manufacturing factory said, I will achieve the maximum amount ofoutput given the current combination of inputs, then the manager is trying to achieveeconomic efficiency.technical efficiency.cost minimization.production minimization.32. United States Postal Service (USPS) is a monopoly in the _____ market because it_______.parcel delivery, exhibits economies of scale in productionordinary mail delivery, charges a lower price than competitorsordinary mail delivery, is granted by the public franchise to open every houses mailboxparcel delivery, charges a lower price than competitors33. When participants in a game choose to take actions that represent Nash equilibrium,no single participant has an incentive to change its action.each participant has chosen the best action possible, given what the others have other set of actions could make all participants better off.both a and b34. Which of the following is INCORRECT in the MS Excel operation for constructing ashort-run production function with labor input (L)?The regression model should be a cubic function such as Q = AL3+BL2.The independent variables should be L3, L2 and L.We need to choose Constant as zero in regression operation.None of the above35. A cubic specification for a short-run total cost (TC) function is appropriate when thescatter diagram indicatesa U-shaped total cost (TC) curve.a S-shaped average variable cost (AVC) curve.a L-shaped marginal cost (MC) curve.a U-shaped marginal cost (MC) curve.36. The U-shaped marginal cost and average cost curves come fromthe law of diminishing marginal utility.the law of diminishing return (marginal product).the law of demandthe fixed cost.37. Suppose that Nike and Adidas are the only sellers of athletic footwear in the UnitedStates. They are deciding how much to charge for similar shoes. The two choices areLow and High. The payoff (profit as million) 2X2 matrix is as follows:Does Nike have the dominant strategy in the game? _____. Does Adidas have the dominantstrategy in the game? _____.Yes, YesNo, YesNo, NoYes, No38. Which of the following about price leadership in oligopoly is INCORRECT?Price leader is generally the firm with the largest market share or the lowest average costs.Price followers set up the same price as the leader does.It is one kind of cooperative behavior in oligopoly.It requires explicit agreements among firms.39. When we construct the cubic total variable cost, TVC = aQ + bQ2+ cQ3, in order to confirm the theoretical properties, the parameters must satisfya > 0, b > 0, and c < 0.a 0, and c 0, b 0.a < 0, b 0.40. Economies of scope means thatthe average cost declines when output increases.the joint cost of producing two goods is less than the sum of the separate costs of producingthe two goods.economies of scale also exhibits.two goods can be produced more efficiently if their production processes are separate.41. What is the most special market characteristic of oligopoly different from the othermarket structures?firms have market powerproduct differentiationbarriers to entryinterdependence of decision making42. Which of the following is most likely to be qualified as a perfectly competitive market?Airline industryStock marketGas stationPower utility industry43. Under the Lerner Index of market power definition, an existing perfectly competitivefirmhas zero market power because its marginal cost equal the market price.has a positive market power because it makes a positive profit.has the same market power as a not qualified to apply the Lerner index.44. Assume that a monopoly faces the inverse market demand as P = 100 2Q and themonopolys marginal cost function is MC = 40Q. The monopolys optimal output shouldbe2030406045. If a firm can influence the market price by changing its quantity of output, then the firmmust be a monopolyhas market powerwill set the price equal to its average total costsearns a normal profit in both short-run and long-run46. Suppose that Ford and GM are the only auto makers in the United States. They aredeciding how much to charge for similar models. The two choices are Low and High.The payoff (profit as million) 2X2 matrix is as follows:How many Nash equilibrium in this game?012447. Refer to the following table with demand and cost schedule for a monopoly:Price ($)QTC ($)2047519588186103177120168139159159For profit maximization, what price should the monopoly charge?$19$18$17$1648. Refer to the following table with demand and cost schedule for a monopoly:Price ($)QTC ($)2047519588186103177120168139159159The marginal revenue (MR) for the 9th unit of output (Q) is$10$9$8$7


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