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Applied Economics Multiple Choice Questions Set




Question;1.(Points: 2)If a firm finds itself operating in Stage I, it implies thata. variable inputs are extremely expensive.b. it underinvested in fixed capacity.c. it overinvested in fixed capacity.d. fixed inputs are extremely expensive.Save Answer2.(Points: 1)Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?a. variable cost vs. incremental costb. sunk cost vs. fixed costc. historical cost vs. replacement costd. accounting cost vs. direct costSave Answer3.(Points: 1)The pricing of a product at each stage of production as the product moves through several stages is calleda. transfer pricing.b. cost plus pricing.c. penetration pricing.d. monopolistic pricing.Save Answer4.(Points: 1)All of the following are conditions which are favorable to the formation of cartels excepta. the existence of a small number of firms.b. geographic proximity of firms.c. homogeneity of the product.d. easy entry into the industry.Save Answer5.(Points: 2)The result for the seller of being able to practice price discrimination will bea. lower quantity sold.b. higher profits.c. cost minimization.d. lower demand elasticity.Save Answer6.(Points: 2)When a firm prices its goods below the marginal cost to drive away competitors, it is referred asa. limit pricing.b. price skimming.c. predatory pricing.d. penetration pricing.Save Answer7.(Points: 1)Other things remaining the same, an increase in the price of butter can be expected toa. increase margarine sales.b. increase butter sales.c. decrease margarine sales.d. None of the aboveSave Answer8.(Points: 2)In which of these markets would the firms be facing the least elastic demand curve?a. oligopolyb. perfect competitionc. pure monopolyd. monopolistic competitionSave Answer9.(Points: 2)Mutual interdependence occurs whena. the actions of one firm in an industry are easily recognized and perhaps copied by others.b. monopolists recognize that they must face eventual competition in the long run.c. all firms in an industry are affected by the same macro economic conditions, such as a recession, inflation, interest rates, exchange rates, etc.d. the actions of firms are independent of each other.Save Answer10.(Points: 1)Mutual interdependence means thata. all firms are price takers.b. all firms collaborate to establish one price.c. each firm sets its own price based on its anticipated reaction by its competitors.d. all firms are free to enter or leave the market.Save Answer11.(Points: 2)In general, there is a(n) ________ relationship between the height/strength of the barriers and the number of firms in an industry.a. inverseb. randomc. constantd. directSave Answer12.(Points: 1)When a company is faced by a kinked demand curve, the marginal revenue curvea. will be upward sloping.b. will be horizontal.c. will always be zero at the quantity produced.d. will be discontinuous.Save Answer13.(Points: 2)The existence of a kinked demand curve under oligopoly conditions may result ina. competitive pricing.b. price rigidity.c. price flexibility.d. None of the aboveSave Answer14.(Points: 1)In the kinked demand curve model, the demand curve is ________ for price increases and ________ for price decreases.a. relatively inelastic, relatively elasticb. unit elastic, relatively elasticc. perfectly elastic, perfectly inelasticd. relatively elastic, relatively inelasticSave Answer15.(Points: 1)The four-firm concentration ratioa. indicates the total profitability among the top four firms in an industry.b. indicates the presence and intensity of an oligopoly market.c. is used by the government as a basis for anti-trust cases.d. is an indicator of the degree of monopolistic competition.Save Answer16.(Points: 1)The main difference between perfect competition and monopolistic competition isa. the ease of exit from the market.b. the degree of product differentiation.c. the difference in the firm's profits in the long run.d. the number of sellers in the market.Save Answer17.(Points: 1)If firms are earning economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run?a. Firms will continue to earn economic profit.b. Firms will join together to keep others from entering.c. Some firms will leave the market.d. New firms will enter the market, thereby eliminating the economic profit.Save Answer18.(Points: 1)Which of the following represents a good example of an oligopoly?a. a public utilityb. the agriculture industryc. the automobile industryd. the restaurant industrySave Answer19.(Points: 2)Monopoly is characterized bya. non-price competition not necessary.b. market entry and exit difficult or impossible.c. unique products.d. All of the aboveSave Answer20.(Points: 2)In the short run a firm should shut down if it cannota. cover its fixed costs.b. make normal profits.c. cover its variable costs.d. make economic profits.Save Answer21.(Points: 2)Which of the following characteristics is most important in differentiating between perfect competition and all other types of markets?a. whether or not the product is standardizedb. whether or not firms are price takersc. whether or not there is complete market information about priced. All of the above are equally important.Save Answer22.(Points: 2)Which is a required characteristic of a perfectly competitive industry?a. Barriers to entry are highb. There are few firms so that none can influence market price.c. Products are highly differentiated.d. None of the aboveSave Answer23.(Points: 2)In the short run, which of the following would indicate that a perfectly competitive firm is producing an output for which it is receiving a normal profit?a. P > ACb. AVC < P < ACc. P = AVCd. P = ACSave Answer24.(Points: 2)Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q. If its demand curve is P = 300 - 15Q, what should it do in the short run?a. continue operating in the short run even though it is losing moneyb. continue operating because it is earning an economic profitc. shut downd. Cannot be determined from the above informationSave Answer25.