previous mcq's (weekly)
If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:
0.75
A monopoly will have a Herfindahl-Hirschman index (HHI) equal to:
10,000
Which of the following Herfindahl-Hirschman index (HHI) is most likely to indicate a perfectly competitive market
100
The publisher of an economic textbook finds that when the book's price is lowered from £70 to £60, sales rise from 10,000 to 15,000. Using the midpoint method, the price elasticity of demand is:
2.6
. If the income elasticity of demand for a good is positive, the good is said to be:
A normal good
To be called an oligopoly, an industry must have:
A small number of interdependent firms
Which of the following is correctly defined?
ATC=AVC+AFC
The lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the ______ curve.
AVC
The demand curve for a monopoly is:
Above the MR curve
In the long run:
All inputs are variable
When actually calculated for a normal demand curve, the price elasticity of demand will be:
Always negative
If marginal cost is equal to average total cost, then:
Average total cost is at its minimum
If marginal cost is greater than average total cost, then:
Average total cost is increasing
If a good is a necessity with few substitutes, then demand will tend to:
Be less price-elastic
On a linear demand curve , demand at lower prices will:
Be price -inelastic
. A linear demand curve:
Can have both elastic and inelastic price elasticities of demand
If the only two firms in an industry agree to fix the price at a given level, this is an example of:
Collusion
If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
Continue to produce at an economic loss
The pricing in monopoly prevents some mutually beneficial trades. The value of these unrealized mutually beneficial trades is called:
Deadweight loss
If the government allowed only one airline to serve the entire market, there would be a ______ loss associated with ______ efficiency in the airline industry.
Deadweight; reduced
A monopolist responds to a decrease in demand by _______ price and _______ output.
Decreasing; decreasing
On a linear demand curve:
Demand is elastic at high prices
In the short run, the average total cost curve slopes upward because of:
Diminishing returns
A firm finds that its long-run average total costs increase as it produces more output. This firm is experiencing:
Diseconomies of scale
The most important source of oligopoly is an industry is:
Economies of scale
The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:
Electricity and natural gas are substitutes
If firms are making positive economic profits in the short run, then in the long run:
Firms will enter the industry
A cost that does not depend on the quantity of output produced is called a:
Fixed cost
If your local government gave you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
Government-created barriers
A perfectly competitive firm will incur an economic loss but will continue to produce the profit-maximizing quantity of output in the short run if the price is:
Greater than average variable cost and less than average total cost
A natural monopoly is one that:
Has increasing returns to scale over the entire relevant range of output
Price discrimination leads to a ______ price for consumers with a ______demand.
Higher; less elastic
A perfectly elastic supply curve is:
Horizontal
The fixed cost curve is:
Horizontal
The pair of items that is most likely to have a negative cross-price elasticity of demand is:
Hot dogs and mustard
One government policy for dealing with a natural monopoly is to:
Impose a price ceiling to reduce economic profit
In perfect competition, the assumption of easy entry and exit implies that:
In the long run all firms in the industry will earn zero economic profits
In a perfectly competitive market, which of the following statements is true?
In the long run, the price will change to reflect whatever change we observe in production cost
In short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:
In the short run, food producers do not have as much time to respond to changes in demand
Elasticity: -1.73
Income elastic / inferior good
Elasticity: 2.45
Income elastic / normal good / luxury
Elasticity: 0.46
Income inelastic / normal good / necessity
If Marie Marionettes is operating under condition of diminishing marginal product, the marginal cost will be:
Increasing
Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run:
Industry supply curve will shift to the left
A local community college charges lower tuition fees to local town residents than to non-residents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that non-residents must have a ______ for attending the community college than residents.
Less price-elastic demand
If two goods are complements, their cross-price elasticity of demand should be:
Less than 0
Marginal revenue for a monopolist is:
Less than price
The short-run supply curve for a perfectly competitive firm has its:
Marginal cost curve above its average variable cost curve
If it produces, a perfectly competitive firm will maximize profits when the:
Marginal revenue equals marginal cost
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
Market power
In contrast with perfect competition, a monopolist:
May have economic profits in the long run
Firms in which of the following market structures have the most market power?
