Multiple Choice
Questions 1 - 16, 41, and 42 are relevant for our second exam on
November 4, 2011.
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1.
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A
natural monopoly results when a firm has
A) a
license B) a patent C) official approval to produce a
product D) decreasing average costs over the range of market demand
E) exclusive use of a natural resource
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2.
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In
Exhibit 0138, the marginal revenue of the third unit is
A) $20 B) $120 C) $100
D) $40 E) $30
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3.
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The
profit-maximizing output and price for the firm in Exhibit 0140, which charges the same price to all
customers, are
A) 117 and $14 B) 150 and $22
C) 150 and $14 D) 117 and $22 E) 117 and $24
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4.
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Suppose that at an output of 1,000 units, a monopolist has marginal cost of $40,
marginal revenue of $30, average variable cost of $30, and average total cost of $50. In order to
maximize profit or minimize loss in the short run, the firm should
A) shut
down B) continue to produce 1,000 units C) produce fewer than 1,000
units but still operate D) produce more than 1,000 units
E) increase its plant size to gain economies of scale
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5.
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In
the short run, the monopolist depicted in Exhibit 0151 should
A) shut
down because P < AVC at some output levels B) shut down because P < ATC at all
output levels C) continue producing because P > AVC at some output
levels D) continue producing because P > ATC at all output levels
E) continue producing because monopolists never shut down
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6.
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Suppose that a price-discriminating monopolist divides its market into two segments.
The firm will charge the lower price in the market segment where consumers
A) have
relatively less elastic demand B) have relatively more elastic demand
C) attach a higher marginal value to each unit of the good D) have perfectly
inelastic demand E) attach higher average value to units of the good
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7.
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When
a monopolist practices perfect price discrimination,
A) consumers receive no consumer surplus B) there is allocative
inefficiency C) there is a deadweight loss D) profit is lower than
for the nondiscriminating monopolist E) total revenue is less than for the
nondiscriminating monopolist
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8.
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Which
of the following characteristics does perfect competition share with monopolistic
competition?
A) price-taking firms B) zero long-run economic
profit C) homogeneous product D) some barriers to entry
E) economies of scale in production
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9.
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Monopolistic competitors are
A) price
takers B) price searchers C) price maximizers
D) price ignorers E) collusive price fixers
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10.
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A
firm could differentiate its product by all except one of the following means. Which is the
exception?
A) making the product available at a number of different
locations B) increasing the number of services that accompany the
product C) making the product physically different from other products
D) using packaging or advertising to create a special subjective image of the product in the
consumer's mind E) emphasizing that the product provides the same benefits to
consumers as the others on the market, even when it's really physically different
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11.
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If
the monopolist in Exhibit 0150 engages in perfect price discrimination, total revenue would
be
A) $95,300 B) $104,000 C) $106,080
D) $187,408 E) equal to the area under the demand curve bounded by the
horizontal axis and a quantity of 884 units
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12.
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The
demand curve facing Imelda's Shoe Boutique, a firm in monopolistic
competition,
A) is horizontal because Imelda's is small relative to the market
as a whole B) is horizontal because Imelda's is large relative to the market as a
whole C) slopes downward because Imelda's is small relative to the market as a
whole D) slopes downward because Imelda's sells a differentiated product
E) slopes downward because Imelda's is the entire industry
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13.
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In
the short run, the firm in Exhibit 0159 should
A) shut
down B) produce 8 units at a price of $11 per unit C) produce 8
units at a price of $10 per unit D) produce 8 units at a price of $9 per
unit E) produce 10 units at a price of $9 per unit
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14.
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At
the profit-maximizing output level, total cost for the firm in Exhibit 0161
is
A) $5,200 B) $4,000 C) $3,600
D) $5,600 E) impossible to determine
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15.
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At
the profit-maximizing output level, the firm in Exhibit 0161 is
A) earning
economic profit of $400 B) earning economic profit of $200
C) earning zero economic profit D) suffering a loss of $200
E) suffering a loss of $400
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16.
