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Economic MCQ
Question
Question 1
A frozen food company buys a fresh food company. This takeover is an example of:
vertical integration
horizontal integration
cointegration
conglomerate integration
Question 2
Which of the following is true?
A monopolist produces on the inelastic portion of its demand
A monopolist always earns an economic profit
The more inelastic the demand, the closer marginal revenue is to price
In the short run, a monopoly will shut down if P < AVC
Question 3
A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is
0.20
0.50
0.33
0.75
Question 4
Which of the following is an example of monopoly?
Shoe industry in the United States
Local utility industry in a small town
Newspaper industry in New York City
Bread industry in New York City
Question 5
The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:
Production function.
Technological constraint.
Research and development schedule.
Total product
Question 6
Which of the following is NOT a measure of market structure?
Entry conditions
Four-firm concentration ratio
Herfindahl-Hirschman index
Pricing behavior
Question 7
An electronics company takes over one of its original suppliers in a merger. This is an example of:
vertical integration
horizontal integration
cointegration
conglomerate integration
Question 8
Pricing is an aspect of a firm's:
performance
structure
conduct
environment
Question 9
The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:
Land.
Production.
Capital.
Technology
Question 10
When economies of scale are large, firms can reduce their average total cost by:
selling off their subsidiaries
merging into even larger firms
eliminating the bureaucratic costs
hiring professional managers
Question 11
Which of the following is not a measure of productivity?
total product.
marginal product.
average advertising.
input-output ratio
Question 12
The marginal cost curve
lies always below the average total cost curve (ATC).
lies always above the average variable cost curve (AVC).
intersects the ATC and AVC at their maximum points.
intersects the ATC and AVC at their minimum points
Question 13
Chris raises cows and produces cheese and milk because he enjoys:
economies of scale
economies of scope
cost complementarity
None of the answers is correct
Question 14
You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q2, .; Its MC = 8Q. The profit-maximizing output for your firm is:
4
5
10
15
Question 15
Sunk costs are those costs that
do not vary without output.
are forever lost after they have been paid.
can be collected even after they have been paid.
do vary with output
Question 16
A perfectly competitive firm faces a:
perfectly elastic demand function
perfectly inelastic demand function
demand function with unitary elasticity
None of the answers is correct
Question 17
Which of the following kinds of market structure are NOT associated with market power?
Oligopoly
Perfect competition
Monopolistic competition
Perfect competition and monopolistic competition
Question 18
According to the "feedback critique":
the conduct of firms in an industry may affect the firm's performance
the conduct of firms in an industry may affect the market structure
market structure may affect the firm's conduct
All of the statements associated with this question are correct
Question 19
You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2. What price should you charge in the short run?
$12
$14
$16
$18
Question 20
Economies of scale exist whenever:
average total costs decline as output increases
average total costs increase as output increases
average total costs are stationary as output increases
average total costs increase as output increases and average total costs are stationary as output increases
Question 21
Which of the following statements is NOT correct about monopoly?
A monopolist generally faces a downward-sloping demand curve
Monopolists always make positive profits in the long run
A monopoly may make negative profits in the short run
There is no close substitute for a monopoly's product
Question 22
In a competitive industry with identical firms, long-run equilibrium is characterized by:
P = AC
P = MC
MR = MC
All of the statements associated with this question are correct
Question 23
Which of the following is(are) basic feature(s) of a perfectly competitive industry?
Buyers and sellers have perfect information
There are no transaction costs
There is free entry and exit in the market
All of the statements associated with this question are correct
Question 24
For the cost function C(Q) = 100 + 2Q + 3Q2 , the average fixed cost of producing 2 units of output is
100.
50.
3.
2
Question 25
The causal view of an industry is that:
market structure causes firms to behave in a certain way
market performance causes firms to have a certain structure
market performance causes firms to behave in a certain way
behavior causes firms to have a certain structure
Question 26
Fixed costs exist only in:
The long run.
Capital intensive markets. .
The short run.
Labor intensive markets
Question 27
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
Firms produce homogeneous goods
There is free entry
Long-run profits are zero
There is free entry and long-run profits are zero
Question 28
Which of the following are measures of industry concentration?
Four-firm concentration ratio
HHI index
Consumer surplus
Four-firm concentration ratio and HHI index
Question 29
Differentiated goods are NOT a feature of a:
perfectly competitive market
monopolistically competitive market
monopolistic market
perfectly competitive market and monopolistic market
Question 30
What is the value marginal product of labor if: P = $10, MPL = $25, and APL = 40?
$10,000.
$1,000.
$400.
$250
Question 31
Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 5 units of capital and 10 units of labor are employed?
3.
4.
11.
45
Question 32
The combinations of inputs that produce a given level of output are depicted by:
Indifference curves.
Budget lines.
Iscost curves.
Isoquants
Question 33
Producer and consumer surpluses are measures of:
industry performance
market structure
firm conduct
None of the answers are correct
Question 34
The ranking of industries by the four-firm concentration ratio usually, but not always, reveals the same pattern as ranking by HHI. When a discrepancy is found it is usually due to the following:
The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry
The HHI is based on squared market shares, while the four-firm concentration ratio is not
The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry and the HHI is based on squared market shares, while the four-firm concentration ratio is not.
The two indices are designed to measure two different attributes of markets
Question 35
If you wish to open a store and you do not like risk, it would be wise to sell:
only normal goods.
a mix of normal and inferior goods.
all inferior goods.
none of the statements associated with this question are correct.
Question 36
In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:
Its price rises.
Its price falls.
Its price remains the same.
The price of other inputs fall.
Question 37
What is implied when the total cost of producing Q1and Q2 together is less than the total cost of producing Q1 and Q2 separately?
Economies of scale.
Diminishing average fixed costs.
Cost complementarity.
Economies of scope.
Question 38
There is no market supply curve in:
a perfectly competitive market
a monopolistically competitive market
a monopolistic market
monopolistically competitive and monopolistic markets
Question 39
Total product begins to fall when:
Marginal product is maximized.
Average product is below zero.
Average product is negative.
Marginal product is zero.
Question 40
The absolute value of the slope of the isoquant is the:
Marginal rate of technical substitution.
Marginal product of capital.
Marginal rate of substitution.
Value marginal product of labor
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