Monopoly
Most electric, gas and water companies are examples of:
Natural monopolies
Elasticity: 0.00
No relationship between the income change and the demand for a good
In Economics, the short run is defined as:
Period in which some inputs are considered to be fixed in quantity
There is no total revenue test for price elasticity of supply because:
Price and quantity are usually positively related
Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is
Price inelastic
If the quantity supplied responds substantially to a relatively small change in price, supply is:
Price-elastic
A firm that faces a downward-sloping demand curve is a:
Price-setter
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
Produce at a profit
The supply curve for a good will be more elastic if:
Production inputs are readily available at a relatively low cost
The price elasticity of demand is computed as the percentage change in the:
Quantity demanded divided by the percentage change in the price
The price elasticity of demand measures the responsiveness of the change in the:
Quantity demanded to a change in the price
The price elasticity of supply is computed as the percentage change in the:
Quantity supplied divided by the percentage change in price
A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared to the condition before the increase in marginal costs, the monopolist will _________ its price and _________its level of production.
Raise; decrease
For a perfectly competitive firm, the short-run supply curve is the:
Rising part of the MC curve beginning at the shut-down point
If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should:
Shut down
The larger the output, the greater the quantity of output over which fixed cost is spread. Called the ______ effect, this leads to a ________.
Spreading; lower average fixed cost
To calculate the Herfindahl-Hirschman index (HHI), one must:
Sum the squared market shares of all firms in the industry
Which of the following curves is not affected by the existence of diminishing returns?
The average fixed cost curve
If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?
The firm will not sell any output
Suppose the equilibrium price in a perfectly competitive industry is £15 and a firm in the industry charges £21. Which of the following will happen?
The firm will not sell any output
The marginal cost curve is the mirror image of the:
The marginal cost curve is the mirror image of the:
The shut-down price is:
The minimum of the AVC curve
Market structures are categorized by the following two criteria:
The number of firms and whether or not products are differentiated
Which of the following will lead to a decrease in total revenue?
The price increases and demand is price-elastic
Which of the following is not a characteristic of a perfectly competitive industry?
There are differentiated products
Which of the following is a characteristic of an oligopolistic market structure?
There are few dominant sellers
Which of the following is a characteristic of a monopoly?
There is only one seller in the market
The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15% in a period, how will that affect total revenue from peaches in that period, all other things unchanged?
Total revenue will rise
Average variable cost equals all of the following except:
Variable cost times output
Diminishing returns to an input occur:
When some inputs are fixed and some are variable
In a long-run equilibrium, economic profits in a perfectly competitive industry are:
Zero
A monopolist faces:
a downward-sloping demand curve
A price floor will cause a larger surplus when demand is _________ and supply is _________.
elastic; elastic
If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should
increase its output
A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm
is a price taker
A perfectly competitive firm's marginal revenue
is equal to price
At the profit-maximizing level of output for a perfectly competitive firm,
price equals marginal cost
A monopolist is likely to _______ and________than a comparable perfectly competitive firm.
produce less; charge more
A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of £36,000. The price of each bushel is £50. Calculate the firm's short-run profit or loss.
profit of £14,000
To maximize profit, a perfectly competitive firm
should produce the quantity of output that results in the greatest difference between total revenue and total cost
In perfect competition
the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic
The demand curve for the monopoly's product is
the market demand for the product
In a graph that illustrates a perfectly competitive firm, marginal revenue is
the same as the firm's demand curve
Which of the following is the best example of a perfectly competitive industry?
wheat production
A monopolist's profit maximizing price and output correspond to the point on a graph
where marginal revenue equals marginal cost and charging the price on the market demand curve for that output
Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from £30 per unit to £29 per unit, marginal revenue for the eleventh unit is:
£19
If the market price is £25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
£25
The price of a seller's product in perfect competition is determined by:
market demand and market supply
