Micro multiple choice questions
Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%, then: A) Burger King will sell 10% more burgers B) Burger King will sell 8% more burgers C) Burger King will sell 8% fewer burgers D) We cannot tell what will happen to Burger King, but McDonald's will sell 8% fewer burgers
B
Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop (and thus reduces supply), how will that affect total revenue, all other things unchanged? A) Total revenue will rise B) Total revenue will fall C) Total revenue will remain unchanged D) Not enough information is given to answer the question
B
The law of diminishing marginal returns A) causes the difference between average total cost and average variable cost to get smaller as output increases B) explains why the average total cost and marginal cost curves are U-shaped in the short run. C) explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run D) causes average total costs to rise at a decreasing rate as output increases
B
The lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the ______ curve. A) ATC B) AVC C) AFC D) MC
B
The total producer surplus for a good can be calculated in all except one of the following ways. Which is the exception? A) The sum of the individual producer surpluses for all sellers of the good B) The area below the supply curve for the good up to the quantity of the good sold C) The area above the supply curve and below the price at which the good is being sold D) The sum, for all sellers of the good, of the difference between what each seller receives and the minimum amount he or she is willing to accept for selling the good
B
To maximize profit, a perfectly competitive firm A) should sell the quantity of output that results in a value for total revenue that is equal to total cost B) should produce the quantity of output that results in the greatest difference between total revenue and total cost C) should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost D) should sell the quantity of output determined by the interaction between industry demand and supply
B
A decrease in a price of a good will result in: A) An increase in demand B) An increase in supply C) An increase in the quantity demanded D) More being supplied
C
If marginal cost is equal to average total cost, then: A) Average total cost is increasing B) Average total cost is at its maximum C) Average total cost is at its minimum D) Marginal cost is increasing
C
If the income elasticity of demand for a good is positive, the good is said to be: A) An inferior good B) A substitute good C) A normal good D) A positive good
C
Marginal revenue for a monopolist is: A) Equal to price B) Greater than price C) Less than price D) Equal to average revenue
C
The implicit cost of capital is: A) The expense associated with leasing machines B) The expense associated with buying machines C) The opportunity cost of capital used by a business D) Irrelevant for determining economic profit
C
Which of the following is the best example of a perfectly competitive industry? A) airplane production B) electricity production C) wheat production D) steel production
C
A monopoly will have a Herfindahl-Hirschman index (HHI) equal to: A) 1 B) 100 C) 1,000 D) 10,000
D
The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If fixed cost is $1,200 per week: A) Average fixed cost is $20 B) Total cost is $3,200 C) Variable cost is $2,000 D) Average variable cost is $8
D
The demand curve for a monopoly is: A) The MR curve above the AVC curve B) The MR curve above the horizontal axis C) The entire MR curve D) Above the MR curve
D
The price elasticity of demand is computed as the percentage change in the: A) Quantity demanded divided by the percentage change in the quantity supplied B) Price divided by the percentage change in the quantity demanded C) Quantity demanded divided by the percentage change in income D) Quantity demanded divided by the percentage change in the price
D
Which of the following will lead to a decrease in total revenue? A) The price goes up and demand is perfectly inelastic B) The price goes up and demand is price-inelastic C) The price declines and demand is price-elastic D) The price increases and demand is price-elastic
D
A perfectly elastic supply curve is: A) Horizontal B) Downward sloping C) Upward sloping D) Vertical
A
At the profit-maximizing level of output for a perfectly competitive firm, A) price equals marginal cost B) price equals average revenue and marginal cost equals average variable cost C) marginal revenue equals marginal cost and average total cost equals average fixed cost D) average revenue equals average variable cost and price equals marginal cost
A
If the income elasticity of demand for a good is negative, the good is said to be: A) An inferior good B) A substitute good C) A normal good D) A positive good
A
If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should A) increase its output B) lower the price C) keep output constant and enjoy the above normal profit D) reduce its output
A
Money that must be paid for the use of the factors of production such as labor and capital is an: A) Explicit cost B) Accounting profit C) Implicit cost D) Economic profit
A
Price discrimination is the practice of: A) Charging different prices to buyers of the same good B) Paying different prices to suppliers of the same good C) Equating price to marginal cost D) Equating price to marginal revenue
A
Suppose that an increase in the price of a good lead to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be: A) Price-inelastic B) Price elastic C) Perfectly price-elastic D) Inferior
A
The average total cost of production A) equals total cost of production divided by the level of output B) equals total cost of production multiplied by the level of output C) equals the explicit cost of production D) is the extra cost required to produce one more unit
A
The price elasticity of demand measures the responsiveness of the change in the: A) Quantity demanded to a change in the price B) Price to a change in the quantity demanded C) Slope of the demand curve to a change in the price D) Slope of the demand curve to a change in the quantity demanded
A
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _________ and demand is described as ________. A) 0.2; inelastic B) 5; inelastic C) 0.2; elastic D) 5; elastic
A
Which of the following Herfindahl-Hirschman index (HHI) is most likely to indicate a perfectly competitive market A) 100 B) 1,800 C) 10,000 D) 100,000
A
Which of the following curves is not affected by the existence of diminishing returns? A) The average fixed cost curve B) The average variable cost curve C) The average total cost curve D) The marginal cost curve Difficulty:
A
.Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is £11 and the marginal cost is £14.54, then to maximize profits the firm should A) produce a larger level of output B) produce a smaller level of output C) continue producing at the current output D) There is not enough information given to answer the question
B
A characteristic of the long run is A) there are both fixed and variable factors of production B) all inputs can be varied C) factory capacity cannot be increased or decreased D) there are fixed factors of production
B
Along a given demand curve, an increase in the price of a good will cause consumer surplus to: A) Increase B) Decrease C) Not change D) Cannot be determined without information about the supply curve
B
Diminishing returns to an input occur: A) When all inputs are fixed B) When some inputs are fixed and some are variable C) When all inputs are variable D) Only in the long run
B
If a good is a necessity with few substitutes, then demand will tend to: A) Be more price-elastic B) Be less price-elastic C) Have price elasticity equal to 1 D) Be the same as that of a luxury good
B