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As a
result of the economic profit earned by the first videotape rental
outlets,
A) existing firms were able to successfully lobby the government
for patent protection B) competitors were attracted to the industry, and their entry
reduced economic profit C) demand dried up D) Blockbuster saw an
opportunity to take over the industry E) competitors were discouraged from entering
the industry
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17.
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In
Exhibit 0171, economic rent at equilibrium equals
A) $0 B) $120 C) $1,000
D) $300 E) $1,300
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18.
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The
change in total revenue that results from a one-unit change in the amount of a variable resource used
is
A) average resource cost B) marginal resource cost
C) marginal product D) marginal revenue product E) average
revenue product
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19.
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A
firm produces staples in a perfectly competitive market and hires workers in a perfectly competitive
labor market. Which of the following is true?
A) The
supply curve of staples is horizontal. B) The firm's marginal resource cost of labor
equals the wage rate. C) The firm's demand curve for labor is
horizontal. D) The marginal revenue product of labor curve is
horizontal. E) The marginal product of labor curve is horizontal.
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20.
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A
profit-maximizing firm will hire units of an input to the point where
A) MRP >
price of the input B) MRP < MRC C) MRP = the supply of the
input D) MRP = MRC E) MRP < the supply of the
input
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21.
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Suppose a firm is a price searcher in the product market and hires labor in a
perfectly competitive labor market. If the wage rate is $20, the marginal product of the last worker
hired is 5, and the firm is hiring the profit-maximizing amount of labor, then the marginal revenue
product of the last worker hired must be
A) $1 B) $1.50 C) $4
D) $5 E) $20
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22.
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If
the marginal product of labor increases (i.e., is due to an upward shift of the MP curve), that will
likely cause
A) an increase in the price of output produced by
labor B) an increase in labor demand C) an increase in labor
supply D) a fall in the wage paid to labor E) a fall in the number
of workers employed
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23.
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The
smaller the quantity and quality of complementary resources used in
production,
A) the greater the demand for labor B) the
greater the marginal resource cost of labor C) the lower the marginal resource cost
of labor D) the lower the marginal productivity of labor E) the
greater the marginal productivity of labor
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24.
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The
demand for architects
A) is derived from the demand for new building
construction B) is derived from the demand for computer-assisted design
software C) is derived from the demand for architectural education
D) is itself the source of the derived demand for commercial real estate E) has
been increasing rapidly, partly due to the increasing demand for new hospitals and health
centers
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25.
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Mr.
"Rational Man" Eastwood maximizes utility by allocating his time among leisure, market
work, and household work so that his
A) expected marginal utility from leisure is
greater than his expected marginal utility from market work B) expected total
utility per hour is equal among all three C) expected marginal utility per hour is
equal among all three D) expected marginal utility from market work is greater than
his expected marginal utility from leisure E) expected total utility of each use is
equal
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26.
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A
stock market crash that reduces the value of an individual's trust fund would tend
to
A) increase her supply of labor if the substitution effect outweighs the income
effect B) decrease her supply of labor if the substitution effect outweighs the
income effect C) have no impact on her labor supply decision
D) increase her supply of labor E) decrease her supply of labor
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27.
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By
itself, the substitution effect of an increase in the wage rate will
A) always
lead to an increase in the quantity of labor supplied B) always lead to a decrease
in the quantity of labor supplied C) lead to an increase in the quantity of labor
supplied only if leisure is like a normal good D) lead to an increase in the
quantity of labor supplied only if leisure is not a normal good E) lead to an
increase in the quantity of labor supplied only if the income effect works in the same
direction
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28.
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Consider Exhibit 0186. If the wage rate is $9, how many hours per week will this
person work?
A) 30 hours B) 36 hours C) 40
hours D) 45 hours E) 48 hours
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29.
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Most
collective bargaining agreements in the United States are reached
A) only
after binding arbitration B) only after a strike C) without a
strike D) only after a strike lasting at least three weeks E) only
after government intervention to avoid a strike
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30.
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If an
industrial union would strike if it does not receive a particular wage rate, then the supply curve of
labor in this market
A) is horizontal at that particular wage rate until it intersects
the original supply of labor curve B) is vertical at that particular wage rate until
it intersects the original supply of labor curve C) shifts to the left
D) disappears E) slopes downward
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31.
