The Ideal Quiz On Microeconomics

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Microeconomics Quizzes & Trivia

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Questions and Answers
  • 1. 
    When the marginal product equals the average product, the...
    • A. 

      Average product is at its maximum

    • B. 

      Average product curve is upward sloping

    • C. 

      Marginal product is at its maximum

    • D. 

      Average product curve is downward sloping

  • 2. 
    If profit is greater than marginal cost the firm should
    • A. 

      Should contract output

    • B. 

      Shut down permanently

    • C. 

      Continue the way they are running

    • D. 

      Expand output

  • 3. 
    If profit is less than marginal cost, the firm should 
    • A. 

      Expand its output

    • B. 

      Contract its output

    • C. 

      Stay consistent

    • D. 

      Shut down permanently

  • 4. 
    Two key properties of a perfect competition
    • A. 

      There are many, many firms in the industry

    • B. 

      There are no barriers to entry and exit

    • C. 

      The government determines the prices

    • D. 

      Both A & B

  • 5. 
    When Price < Average Variable Cost, the firm should discontinue production
    • A. 

      True

    • B. 

      False

  • 6. 
    A perfectly competitve market
    • A. 

      The firm determines the price

    • B. 

      The firm must sell at the price dictated by the market

    • C. 

      The entrepreneur determine the price

    • D. 

      The government determines the price

  • 7. 
    According tot he kinked demand curve theory of oligopoly, each firm believes that if it lowers its price
    • A. 

      The government will impose price floors

    • B. 

      The government will impose price ceilings

    • C. 

      Other firms will not lower theirs

    • D. 

      Other firms will also lower theirs

  • 8. 
    The long run is a period during which:
    • A. 

      All inputs are variable and no inputs are fixed

    • B. 

      No inputs are variable and some inputs are fixed

    • C. 

      No inputs are variable and all inputs are fixed

    • D. 

      Some inputs are variable and some inputs are fixed

  • 9. 
    How long is the short run?
    • A. 

      When it is impossible for any firm to make a profit

    • B. 

      When all costs are fixed

    • C. 

      When there are fixed costs, but some costs are variable

    • D. 

      Always shorter than 6 months

  • 10. 
    When an additional worker is hired, and all other inputs are unchanged, the increase in output due to that worker is called:
    • A. 

      Her average product

    • B. 

      Her total product

    • C. 

      Her marginal product

    • D. 

      Her marginal cot

  • 11. 
    A business produces 300 items and sells them for $15 each. The total cost of producing the items is $2,000 explicit costs and $1,000 implicit cost. Economic profit is:
    • A. 

      0

    • B. 

      500

    • C. 

      1,000

    • D. 

      1,500

  • 12. 
    Ann's furniture factory is experiencing rapid growth in sales. As sales have increased, Ann has found it necessary to hire more workers. However, she has observed that doubling the number of workers has less than doubld her output. What is the likely explanation?
    • A. 

      The law of supply

    • B. 

      The law of diminishing marginal utility

    • C. 

      The law of diminishing marginal productivity

    • D. 

      The law of demand

  • 13. 
    Daisy incurs $7,200 per month in fixed costs operating her floral shop. she pays her employees $9.00 per hour and has three assistants each working 120 hours per month. Her other variable costs are $800 per month. What are Daisy's total variable costs and total costs each month
    • A. 

      TVC is 800 and TC is 8000

    • B. 

      TVC is 4040 and TC is 11240

    • C. 

      TVC are 800 and TC is 11240

    • D. 

      TVC are 3240 and TC is 11240

  • 14. 
    A firm is producing 200 units of output at a total cost of $84,000. The firm's fixed cost is $34,000. What is the Averagle varible cost?
    • A. 

      250

    • B. 

      500

    • C. 

      600

    • D. 

      640

  • 15. 
    Marginal cost:
    • A. 

      Can be calculated by dividing average total cost by the number of units prouced

    • B. 

      Can be calculated by dividing average variable cost by the number of units produced

    • C. 

      Is the increase in fixed costs that results from increasing pro ducting by one unit

    • D. 

      Is the increase in total costs that results from increasing pro ducting by one unit

  • 16. 
    When a firm's output is zero
    • A. 

      Total fixed cost and total variable cost are both zero

    • B. 

      Total fixe cost is zero, but total variable cost may be positive

    • C. 

      Both total fixed cost and total variable cost may be positive

    • D. 

      Total variable cost is zero, but total fixed cost may be positive

  • 17. 
    • A. 

      There is learning in this company

    • B. 

      There are economies of scale

    • C. 

      There are economies of scope

    • D. 

      There is increasing marginal productivity

  • 18. 
    For a firm, its LRAC is $50/unit when output is 2000 unitsday, but increases to $52/unit when output is 2500 units/day. There is an example of 
    • A. 

      Economies of scale

    • B. 

      Diseconomies of scale

    • C. 

      Increasing returns

    • D. 

      Economies of scope

  • 19. 
    The three main criteria used by economists to classify market structures are:
    • A. 

      Nationality, size, and ownership

    • B. 

      Number of firms, entry and exit barriers, whether the product is homogeneous or differentiated

    • C. 

      Agriculture, industry, or services

    • D. 

      Old, new, or in-between

  • 20. 
    Each firm in perfect competition:
    • A. 

      Sets quantity based on market price

    • B. 

