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economics mcq questions




Question;1.;The demand curve facing the firm in;is the same as the whole market demand curve.;perfect competition;monopolistic competition;oligopoly;Monopoly;2.;In the short-run for a perfectly;competitive market, a manufacturer will stop production when;the total revenue is less than;total costs;the contribution cannot cover any;fixed costs;the price is greater than AVC;operating at a negative economic;profit;3.;Economies of scale exist when;long-run average cost decreases as;output increases.;total 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 by increasing 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 firm?s marginal revenue (MR) is equal to;its total cost;its marginal profit;the market price;its total revenue;6.;The profit-maximizing monopolist;facing a negative-sloping demand curve will always produce;at an output greater than the;output where average total costs are minimized.;at an output short of that output;where average total costs are minimized.;at an output equal to industry;output under perfect competition.;at 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 among firms in IT industry because;there are too many firms in the;industry.;most firms charge a high price for;their products.;all firms? marginal costs are very;low.;no firm has market power.;8.;In the;long-run, a firm in a monopolistically competitive industry will;earn a positive economic profit;tend to just cover its total;cost, maintaining a normal profit;charge a price equal to its;marginal cost;become a monopoly;9.;An;average variable cost function is estimated as AVC;= 96? 2Q + 0.05Q2;When Q=100, the average variable cost is _________.;rising;falling;unknown.;greater than $400;10.;An average variable cost function is;estimated as AVC;= 96? 2Q + 0.05Q2;Which of the following cost functions is associated with this estimate?;MC =? 2Q;+ 0.1Q2;TVC = 96Q? 2Q2 + 0.1Q3;TVC = 96Q? 4Q2 + 0.15Q3;MC = 96? 4Q;+ 0.15Q2;11.;Refer to;the following table showing the total cost schedule for a perfectly;competitive firm;Q;TC;($);0;20;1;45;2;65;3;100;4;145;5;195;If market price is $40, how many;units of output will the firm produce for profit-maximization?;2 units of output;3 units of output;4 units of output.;5 units of output.;12.;Refer to the following table showing;the total cost schedule for a perfectly competitive;firm;Q;TC;($);0;20;1;45;2;65;3;100;4;145;5;195;If market price is $40, what is the maximum profit the firm can earn?;$15;$20;$25;$30;13.;Refer to the following table showing;the total cost schedule for a perfectly competitive;firm;Q;TC;($);0;20;1;45;2;65;3;100;4;145;5;195;If market price is $20, how many units of output will the firm produce?;0, the firm shuts down.;1;2;3;14.;Refer to;the following table showing the total cost schedule for a perfectly;competitive firm;Q;TC;($);0;20;1;45;2;65;3;100;4;145;5;195;If the firm shouts down, its short-run loss will be;$65.;$45.;$20.;unavailable because of;insufficient information.;15.;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 firm?s product has few close;substitutes.;16.;Which of;the flowing is the most complicated market structure because no single model;can explain the firms? behavior thoroughly?;Oligopoly;Monopolistic competition;Perfect competition;Monopoly;17.;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 Houston and Tokyo for business;travelers;Demand;Schedule of Business Travelers;Price;QD;$2,000;500;$1,500;1,000;$1,000;1,500;$500;2,000;Suppose an airline? marginal cost per seat for the round-trip fight is $500.;For profit-maximization, the airline should charge $_____ per round-trip (Hint;Apply the ?half-way rule? of MR in graph).;500;1,000;1,500;2,000;19.;Which of the following;profit-maximizing equilibrium condition is correct for a monopoly with positive;profit?;P = ATC = MR = MC;P > ATC > MR > MC;P > ATC > MR = MC;P = ATC > MR > MC;20.;The Prisoner?s Dilemma 2X2 game can;be used to explain why oligopolists;tend 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 units of output;while the last unit of labor added 10 units of output. The firm;is using the cost?minimizing;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;firm?s marginal cost (MC) is unavailable, the best alternative of MC is its;average 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 all price searchers, one firm;charging at a price in which the demand is more elastic compared with another;firm?s implies that the firm has;no market power.;less market power.;greater market power.;the same market power as the;another.;24.;A monopoly?s _______ changes with;the shift of demand curve, when all the other factors remain.;total cost (TC) curve;marginal cost (MC) curve;average cost (AC) curve;marginal revenue (MR) curve;25.;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;$80;unavailable from the figure;27.;A production function using K;(capital) and L (labor) inputs, Q=2K+3L, exhibits;increasing 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 ?Low? and ?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 if;it 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 the amount of input where;the 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 of output given the current;combination of inputs,? then the manager is trying to achieve;economic 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 production;ordinary mail delivery, charges a;lower price than competitors;ordinary mail delivery, is granted;by the public franchise to open every house?s mailbox;parcel delivery, charges a lower;price than competitors;33.;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 chosen.;no other set of actions could make;all participants better off.;both a and b;34.;Which of the following is INCORRECT;in the MS Excel operation for constructing a short-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 above;35.;A cubic specification for a;short-run total cost (TC) function is appropriate when the scatter diagram;indicates;a 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 from;the law of diminishing marginal;utility.;the law of diminishing return;(marginal product).;the law of demand;the fixed cost.;37.;Suppose that Nike and Adidas are the;only sellers of athletic footwear in the United States. They are deciding how;much to charge for similar shoes. The two choices are ?Low? 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;dominant strategy in the game? _____.;Yes, Yes;No, Yes;No, No;Yes, No;38.;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 satisfy;a > 0, b > 0, and c;0.;a 0, and c 0, b 0.;a < 0, b 0.;40.;Economies of ?scope? means that;the average cost declines when;output increases.;the joint cost of producing two;goods is less than the sum of the separate costs of producing the 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 other market structures?;firms have market power;product differentiation;barriers to entry;interdependence of decision making;42.;Which of the following is most;likely to be qualified as a perfectly competitive market?;Airline industry;Stock market;Gas station;Power utility industry;43.;Under the Lerner Index of market;power definition, an existing perfectly competitive;firm;has 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;monopoly.;is not qualified to apply the;Lerner index.;44.;Assume that a monopoly faces the;inverse market demand as P = 100 ? 2Q and the monopoly?s marginal cost function;is MC = 40?Q. The monopoly?s optimal output should be;20;30;40;60;45.;If a firm can influence the market;price by changing its quantity of output, then the firm;must be a monopoly;has market power;will set the price equal to its;average total costs;earns a normal profit in both short-run;and long-run;46.;Suppose that Ford and GM are the only auto;makers in the United States. They are deciding 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?;0;1;2;4;47.;Refer to the following table with;demand and cost schedule for a;monopoly;Price;($);Q;TC;($);20;4;75;19;5;88;18;6;103;17;7;120;16;8;139;15;9;159;For profit maximization, what price;should the monopoly charge?;$19;$18;$17;$16;48.;Refer to the following table with;demand and cost schedule for a;monopoly;Price;($);Q;TC;($);20;4;75;19;5;88;18;6;103;17;7;120;16;8;139;15;9;159;The marginal revenue (MR) for the 9th;unit of output (Q) is;$10;$9;$8;$7


Paper#55818 | Written in 18-Jul-2015

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