40 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