Econ Mock Exam
A duopoly is A) an oligopoly with only two sellers. B) a monopolist that has two related products. C) an oligopoly with only two buyers. D) an oligopoly with only two products. E) a monopoly firm that has only two suppliers.
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A public good is a product that is A) produced by the government. B) rivalrous but nonexcludable. C) excludable but nonrivalrous D) excludable and rivalrous. E) nonexcludable and nonrivalrous.
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As a seller of labour services, a labour union is a form of A) illegal cartel. B) monopoly. C) oligopoly. D) monopolistic competitor. E) monopsony.
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Certain professions limit the number of students who are eligible to enroll in their programs in university - engineering, architecture, dentistry, and law, for example. Other things being equal, what is one predicted effect of such restrictions? A) increased wages across all segments of the labour market B) decreased wages in the labour market outside of these professions C) decreased wages across all segments of the labour market D) increased wages in the labour market outside of these professions E) there will be no effect on any wages
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Economists generally view pollution as A) a negative economy. B) a negative externality. C) a non-excludable good. D) an economic "bad" that must be eliminated entirely. E) a positive externality.
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For a monopsonist in a labour market, the firm's MC curve for labour lies ________ the competitive supply curve for labour; just as the marginal revenue curve for a monopolist lies ________ the demand curve for its product. A) above; below B) below; above C) above; above D) below; below
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For firms in an oligopoly, the main advantage of explicit collusion is that it A) removes much of the uncertainty about rivals' reactions. B) makes all firms more productively efficient. C) eliminates the gains from cheating. D) reduces the cost per unit of advertising. E) leads to greater product differentiation.
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If you consume some good, and by doing so you diminish other people's possible use of that good, we say that the good is A) a public good. B) a common resource. C) not productively efficient. D) excludable. E) rivalrous.
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One characteristic of oligopolistic markets is A) zero profits in the long run. B) mutual interdependence between firms. C) ease of entry and exit. D) a large number of firms in the industry. E) a horizontal demand curve facing each individual firm.
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Suppose a farm that is polluting an underground water supply faces the following marginal costs for abating units of pollution: 1st unit abated, MC = $250 2nd unit abated, MC = $400 3rd unit abated, MC = $650 4th unit abated, MC = $950 The marginal benefit to society from this farm abating units of pollution are as follows: 1st unit abated, MB = $1000 2nd unit abated, MB = $800 3rd unit abated, MB = $650 4th unit abated, MB = $300 What is the socially optimal amount of pollution abatement for this farm? A) 0 units B) 1 units C) 2 units D) 3 units E) 4 units
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The marginal benefit of reducing pollution and the marginal cost of reducing pollution are given by the following equations: MB = -2U2 + 18, and MC = 2U2 + 2, where U is the number of units of pollution abatement. What is the optimal level of pollution abatement? A) 0 B) 1 C) 2 D) 3 E) 4
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When a monopolistically competitive industry is in long-run equilibrium, the excess capacity in an individual firm is indicated by the difference between A) the output at which ATC is at a minimum and the output at which price equals marginal cost. B) the output at which ATC is at a minimum and the output at which marginal revenue is equal to marginal cost. C) zero and the output at which the demand curve is tangent to the ATC curve. D) price and average cost. E) price and marginal cost.
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When firms in an industry have fully internalized a production externality, A) they produce at more than the optimal level of output. B) it is not possible to achieve allocative efficiency. C) the marginal social cost is zero. D) they produce at less than the optimal level of output. E) they bear the entire social marginal cost of production.
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Which of the following is an incorrect statement about a Nash equilibrium? A) In a Nash equilibrium, all players are maximizing their payoffs given the current behaviour of the other players. B) A Nash equilibrium is an example of a non-cooperative equilibrium. C) In a Nash equilibrium, all players are better off than they would be with any other combination of strategies. D) Once a Nash equilibrium is established, no individual firm has an incentive to depart from it. E) A Nash equilibrium is a self-policing equilibrium.
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Which of the following is the best description of a "free rider"? Someone who A) consumes a good until the marginal benefit received from the last unit is zero. B) does not produce any goods but is able to consume them. C) receives the benefit of a good without having to pay for it. D) consumes a good until the marginal benefit received from the last unit is equal to the marginal cost of producing the good. E) pays for a good but does not receive any benefit from the good.
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Which of the following statements about public goods is true? A) The firms producing them must be listed on a public stock exchange. B) They cannot be publicly provided. C) They are unlikely to be provided by private, profit-seeking firms. D) They are essentially negative externalities. E) They respond to market signals.
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Why would it be inefficient for the government to charge a price for consuming a public good such as national defence? A) Too little national defence will be provided. B) The price cannot be set to cover all defence costs. C) The marginal cost of providing national defence is zero. D) Too much defence will be provided. E) No one will be willing to pay to consume any national defence.
