1. If the production of a good generates a positive externality, then at the level of output produced by a perfectly competitive market with no government intervention,
|
|
| a. the marginal social cost will be greater than the price.
|
| b. the marginal private cost will be less than the price.
|
| c. the good will be over-produced
|
| d. the good will be under-produced
|
|
2. If firms in a monopolistically competitive industry were somehow forced to sell at the Pareto efficient price, we would expect the following to happen:
|
|
| a. The price would rise in the long run.
|
| b. The variety of goods in the industry would rise in the long run.
|
| c. The output of each firm would fall in the long run.
|
| d. Firms would make losses in the short run.
|
|
3. If the total profit function has discontinuous jumps, then:
|
|
| a. There will always be more than one profit-maximizing level of output.
|
| b. There may be a level of output where marginal revenue equals marginal cost that is not profit-maximizing.
|
| c. There will not be any profit-maximizing level of output.
|
| d. At the profit-maximizing level of output, marginal revenue may not equal marginal cost.
|
|
4. An industry will produce a Pareto efficient quantity if it has any of the following features, except:
|
|
| a. the marginal benefit to consumers equals the marginal cost.
|
| b. there is a natural monopoly.
|
| c. all firms are price takers.
|
| d. the price equals the marginal cost.
|
|
5. The net benefit of producing a good is maximized whenever:
|
|
| a. The marginal benefit of producing the good equals the average cost.
|
| b. The total benefit equals the total cost.
|
| c. The marginal net benefit of producing the good is zero.
|
| d. The marginal revenue equals the marginal cost.
|
|
6. If there is free entry and exit in an industry, then in the long run equilibrium:
|
|
| a. Firms earn zero profits.
|
| b. Incumbent firms earn positive profits.
|
| c. There are increasing returns to scale at all quantities.
|
| d. The resulting industry output will be Pareto efficient.
|
|
7. Under monopolistic competition, like under a monopoly,
|
|
| a. there are barriers to entry.
|
| b. firms always earn zero profits in the long run.
|
| c. the marginal revenue curve does not depend on the strategic behavior of the firm.
|
| d. the marginal revenue curve may not be well-defined
|
|
8. In the short run, under perfect competition,
|
|
| a. each firm's supply curve is equal to the upward sloping portion of its marginal cost curve.
|
| b. the supply curve will be below the firm-level demand curve at the output level where a firm produces.
|
| c. the short-run supply curve will be determined in part by consumer demand.
|
| d. the supply curve will be unaffected by changes in variable cost.
|
|
9. All of the following are examples of tacit collusion, except:
|
|
| a. Firms, although they have market power, copy the prices set by the largest producer.
|
| b. Firms avoid price wars.
|
| c. Cournot competition.
|
| d. Firms publish price increases in advance, and do not follow through if their competitors do not.
|
|
10. If the total profit function is smooth and everywhere concave, then the level of output is equal to the profit-maximizing level whenever:
|
|
| a. total revenue is below total cost.
|
| b. marginal revenue equals marginal cost.
|
| c. price is above average cost.
|
| d. marginal profit is negative.
|
|
11. The following will create an outward shift in demand:
|
|
| a. An increase in the number of consumers in a market.
|
| b. A fall in the price of a substitute.
|
| c. A fall in the price of input goods.
|
| d. A drop in the number of consumers in a market.
|
|
12. All of the following are true about cartels, except:
|
|
| a. No member of a cartel has an incentive to cheat.
|
| b. A cartel will lower the output of an industry.
|
| c. Cartels are illegal in many countries, including the United States.
|
| d. The incentive to cheat can make cartels unstable.
|
|
13. If a firm is a price taker, then:
|
|
| a. The marginal revenue curve is the same as the firm-level demand curve.
|
| b. The marginal revenue curve is below the demand curve.
|
| c. The marginal revenue curve is upward sloping.
|
| d. Marginal revenue is less than the price.
|
|
14. Investigation of deceptive advertising was instituted by:
|
|
| a. The Sherman Anti-Trust Act.
|
| b. A revision to the Federal Trade Commission Act.
|
| c. The Securities Act.
|
| d. The Robinson-Patman Act.
|
|
15. All of the following are true about the Nash-equilibrium of a one-shot Prisoner's Dilemma game, except:
|
|
| a. It leads to the worst possible outcome for somebody.
|
| b. It assumes that collusion among the players is not possible.
|
| c. All players can improve their outcome if the game is repeated.
|
| d. It is not Pareto optimal.
|
|
16. Firms will be more concerned with maximizing profits when the following factors are present:
|
|
| a. Empire building.
|
| b. The company's stock contributes to a large portion of its executives' income.
|
| c. Shareholders have social concerns.
|
| d. The firm is privately held.
|
|
17. If a market is a monopoly, then a price ceiling leading to a small price drop will have the following effect:
|
|
| a. The number of firms in the industry will fall.
|
| b. The answer will depend on the degree of collusion among firms.
|
| c. The industry output will rise.
|
| d. The industry output will fall.
|
|
18. All of the following are barriers to entry, except:
|
|
| a. A price that is below the average cost.
|
| b. Patents.
|
| c. Licensing restrictions.
|
| d. Frivolous lawsuits.
|
|
19. If an industry is a monopoly, then:
|
|
| a. Exactly one firm is not a price taker.
|
| b. More than one firm is not a price taker.
|
| c. All firms are price takers.
|
| d. No firm is a price taker.
|
|
20. The demand for gasoline is such that 23 gallons are demanded at a price of 5, and 13 gallons are demanded at a price of 10. The elasticity of demand for gasoline along this interval is:
|
|
| a. -1.2
|
| b. -2
|
| c. -0.83
|
| d. -0.5
|
|