(Points: 2)A perfectly competitive firm sells 15 units of output at the going market price of $10. Suppose its average fixed cost is $15 and its average variable cost is $8. Its contribution margin (i.e., contribution to fixed cost) isa. $30.b. $105.c. $150.d. Cannot be determined from the above informationSave Answer26.(Points: 1)At the point at which P=MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its AC = $110. This firm shoulda. continue operating in the short run.b. shut down immediately.c. try to take advantage of economies of scale.d. try to increase its advertising and promotion.Save Answer27.(Points: 2)If a perfectly competitive firm incurs an economic loss, it shoulda. shut down in the long run.b. shut down if this loss exceeds variable cost.c. shut down immediately.d. try to raise its price.Save Answer28.(Points: 2)A firm that seeks to maximize its revenue is most likely to adhere to which of the following?a. MR =0b. MR < MCc. MR =Pd. MR = MCSave Answer29.(Points: 1)The principle marginal revenue equal-marginal-cost rule for maximizing profita. applies to new firms but not to existing firms in an industry.b. applies only for firm in perfect competition but not in monopolistic competition.c. does not apply to firms in the monopoly or oligopolistic industries.d. applies to all the firms in all industries.Save Answer30.(Points: 2)Which of the following actions has the best potential for experiencing economies of scope?a. producing a product that has appeal to a wider segment of the marketb. producing computers and softwarec. producing spaghetti and soft drinksd. producing cars and trucksSave Answer31.(Points: 1)Changes in the short-run total costs result from changes in onlya. total fixed costs.b. variable costs.c. fixed costs.d. zero.Save Answer32.(Points: 1)Diseconomies of scale can be caused bya. the law of diminishing returns.b. increasing advertising and promotional costs.c. bureaucratic inefficiencies.d. All of the aboveSave Answer33.(Points: 1)Which of the following is most likely a fixed cost?a. wages for unskilled laborb. property taxesc. expenditures for raw materialsd. fuel costSave Answer34.(Points: 2)When a firm increased its output by one unit, its AC decreased. This implies thata. MC = AC.b. MC < AFC.c. MC < AC.d. the law of diminishing returns has not yet taken effect.Save Answer35.(Points: 2)Which level indicates the point of maximum economic efficiency?a. lowest point on AVC curveb. lowest point on MC curvec. lowest point on AC curved. None of the aboveSave Answer36.(Points: 2)When a firm increased its output by unit, its AFC decreased. This is an indication thata. AVC < AFC.b. the firm is spreading out its total fixed cost.c. the law of diminishing returns has taken effect.d. MC < AFC.Save Answer37.(Points: 2)The marginal cost will intersect the average variable cost curvea. where average variable cost curve equals price.b. when the average variable cost curve is rising.c. at the minimum point of the average variable cost curve.d. The two will never intersect.Save Answer38.(Points: 2)Which of the following cost functions will exhibit both decreasing and increasing marginal costs?a. a quadratic cost functionb. a cubic cost functionc. a linear cost functiond. All of the aboveSave Answer39.(Points: 2)If a firm used a combination of inputs that was to the left of its isocost line, it would indicate thata. it is operating at its optimal point because it is saving money.b. it is not spending all of its budget.c. it is exceeding its budget.d. None of the aboveSave Answer40.(Points: 2)A firm using two inputs, X and Y, is using them in the most efficient manner whena. Px = Py and MPx = MPy.b. MPx/MPy = Px/Py.c. MPx/Py = MPy/Px.d. MPx = MPy.Save Answer41.(Points: 2)When the law of diminishing returns takes effecta. firms must add decreasingly more input if they are to maintain the same extra amount of output.b. firms must add increasingly more input if they are to maintain the same extra amount of output.c. more input must be added in order to increase its output.d. a firm must always try to add the same amount of input to the production process.Save Answer42.(Points: 2)In the short run, finding the optimal amount of variable input involves which relationship?a. MP = MCb. MRP = MFCc. AP = MPd. MP = 0Save Answer43.(Points: 2)Which of the following indicates when Stage I ends and Stage II begins in the short-run production?a. when MP starts to diminishb. when MP = APc. when MP = 0d. when AP = 0Save Answer44.(Points: 2)________ functions are very useful in analyzing production functions, which exhibit both increasing and decreasing marginal products.a. Quadraticb. Cobb-Douglasc. Straight-lined. CubicSave Answer45.(Points: 2)The "Law of Diminishing Returns" states thata. additional inputs will decrease average productivity.b. the supply of inputs is becoming scarce.c. additional inputs will reduce output.d. additional inputs will lead to less additional output.Save Answer46.(Points: 2)In a call center, which of the following situations can be considered as a variable input in the short run?a. the size (e.g., square footage) of the call centerb. the number of call center managers or supervisorsc. the number of call center representatives on duty at the centerd. the level of computer-telephony software being utilizedSave Answer47.(Points: 2)An isoquant indicates different combinations ofa. two inputs that can be purchased for the same amount of money.b. two inputs that can produce the same amount of output.c. output that can be produced with the same amount of input.d. output that cost the same amount to produce.Save Answer48.(Points: 2)The marginal product of the variable inputa. is equal to the total product divided by the total amount of the variable input employed.b. typically falls then rises.c. is always positive.d. None of the aboveSave Answer


Paper#55810 | Written in 18-Jul-2015

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