McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Arts in Economics (BA Economics) .
| 51. |
Perfect completion means _____ rivalry |
| A. | perfect |
| B. | absence of |
| C. | fierce |
| D. | intense |
| Answer» B. absence of | |
| 52. |
_______ is situation in which a single company or group owns all or nearly all of the market for a given type of product or service. |
| A. | monopsony |
| B. | oligopoly |
| C. | perfect competition |
| D. | monopoly |
| Answer» D. monopoly | |
| 53. |
_______ is situation in which a particular market is controlled by a small group of firms. |
| A. | monopsony |
| B. | oligopoly |
| C. | perfect competition |
| D. | monopoly |
| Answer» B. oligopoly | |
| 54. |
________ is a market in which there are only a few large buyers for a product or service. |
| A. | monopsony |
| B. | oligopoly |
| C. | oligopsony |
| D. | monopoly |
| Answer» C. oligopsony | |
| 55. |
________ is one organization created from a formal agreement between a group of producers of a good or service, to regulate supply in an effort to regulate or manipulate prices. |
| A. | industry |
| B. | firm |
| C. | monopoly |
| D. | cartel |
| Answer» D. cartel | |
| 56. |
Which of the following statements is true |
| A. | oligopolies sell more output than perfect competition |
| B. | oligopolies charge a higher price than monopolies |
| C. | oligopolies sell more output than monopolies |
| D. | oligopolies charge a lower price than perfect competition |
| Answer» C. oligopolies sell more output than monopolies | |
| 57. |
The larger the number of firms in an oligopoly, the ________ the price and the ________ the output of the industry. |
| A. | lower, greater |
| B. | higher, lesser |
| C. | higher, greater |
| D. | lower, lesser |
| Answer» A. lower, greater | |
| 58. |
Factors of production are: |
| A. | the coefficients in a production function |
| B. | the characteristics of a market that determine how much is produced |
| C. | the inputs used to produce goods and services |
| D. | the outputs from a production function |
| Answer» C. the inputs used to produce goods and services | |
| 59. |
The property of diminishing marginal product applies: |
| A. | only to workers in the short run |
| B. | applies to workers and any other variable inputs in the short run |
| C. | only to workers in the long run |
| D. | applies to workers and any other variable inputs in the long run |
| Answer» B. applies to workers and any other variable inputs in the short run | |
| 60. |
All of the following will cause the value of the marginal product of labor to increase, EXCEPT: |
| A. | an increase in the price of the good sold by the firm |
| B. | a new production technology is developed and implemented by the firm |
| C. | an increase in the number of workers employed by the firm |
| D. | an increase in the quantity of other factors of production used by the firm |
| Answer» C. an increase in the number of workers employed by the firm | |
| 61. |
If the supply curve for labor is backward bending, and if the wage of a worker increases, she might choose to work: |
| A. | fewer hours per week, since she can earn the same income working fewer hours |
| B. | more hours per week, since she can earn the same income working fewer hours |
| C. | fewer hours per week, since every hour of leisure is cheaper than before |
| D. | more hours per week, since she needs to work more hours to earn the same income |
| Answer» A. fewer hours per week, since she can earn the same income working fewer hours | |
| 62. |
If many students choose to study to become accountants, when all of these students eventually graduate, we can expect accountant's wages to ________, and the equilibrium number of accountants will ________ |
| A. | rise, increase |
| B. | drop, increase |
| C. | rise, decrease |
| D. | drop, decrease |
| Answer» B. drop, increase | |
| 63. |
If there is a permanent increase in the demand for cars, car manufacturers will want to hire ________ workers, which will cause wages in the industry to ________. |
| A. | more, rise |
| B. | more, drop |
| C. | less, rise |
| D. | less, drop |
| Answer» A. more, rise | |
| 64. |
As firms gradually acquire ever more technology, machinery and equipment, workers' productivity gradually ________, and workers wages gradually ________. |
| A. | rises, decrease |
| B. | diminishes, decrease |
| C. | diminishes, increase |
| D. | rises, increase |
| Answer» D. rises, increase | |
| 65. |
The price paid for any factor of production tends to be equal to: |
| A. | the wage rate |
| B. | the value of the marginal product of that input |
| C. | the price of the product sold by the firm that inputs |
| D. | the price of the product sold by the firm that buys the inputs |
| Answer» B. the value of the marginal product of that input | |
| 66. |
In a perfectly competitive market |
| A. | each firm sets its own price |
| B. | there are a few firms selling unique products |
| C. | when one firm ceases production, the market equilibrium price tends to rise |
| D. | none of the above. in a perfectly competitive market, firms sell homogenous products and |
| Answer» D. none of the above. in a perfectly competitive market, firms sell homogenous products and | |
| 67. |
The three primary characteristics of a perfectly competitive market are |
| A. | the firms\ products are unique, they set their own price and can freely enter and exit the market |
| B. | the firms\ products are homogenous, the firms are price takers and can freely enter and exit the market |
| C. | the firms\ products are homogenous, the firms are price takers and there are barriers to entry into the market |
| D. | the firms\ products are unique, they are price takers and there are no barriers to entry in the market |