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A change in demand is said to take place when there is a A) shift of the demand curve. B) shift of the supply curve. C) price change. D) movement along the demand curve. E) quantity change.
A
A firm's short-run marginal cost curve is decreasing when A) marginal product is increasing. B) total fixed cost is decreasing. C) average fixed cost is increasing. D) marginal product is decreasing. E) capacity is reached.
A
A monopolistically competitive firm and a monopoly are similar because A) each firm can raise its price without losing all of its sales. B) both firms must behave strategically toward other firms in the industry. C) both firms always operate at their point of minimum average total cost. D) each firm has a large number of small competitors. E) both firms will earn zero profits in the long run.
A
A single proprietorship is a form of business organization which A) has one owner-manager who is personally responsible for the firm's actions and debts. B) has a single owner but has directors who are responsible for the firm's debts. C) has unlimited access to money capital. D) allows easy transferability of ownership by the trading of shares. E) has limited liability.
A
Because resources are scarce, individuals are required to A) make choices among alternatives. B) improve production but not distribution. C) improve distribution but not production. D) use resources inefficiently. E) sacrifice production but not consumption.
A
Consider a firm in the short run. Average product is at its maximum when A) average product equals marginal product and marginal product is falling. B) marginal product is maximized. C) the maximum quantity of the variable input is employed. D) diminishing returns cease to operate. E) total product is maximized.
A
For a monopolist, the profit-maximizing level of output occurs where A) MR = MC. B) MC = price. C) MR = AC. D) MC = 0.
A
In economics, the term "fixed costs" means A) costs that do not vary with the level of output produced. B) implicit costs. C) costs incurred in the past that involve no implicit costs. D) costs that are never accounted for. E) opportunity costs.
A
Monopolistic firms do not have supply curves because A) monopolists get to choose their price-quantity combination along the demand curve. B) monopolists face a given market price. C) their marginal costs cannot be calculated. D) they are not constrained by the marginal costs of production. E) their output is a fixed quantity.
A
One prediction about monopolistic competition is that it has higher unit costs than perfect competition. But it is unreasonable to conclude that monopolistic competition is therefore bad for consumers because A) consumers benefit from an increased variety of products. B) higher production costs means more employment. C) consumers benefit from products becoming more homogeneous. D) consumers benefit from lower prices. E) consumers benefit because of an increase in quantity available.
A
The supply and demand schedules for dozens of roses are given below: Price__ Quantity S per period__ Quantity D per period $10________ 200_______________ 500 $20________ 300_______________ 450 $30________ 400_______________ 400 $40________ 500_______________ 350 $50________ 600_______________ 300 The equilibrium price for a dozen roses is A) $30. B) $50. C) $20. D) $10. E) $40.
A
A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly A) can choose its output level. B) faces a demand curve which is identical to the market demand curve. C) can choose its level of cost. D) does not produce at a profit-maximizing level of output. E) charges a price higher than its average revenue.
B
A straight-line production possibilities boundary differs from a concave boundary in which of the following ways? A) The straight-line boundary shows opportunity cost, whereas the concave boundary does not. B) The straight-line boundary illustrates constant opportunity costs, whereas the concave boundary illustrates increasing opportunity costs. C) A straight-line boundary is associated with a command economy, whereas a concave boundary is associated with a free-market economy. D) The concave boundary illustrates constant opportunity costs, whereas the straight-line boundary illustrates decreasing opportunity costs. E) The straight-line boundary does not show scarcity, whereas the concave boundary does.
B
Economists use the term "marginal utility" to describe the A) total satisfaction received from consumption of a good. B) change in total satisfaction caused by consumption of an additional unit of a good. C) price paid for every unit consumed. D) average utility of each unit of a good consumed. E) inverse of the measure of total utility.
B
For a single-price monopolist, marginal revenue falls faster than price (as output rises) because A) the firm has no supply curve. B) in order to sell additional units, the price must be lowered on all units. C) the cost of producing extra units of output increases as production is increased. D) profits are maximized when marginal cost equals marginal revenue. E) none of the above — marginal revenue does not fall faster than price.
B
If a single-price monopolist sets price where the price elasticity of demand exactly equals 1, its A) total profits are at a maximum. B) total revenue is at its maximum. C) total revenue is rising, although marginal revenue is falling. D) total revenue is falling. E) marginal revenue is always positive.
B
If the price elasticity of demand is 0.5, then a 10% increase in price results in a A) 5% decrease in total revenues. B) 5% decrease in quantity demanded. C) 0.5% decrease in quantity demanded. D) 5% increase in quantity demanded. E) 50% reduction in quantity demanded.
