Econ Exam Final 2

27 Questions

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Economics Quizzes & Trivia

Part 2


Questions and Answers
  • 1. 
    Economic profit 
    • A. 

      Is normally greater than accounting profit

    • B. 

      Cannot be measured

    • C. 

      Takes into account opportunity cost

    • D. 

      Is equal to accounting cost at equilibrium

  • 2. 
    The change in total cost resulting from an increase in output is
    • A. 

      Average fixed cost

    • B. 

      Average variable cost

    • C. 

      Average total cost

    • D. 

      Marginal cost

  • 3. 
    In the long run, the law of diminishing marginal returns
    • A. 

      Does not hold because nothing is fixed

    • B. 

      Does affect the cost curves

    • C. 

      Sometimes holds

    • D. 

      None of the above

  • 4. 
    If a firm increases output when MR > MC
    • A. 

      Profit will equal zero

    • B. 

      Profit will rise

    • C. 

      Profit will fall

    • D. 

      Profit will remain the same

  • 5. 
    Which characteristic best describes oligopoly
    • A. 

      Mutual interdependence

    • B. 

      Very large firms

    • C. 

      Few firms

    • D. 

      All of the above

  • 6. 
    The most important factor which determines market structure is the
    • A. 

      Location

    • B. 

      Size of the market

    • C. 

      Number of firms in the market

    • D. 

      Product price

  • 7. 
    The firm's demand curve in perfect competition is
    • A. 

      Upward sloping

    • B. 

      Downward sloping

    • C. 

      Vertical

    • D. 

      Horizontal

  • 8. 
    Perfect competitiors produce products that are
    • A. 

      Highly differentiated

    • B. 

      Highly advertised

    • C. 

      Unique

    • D. 

      Homogeneous

  • 9. 
    The demand curve for the monopolist is
    • A. 

      The demand curve for the industry

    • B. 

      Less than market demand

    • C. 

      Below the marginal revenue curve

    • D. 

      Nonexistent

  • 10. 
    If marginal costs increase, a monopolist will
    • A. 

      Decrease price and increase output

    • B. 

      Decrease both price and output

    • C. 

      Increase price and decrease output

    • D. 

      Increase both price and output

  • 11. 
    Compared to a perfectly competitive firm, the monopolist will charge
    • A. 

      A higher price and produce more output

    • B. 

      Higher price and produce less output

    • C. 

      Charge the same price

    • D. 

      Offer more

  • 12. 
    The firm in a perfectly competitive market
    • A. 

      Has a high degree of market power

    • B. 

      Accepts the market price

    • C. 

      Often will attempt to form a cartel

  • 13. 
    Economic profit 
    • A. 

      Is always zero for a perfect competitor

    • B. 

      Is always zero for a monopolist

    • C. 

      Is zero for a perfect competitor in the long run

    • D. 

      Equals total revenue minus marginal cost

  • 14. 
    As new firms enter a perfectly competitive industry
    • A. 

      Market price will increase

    • B. 

      Market price will decrease

    • C. 

      Profits will rise

    • D. 

      Market demand will fall

  • 15. 
    Which of the following is associated with monopolistic competition
    • A. 

      Identical products

    • B. 

      Economic profits in the long run

    • C. 

      Product differentiation

    • D. 

      High prices

  • 16. 
    The purpose of a cartel is to
    • A. 

      Promote product innovation

    • B. 

      Increase competition

    • C. 

      Diversify operations

    • D. 

      Act like a monopoly

  • 17. 
    When ologopolists take into account competitiors' behavior, they employ
    • A. 

      Game theory

    • B. 

      Independence

    • C. 

      Loss minimization

    • D. 

      Price discrimination

  • 18. 
    The primary purpose of antitrust legislation is to
    • A. 

      Protect the business

    • B. 

      Protect the competitiveness of U.S. business

    • C. 

      Ensure that labor is paid fairly

    • D. 

      Ensure a fair profit

  • 19. 
    The effects of airline deregulation included all of the following except
    • A. 

      Dropping of unprofitable routes

    • B. 

      Development of the hub and spoke system

    • C. 

      Establishment of commuter lines

    • D. 

      Raising of rates

  • 20. 
    When contestable markets exist
    • A. 

      Firms set high prices

    • B. 

      Firms set low prices

    • C. 

      Government regulation is needed

    • D. 

      Concentration ratios are very high

  • 21. 
    An example of a craft union is
    • A. 

      The United Auto Workers

    • B. 

      The United Steel Workers

    • C. 

      The carpenter's union

    • D. 

      The Oregon Public Employee's Union

  • 22. 
    An open shop is
    • A. 

      A union that accepts anyone who wishes to join

    • B. 

      A union that works for safer working conditions

    • C. 

      A business in which all unions belong to the same union

    • D. 

      An arrangement in which workers may be employed without belonging to a union

  • 23. 
    The demand for loanable funds comes from
    • A. 

      Households

    • B. 

      Business

    • C. 

      Households and business

    • D. 

      Households, business and government

  • 24. 
    Which of the following is not a characteristic of a public good
    • A. 

      It is scarce

    • B. 

      Its benefits cannot be withheld from anyone

    • C. 

      It is free

    • D. 

      Free riders are a problem

  • 25. 
    When property rights are poorly defined
    • A. 

      Free markets are best

    • B. 

      Externalities can exist

    • C. 

      Only positive externalities can exist

    • D. 

      The customer loses

  • 26. 
    To correct market failure, society typically relies on
    • A. 

      Consumer boycotts

    • B. 

      Self policing

    • C. 

      Government

    • D. 

      International standard

  • 27. 
    The law of diminishing returns states that as more workers are hired, beyond some point
    • A. 

      Total output will fall

    • B. 

      Total cost will fall

    • C. 

      Marginal physical product will fall

    • D. 

      Total cost will rise