| Answer» B. the firms\ products are homogenous, the firms are price takers and can freely enter and exit the market | |
| 68. |
Microeconomic theory assumes that all firms maximize profits because |
| A. | it has been observed that managers always align their goals with investors and seek to maximize short and long run profits |
| B. | profit is likely to dominate almost all decisions for smaller firms |
| C. | if managers deviate from profit maximization decisions for too long shareholders or the board of directors will replace them |
| D. | both (b) and (c) |
| Answer» D. both (b) and (c) | |
| 69. |
Profits are maximized when the firm |
| A. | captures the largest market share in its market |
| B. | produces at an output level where marginal revenue exceeds marginal cost |
| C. | produces at the output level where marginal revenue equals marginal cost |
| D. | produces at the output level where total revenue is maximized |
| Answer» C. produces at the output level where marginal revenue equals marginal cost | |
| 70. |
The demand curve for a perfectly competitive firm |
| A. | slopes downward as the quantity demanded increases as the firm lowers price |
| B. | is a horizontal, perfectly elastic demand curve at the market price |
| C. | is a straight, downward sloping curve that is price elastic at higher prices and price inelastic as price falls and approaches zero |
| D. | both (b) and (c) |
| Answer» B. is a horizontal, perfectly elastic demand curve at the market price | |
| 71. |
Profit maximization for a perfectly competitive firm is at the quantity where |
| A. | price equals marginal revenue |
| B. | the difference between price and marginal cost is the greatest |
| C. | price equals marginal cost |
| D. | marginal cost is at a minimum |
| Answer» C. price equals marginal cost | |
| 72. |
A firm may decide to shut down in the short run |
| A. | if profit maximization occurs at an output level where price is less than average variable cost |
| B. | if profit maximization occurs at an output level where price is less than average total cost |
| C. | profit maximization occurs at an output level where price is less than average total cost but greater than average variable cost |
| D. | if profit maximization occurs at an output level where price is equal to average total cost and the firm does not foresee changes to the market price in the future |
| Answer» A. if profit maximization occurs at an output level where price is less than average variable cost | |
| 73. |
If a perfectly competitive firm finds that the profit maximizing output level occurs where price is equal to marginal cost but is less than average variable cost |
| A. | the firm will continue to operate in the short run since total revenue exceeds total variable cost but will exit the industry in the long run |
| B. | the firm will continue to operate in the short run since it has to pay the total fixed cost whether or not it continues to operate |
| C. | the firm will increase its selling price to raise revenue in order to be able to continue to operate profitably in the short run |
| D. | the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing |
| Answer» D. the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing | |
| 74. |
In the long run, a perfectly competitive firm earning zero economic profits |
| A. | will exit the market in search of more profitable use of its resources |
| B. | is earning a normal rate of return on its investments |
| C. | signifies that the firm is performing poorly and so should exit the market |
| D. | will break even |
| Answer» B. is earning a normal rate of return on its investments | |
| 75. |
In the long run, a constant cost industry |
| A. | has an upward sloping supply curve as the quantity supplied increases with increases in demand |
| B. | expands in response to an increase in demand despite rising input costs, and so the long run supply curve is horizontal |
| C. | can expand in response to an increase in demand without input costs changing, and so the long run supply curve is horizontal |
| D. | does not expand in response to an increase in demand and so the long run supply curve is horizontal |
| Answer» C. can expand in response to an increase in demand without input costs changing, and so the long run supply curve is horizontal | |
| 76. |
Market power is defined as |
| A. | the ability of a firm to charge any price it wants |
| B. | produce and sell as large a quantity as possible at high prices |
| C. | the ability of a seller or buyer to affect the market price of a good or service |
| D. | sell large a quantity at high prices |
| Answer» C. the ability of a seller or buyer to affect the market price of a good or service | |
| 77. |
Marginal revenue for a monopolist is equal to |
| A. | the increased revenue from the sale of an additional unit less the loss of revenue from selling previous units at a lower price |
| B. | the change in revenue resulting from a one unit change in output |
| C. | the change in revenue divided by the change in output |
| D. | all of the above are applicable |
| Answer» D. all of the above are applicable | |
| 78. |
For a monopolist, marginal revenue is always less than price because |
| A. | as output increases, the price of all units must fall to sell the additional unit |
| B. | because at lower prices, profit margins fall |
| C. | in order to sell additional quantities, the additional units much be sold at a lower price |
| D. | because monopolist is a price maker |
| Answer» A. as output increases, the price of all units must fall to sell the additional unit | |
| 79. |
The profit maximizing output level for a monopolist is |
| A. | the output level where price elasticity of demand is −1 and total revenue is maximized |
