Sample Exam Questions for ECO FInal

What type of protection does U.S. law grant the creator of a book, film, or piece of music?

Copyright for 70 years

Suppose the marginal utilities for the first three cans of soda are 100, 80, and 60, respectively. The total utility received from consuming 2 cans is

180

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true?

Monopoly will produce less and charge higher price

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly?

No, different brands = close subs

Which of the following is most likely to exert the bargaining power of a buyer?

Walmart

The demand curve for an individual seller's product in perfect competition is

horizontal

How are sunk costs and fixed costs related?

in short run, equal to each other

Oligopolies exist and do not attract new rivals because

of barriers to entry

If a producer is not able to expand its plant capacity immediately, it is

operating in short run

Which of the following describes how output changes in the short run? Because of specialization and the division of labor, as more workers are hired

output will first increase

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called

payoff matrix

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

perfect achieves productive and allocative efficiency, mono achieves neither

Which of the following is the best example of an oligopolistic industry?

pharmaceutical industry

A monopolistically competitive firm maximizes profit where

price is greater than MC

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. How do these problems affect the innovating firm?

reduce profits

The demand curve for a Giffen good is

upward sloping

Consider a downward-sloping demand curve. When the price of an inferior good increases, the income and substitution effects

work in opposite; quantity decreases

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying. Which of the following is not a response you might offer her?

Advertising and brand management

The International Nickel Company of Canada is often cited as an example of monopoly, but International Nickel eventually lost its monopoly. What event was responsible for this?

Competition with Russia in market for nickel after WWII

Which of the following is true of a typical firm in a monopolistically competitive industry?

Each firm acts independently

Which of the following is true for a monopolist?

Faces market demand curve

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

MC will be minimized.

Both monopolistically competitive firms and perfectly competitive firms maximize profits

MR = MC

Suppose Renee can increase her total utility from consuming video rentals and books by buying one more book and renting one fewer video. Which of the following is true?

MU per dollar spent on books exceeds that of videos

If a consumer always buys goods rationally, then

MU spent on all goods will be equal

Minimum efficient scale is defined as the level of output at which

all economies are exhausted

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers to consumers equal to the marginal cost of producing it?

allocative efficiency

An item has utility for a consumer if it

generates enjoyment

A large majority of the personal computers (PCs) in the United States use an operating system purchased from Microsoft. Microsoft's relationship with PC manufacturers is an example of which of Porter's competitive forces?

bargaining power of suppliers

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

budget constraint

Consumers maximize total utility within their budget constraint by

buying goods with largest MU

Marginal revenue is

change in total revenue divided by change in change in quantity of output

Which of the following is not a characteristic of indifference curves?

closer to origin, greater utility level

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

convince customers

A sequential game can be used to analyze whether a retail firm should build a large store or a small store in a city, when the correct choice depends on whether a competing firm will build a new store in the same city. Which of the following is used to analyze this type of decision?

decision tree

All but one of the following have been suggested by some economists as possible consequences of path dependency and switching costs. Which of the following is not a possible consequence of path dependency and switching costs?

diseconomies of scale

When large firms in oligopoly markets cut their prices,

don't know how rival firms will respond.

Jennifer Borts moves her office from the premises she rents at a local mall to her home. As a result of this move,

explicit costs fall while implicit costs rises

What is always true at the quantity where a firm's average total cost equals average revenue?

firm breaks even

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand,

firm would incur loss

Economies of scale occur when

firm's long-run average total costs fall

When a firm faces a downward-sloping demand curve, marginal revenue

is less than price

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called

isoquant

A monopolistically competitive market is described as one in which there are

large number of firms

If a firm shuts down in the short run,

loss = fixed cost

The rate at which a firm is able to substitute one input for another while keeping the level of output constant is called the

marginal rate of tech sub

Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?

market curve is downward sloping; firm's curve is horizontal

For a perfectly competitive firm, average revenue is equal to

market price

The level of output at which all economies of scale have been exhausted is known as

minimum efficient

Two stores - Lazy Guys and Ralph's Recliners - are located in the same city. Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

sells more output; lower average fixed costs

Once a product becomes established, network externalities may create ___________ costs that make consumers reluctant to buy a new product with better technology.

switching