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If an
industrial union is able to negotiate a wage above the market-clearing wage, the non-union wage in
other industries will
A) increase B) decrease C) increase, if the union can restrict the supply of labor
D) increase, if the union can increase the supply of labor
E) decrease due to the strike-breaking activity of the firm
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32.
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Which
of the following is an example of featherbedding?
A) a craft union's restricting entry into its profession
B) a union-imposed wage floor C) an increase in labor productivity that results from a decrease in quit
rates D) attempts to reduce the sale of nonunion goods E) a construction workers union's requiring an unnecessarily large number
of workers to do a particular job
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33.
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The
production of capital is a form of roundabout production.
A) True B) False
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34.
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Increased saving today means
A) more
consumption today and in the future B) less consumption today and in the
future C) more consumption today and less in the future D) less
consumption today and more in the future E) more income today, but the net effect of
increased income on the balance between consumption and saving cannot be determined in
advance
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35.
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Which
of the following does not reflect a positive rate of time
preference?
A) Concert-goers yell and scream when the stage is still dark an
hour after the concert was scheduled to start. B) Borrowers have to pay interest on
loans. C) A dieter, allowed three ounces of butter per day, spends the whole
allotment on her toast at breakfast. D) A dieter, allowed three ounces of butter per
day, promises himself some new clothes if he can break the habit of spending the whole allotment on
his toast at breakfast. E) A student stays up late every night for a week to finish
her term paper two months before it is due.
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36.
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If
you will receive $5,000 two years from today, what is its present value if the discount rate is 5
percent?
A) $5,025 B) $4,500
C) $3,429 D) $4,535 E) $4,762
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37.
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The
Great Homebody Nationwide Sweepstakes promises its winners a choice between $200,000 now or $120,000
now and $100,000 in one year. The winners should take the $200,000 now
A) no
matter what the interest rate is B) no matter what the interest rate is, if their
rate of time preference is high C) no matter what the interest rate is, if their
rate of time preference is low D) only if the interest rate is above 25
percent E) only if the interest rate is below 25 percent
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38.
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If
you are receiving $2,000 per year forever, the present value of that income stream when the
prevailing interest rate is 7 percent is equal to
A) $20,000 B) $62,472 C) $100,087
D) $27,000 E) $28,571
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39.
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You
expect to rent out a vacation home in Sanibel Island for $800 a month as an investment. Upkeep is
estimated at $3,000 a year. If the current market interest rate is 5 percent, you are willing to pay
__________ for the house.
A) $132,000 B) $100,000
C) $160,000 D) $192,000 E) $800,000
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40.
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If
400 million shares of stock are traded on the New York Stock Exchange today at an average price of
$100, then the total amount of money raised today by the corporations whose stock traded on this
exchange would be $40 billion.
A) True B) False
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| | Lilliput | Tariffs | No Tariffs | Oz | Tariffs | 40, 50 | 90, 40 | No Tariffs | 80, 150 | 140, 170 | | | | |
Suppose that the governments of two countries, Oz and Lilliput, are each deciding
whether or not to impose tariffs on all imported goods from the other country. Each government wants
to choose the strategy that will benefit its country the most. The payoffs to each country
(Oz, Lilliput) for each combination of strategies are shown in the payoff matrix.
Assume it is a non-cooperative game where players move simultaneously. NOTE: Payoffs are
listed as with Oz first, Lilliput second. Positive numbers are gains (million dollars per
year).
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41.
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What is the
dominant strategy for Oz?
A) Tariffs B) No Tariffs C) No dominant strategy D) Both strategies are dominant
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42.
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In the payoff
matrix for Oz and Lilliput, what is the Nash equilibrium?
A) Both countries choose tariffs B) Both countries choose no tariffs C) Oz – Tariffs, Lilliput – No Tariffs D) Oz – No Tariffs, Lilliput – Tariffs E) No Nash equilibrium exists because Lilliput lacks a dominant strategy.
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