| B. | the output level where price elasticity of demand is +1 and total revenue is maximized |
| C. | the output level where marginal revenue equals marginal cost |
| D. | where the difference between price and average total cost is the largest |
| Answer» C. the output level where marginal revenue equals marginal cost | |
| 80. |
The supply curve for the monopolist |
| A. | does not exist |
| B. | is represented by the marginal cost curve above the average total cost curve |
| C. | is represented by the marginal cost curve above the average variable cost curve |
| D. | is represented by the marginal cost curve above the average cost curve |
| Answer» A. does not exist | |
| 81. |
The Lerner Index is a measure of __________ |
| A. | perfect competition |
| B. | monopoly power |
| C. | competition |
| D. | market |
| Answer» B. monopoly power | |
| 82. |
For the monopolist, at the profit maximizing level of output |
| A. | price is greater than marginal cost (p > mc) |
| B. | price is equal to marginal cost (p=mc) |
| C. | price may be greater than or equal to marginal cost, |
| D. | price is less than marginal cost (p <mc) |
| Answer» A. price is greater than marginal cost (p > mc) | |
| 83. |
A major source of monopoly power in a market is |
| A. | a low market elasticity of demand |
| B. | a high market price elasticity of demand |
| C. | aggressive rivalry between firms in a market |
| D. | the presence of many firms in a market |
| Answer» A. a low market elasticity of demand | |
| 84. |
According to economic pricing theory, the basic objective of every pricing strategy |
| A. | is to reduce prices in order to increase consumer surplus and the quantity sold |
| B. | to raise prices in order to reduce consumer surplus |
| C. | sell at a price and quantity where total revenue is maximized |
| D. | to capture consumer surplus and convert it to additional profit for the firm |
| Answer» D. to capture consumer surplus and convert it to additional profit for the firm | |
| 85. |
The practice of charging different prices to different consumers for the same goods or services is known as _____ |
| A. | product differentiation |
| B. | marketing |
| C. | aggressive selling |
| D. | price discrimination |
| Answer» D. price discrimination | |
| 86. |
Which of the following statements about industries that are oligopolies is false |
| A. | firms in these industries may attempt to cooperate |
| B. | firms in these industries are interdependent |
| C. | the fact that there is more than one firm in an oligopoly means that there are no barriers to entry |
| D. | an oligopoly with two firms is called a duopoly |
| Answer» C. the fact that there is more than one firm in an oligopoly means that there are no barriers to entry | |
| 87. |
The price rigidity in an oligopolistic market is explained by _______ |
| A. | price discrimination |
| B. | product differentiation |
| C. | bundling |
| D. | kinked demand curve |
| Answer» D. kinked demand curve | |
| 88. |
Product differentiation is seen in |
| A. | perfect competition |
| B. | monopoly |
| C. | monopolistic competition |
| D. | pure competition |
| Answer» C. monopolistic competition | |
| 89. |
Price discrimination is a strategy in |
| A. | monopoly |
| B. | perfect competition |
| C. | monopolistic competition |
| D. | pure competition |
| Answer» A. monopoly | |
| 90. |
Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firm is employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm |
| A. | the firm is in long-run equilibrium |
| B. | the firm is earning excess profits |
| C. | the firm should expand production |
| D. | the firm should contract production |
| Answer» C. the firm should expand production | |
| 91. |
That the perfectly competitive firm will pick a combination of inputs where the ratio of each input’s marginal product to its price is equal follows from |
| A. | the need to use inputs in fixed proportions |
| B. | the backward bending supply curve of labour |
| C. | cost minimization |
| D. | the attempt to achieve a target rate of return |
| Answer» C. cost minimization | |
| 92. |
If an additional worker costs you Rs. 15 per hour, and that person can add 25 units of output to the firm, you should hire that person as long as |
| A. | 25 remains above rs.15 |
| B. | 25/rs.15 is greater than zero |
| C. | rs.15/25 is great than zero |
| D. | the value of the marginal product is above rs.15 ......................... |
| Answer» D. the value of the marginal product is above rs.15 ......................... | |
| 93. |
Entry is restricted under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» B. Monopoly | |
| 94. |
Demand curve is perfectly elastic under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» A. Perfect competition | |
| 95. |
Demand curve is elastic under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» C. Monopolistic competition | |
| 96. |
Demand curve is inelastic under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» B. Monopoly | |
| 97. |
Differentiated but close substitutes exist under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» C. Monopolistic competition | |
| 98. |
Selling cost is insignificant under: |
| A. | Perfect competition |
| B. | Monopoly |
| C. | Monopolistic competition |
| D. | All of the above |
| Answer» B. Monopoly | |
| 99. |
Few firms exist under: |
| A. | Perfect competition |
| B. | Oligopoly |
| C. | Monopolistic competition |
| D. | Both perfect and monopolistic competition |
| Answer» B. Oligopoly | |
| 100. |
In which market structure, price and output solution is indeterminate? |
| A. | Oligopoly |
| B. | Monopolistic competition |
| C. | Perfect competition |
| D. | Monopoly |
| Answer» A. Oligopoly | |
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