B
The theory of perfect competition is built on several assumptions, including that A) the individual firm can affect the price of the product it sells. B) any firm can easily enter or leave the industry. C) the individual firm can influence demand by advertising. D) there are few producers of an identical product. E) each firm must earn economic profits to remain in the industry.
B
A characteristic common to most imperfectly competitive markets is A) a homogeneous product. B) unexploited economies of scale. C) non-price competition among firms. D) inelastic market demand curves. E) common pricing among firms.
C
A firm that has two or more owners who share decision-making power as well as the firm's profits is called A) a corporation. B) a joint-stock company. C) a partnership. D) a non-profit organization. E) a single proprietorship.
C
A perfectly competitive firm is currently producing an output level where price is $10.00, average variable cost is $6.00, average total cost is $10.00, and marginal cost is $8.00. In order to maximize profits, this firm should A) increase the market price. B) shut down. C) decrease its output. D) increase its output. E) not change its output — this firm is at its profit-maximizing position.
C
Consider a firm's short-run cost curves. Which one of the following types of cost declines over the whole range of output? A) total fixed cost B) marginal cost C) average fixed cost D) total variable cost E) average variable cost
C
Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a contract and each firm is allowed to bid either $100 or $180. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation is A) both firms bid $90. B) both firms bid $180. C) both firms bid $100. D) one firm bids $100, the other firm bids $180. E) both firms bid $50.
C
Consider the following list: a worker with training in video gaming technology, 10 hectares of arable land in southern Ontario, a fishing trawler in Nova Scotia, an ice-cream truck at a park in Quebec. Each of these is an example of A) a capital resource. B) goods and services. C) a factor of production. D) an economic service. E) a commodity.
C
Economics can best be described as A) a normative science. B) the study of how to reduce inflation and unemployment. C) the study of the use of scarce resources to satisfy unlimited human wants. D) the study of how a society ought to allocate its resources. E) the application of sophisticated mathematical models to address social problems.
C
If a monopolist is practicing perfect price discrimination, then the following equation is true: A) MC = 1/2 MR at the profit-maximizing level of output. B) MR = 1/2 P for any unit. C) MR = P for all units. D) P = AVC at the profit-maximizing level of output. E) AR = ATC at the profit-maximizing level of output.
C
If goods X and Y are substitutes and the price of X falls, all other things being equal, the demand curve for Y will A) be indeterminate. B) shift to the right. C) shift to the left. D) not shift at all.
C
If there are economic profits in a monopolistically competitive industry, they will generally be competed away through the A) manipulation of the demand curve. B) increasing advertising budgets of existing firms. C) entry of new firms. D) introduction of brand name products by existing firms. E) exit of existing firms.
C
In a typical oligopolistic market, there are A) no barriers to entry and firms sell homogeneous products. B) substantial entry barriers, and firms are too large to strategically interact with each other. C) substantial barriers to entry and firms interact strategically with each other. D) no barriers to entry and firms interact strategically with each other. E) no barriers to entry, but firms sell differentiated products.
C
It is assumed in standard economic theory that a firm makes decisions in an effort to A) have a highly diversified product. B) become as large as possible. C) maximize its profits. D) maximize its revenue. E) be favoured politically.
C
One difference between a perfectly competitive market and a monopolistically competitive market is that A) there is no product differentiation in monopolistic competition. B) there are no barriers to entry in monopolistic competition. C) there is no product differentiation in perfect competition. D) there is strategic interaction among firms in monopolistic competition. E) there are no barriers to exit in monopolistic competition.
C
Rania is selling boxes of cookies door to door in her neighbourhood. At a price of $10 per box she sold 40 boxes per day. When the price was reduced to $4 per box she sold 100 boxes per day. Assuming that the demand conditions were unchanged, what is the price elasticity of demand for Rania's cookies? A) -1.7 B) 1.17 C) 1 D) 0 E) 0.85
C
Suppose that many coal mines are shut for environmental reasons. This will cause A) no change in the supply curve, only a change in price. B) a movement up the supply curve. C) a decrease in the supply of coal (a leftward shift of the supply curve). D) an increase in the supply of coal (a rightward shift of the supply curve). E) a movement down the supply curve.
C
Suppose there are only three alternatives to attending a "free" social event: read a novel (you value this at $10), go to work (you could earn $20), or watch videos with some friends (you value this at $25). The opportunity cost of attending the social event is A) $10. B) $20. C) $25. D) $45. E) $55
C
Suppose there is a competitive market for retail workers at a large shopping mall that is large enough to constitute its own labour market. The labour demand curve is QD = 1000 - 20(w). The labour supply curve is QS = 400 + 40(w). Suppose that a union now successfully organizes the workers at this mall and obtains a wage rate of $11 (but does not affect the demand curve). One result is A) a decrease in employment of 60 workers. B) a decrease in employment of 20 workers. C) an increase in employment of 20 workers. D) an increase in employment of 40 workers. E) a decrease in employment of 40 workers.
C
The "law" of diminishing marginal utility implies that the A) total utility is constant as more units are consumed. B) last unit of a good consumed will contribute most to the consumer's satisfaction. C) marginal utility of a good diminishes over time. D) first unit of a good consumed will contribute most to the consumer's satisfaction. E) total utility is negative.
C
The price elasticity of demand measures the responsiveness of A) supply to demand changes. B) equilibrium changes. C) quantity demanded to changes in the price. D) demand to supply changes. E) the price to changes in quantity demanded.
C
The term "quantity demanded" refers to the A) total amount of a good that is actually purchased during a given period of time. B) total amount of a good that people wish to buy, regardless of price. C) total amount of a good that purchasers wish to purchase at a given price during a given period of time. D) product of advertising, and is unrelated to price. E) entire relationship between desired purchases and possible prices.
C
Which of the following factors of production is most likely to be variable in the short run? A) land B) capital equipment C) labour D) entrepreneurship E) technology
C
Which of the following statements is NOT true of a corporation? A) It is an entity separate from the individuals who own it. B) It can enter into contracts. C) It can incur debt that is an obligation of the corporation but not of its individual owners. D) It has the right to sue and be sued. E) It is legally obliged to distribute all profits to shareholders.
C
A country's production possibilities boundary shows that A) when a society combines its resources inefficiently, it cannot produce more of one good without producing less of the other good. B) the supply for goods always exceeds the demand. C) all points inside the boundary are preferred to all points on the boundary. D) when a society combines its resources efficiently, it is always possible to produce more of all goods. E) when a society combines its resources efficiently, it cannot produce more of one good without producing less of the other good.
D
A firm in a perfectly competitive industry will maximize profits by adjusting A) average total cost until it equals price. B) price until marginal revenue equals marginal cost. C) output until average revenue equals short-run average total cost. D) output until marginal cost equals marginal revenue. E) price until average revenue equals average total cost.
D
A tariff imposed by Canada on Japanese cars ________ the price of cars in Canada and ________ the quantity of Japanese cars imported into Canada. A) raises; increases B) raises; does not change C) lowers; decreases D) raises; decreases E) lowers; increases
D
If we compare the wage rate and the level of employment achieved in a competitive labour market with those in a monopsonistic labour market, the latter will generate A) a lower level of employment and a lower wage. B) the same outcomes as in a competitive labour market. C) a higher level of employment and a higher wage rate. D) a lower level of employment and a higher wage rate. E) a higher level of employment and a lower wage.
D
The optimal amount of pollution abatement is such that A) the total benefit of reducing pollution is equal to the total cost of reducing pollution. B) the marginal private cost of reducing pollution is just equal to the profit of the polluting firms. C) there is no remaining pollution. D) the marginal social cost of reducing pollution is just equal to the marginal social benefits from doing so. E) none of the above; there is no optimal amount of pollution abatement.
D
The period of time over which the firm can vary any of its inputs for a given production technology is called the A) immediate run. B) very-short run. C) long run. D) very-long run. E) short run.
D
The short-run supply curve for a perfectly competitive firm is A) the industry supply curve. B) its rising portion of the average-variable-cost curve. C) its entire marginal-cost curve. D) its marginal-cost curve above the average-variable-cost curve. E) its average-revenue curve.
D
A value of zero for the elasticity of supply of some product implies that A) the supply curve is horizontal. B) supply is highly responsive to price. C) the product will not be supplied at any price. D) there is no supply. E) the supply curve is vertical.
E
If a perfectly competitive firm in the short run is producing where P = ATC = MC, this firm is A) incurring losses. B) earning economic profits. C) obliged to shut down. D) on the downward-sloping portion of its demand curve. E) at its profit-maximizing output level.
E
If the equilibrium price for some product is $1000, a price ceiling of $1200 will result in A) massive surpluses of the good. B) the same general effects as a price floor of $1200. C) the same general effects as an administered price of $1200. D) the same general effects as a price ceiling of $600. E) no effects because the price ceiling is not binding at that price.
E
Specialization of labour led to greater efficiency in the allocation of resources because of A) the use of barter. B) an increase in total work effort. C) greater reliance on self-sufficiency. D) the opportunity cost of labour increased. E) the principle of comparative advantage.
E
The condition required for a consumer to be maximizing utility, for any pair of products, X and Y, is A) MUX = MUY. B) MUX/PY = MUY/PX. C) PX = PY. D) PX(MUX) = PY(MUY). E) MUX/PX = MUY/PY.
E
The opportunity cost of any factor of production is A) its accounting cost. B) the benefit forgone by not using it in its worst alternative. C) the money actually paid to the factors of production. D) its explicit cost. E) the benefit forgone by not using it in its best alternative.
E