      Follows the pricing decisions of other firms

    • C. 

      Follows the output of other firms

    • D. 

      Follows the reactions of competitors

  • 21. 
    The price elasticity of demand for any particular perfectly competitive firm's output is
    • A. 

      Less than 1

    • B. 

      1

    • C. 

      Equal to zero

    • D. 

      Infinite

  • 22. 
    In a perfectly competitive market
    • A. 

      Firms set prices and quantities

    • B. 

      Firms set quantities but not prices

    • C. 

      Firms set prices but not quantities

    • D. 

      Firms set neither prices nor quantities

  • 23. 
    To maximize profits, a perfectly competitive firm should produce:
    • A. 

      Where P>ATC

    • B. 

      Where P=MC

    • C. 

      Where TR=TC

    • D. 

      Where MR=TC

  • 24. 
    A profit maximizing firm should not produce in the short run if
    • A. 

      Price is not at least equal to average fixed cost

    • B. 

      Price is not at least equal to average total cost

    • C. 

      Price is not at least equal to average variable cost

    • D. 

      It cannot make a positive profit

  • 25. 
    A perfectly competitive firm is charging the market price is $18 to sell its product. The firm is producing and selling the profit-maximizing quantity of 50 units at this price. Its average total cost is $17 and its average variable cost is $15. Which of the following statements is then true?
    • A. 

      This firm should shut down now

    • B. 

      The firm is earning an economic profit of $50

    • C. 

      At this current level of production, the firm's marginal cost is $15

    • D. 

      At this current level of production, the firm's marginal cost is $17

  • 26. 
    For a profit-maximizing firm, an additional unit of output should be produced only if
    • A. 

      Total revenue exceeds total cost at that level of output

    • B. 

      The marginal revenue it brings exceeds the marginal cost of producing it

    • C. 

      The additional to output would increase fixe costs more than it would increase marginal cost

    • D. 

      Its marginal cost of production does not exceed its fixed cos per unit

  • 27. 
    A competitive firm facing a price of $6 decides to produce 100 widgets. if its marginal cost of producing the last widget is $5, what would you advise the firm to do?
    • A. 

      Produce more widgets

    • B. 

      Produce fewer widgets

    • C. 

      Shut down

    • D. 

      Not enough information to answer this question. We need to know the firm's average variable cost too.

  • 28. 
    The supply curve of a perfectly competitive firm is 
    • A. 

      The segment of the marginal cost curve that lies above the average variable cost curve

    • B. 

      The segment of the marginal cost curve that lies above the average total cost curve

    • C. 

      The segment of the marginal cost curve that lies above the average fixed cost curve

    • D. 

      Nonexistent

  • 29. 
    New reports indicate that eating spinach causes hairloss. This news shifts the demand curve for spinach leftward. In response, some farms exit the (perfectly competitve) spinach industry. During the period in which these existing farms are exiting, the price of spinach ____ and the profit of the remaing farm ____
    • A. 

      Falls; falls

    • B. 

      Falls; rises

    • C. 

      Rises; falls

    • D. 

      Rises; rises

  • 30. 
    When economists say that an industry has entry barriers, they mean that
    • A. 

      It is difficult for people with disabilities to enter the factories in the industry

    • B. 

      It is difficult for new firms to enter the industry

    • C. 

      It is difficult for foreign firms to enter the industry

    • D. 

      Entry is only by permission from the government

  • 31. 
    • A. 

      Patents

    • B. 

      Technological superiority

    • C. 

      Economies of scale

    • D. 

      All of the above

  • 32. 
    The demand curve for a monopoly is 
    • A. 

      Greater for the firm as for the industry

    • B. 

      The same for the industry than for the firm

    • C. 

      Steeper for the firm than for the industry

    • D. 

      None of the above is correct

  • 33. 
    A monopoly
    • A. 

      Faces a perfectly elastic demand curve

    • B. 

      Can ignore the demand curve and charge any price to sell any quant it it wants

    • C. 

      Raises the price of its product by increasing the quantity sold

    • D. 

      Raises the price of its product by decreasing the quantity sold

  • 34. 
    For a monopolist, marginal revenue is
    • A. 

      Equal to price

    • B. 

      Greater than price

    • C. 

      Below price

    • D. 

      Constant

  • 35. 
    If a monopolist increases output from 4 to 5 by lowering its price from $10 to $9, marginal revenue is
    • A. 

      0

    • B. 

      18

    • C. 

      80

    • D. 

      5

  • 36. 
    If MR<MC, the monopolist should: 
    • A. 

      Decrease production

    • B. 

      Increase production

    • C. 

      Maintain the same level of production

    • D. 

      Stop producing

  • 37. 
    For the monopolist in the shourt run, if P>AVC, the output level produced is established at the point where 
    • A. 

      P> LAC

    • B. 

      P=ATC

    • C. 

      MC=MR

    • D. 

      P=MC

  • 38. 
    Market entry tends to be restricted under
    • A. 

      Monopoly

    • B. 

      Monopolistic competition

    • C. 

      Both A and B

    • D. 

      Neither A or B

  • 39. 
    Compared to a perfectly competitive industry, a monopolist
    • A. 

      Produces a large quantity

    • B. 

      Charges a higher price

    • C. 

      Creates a higher price

    • D. 

      All of the above

  • 40. 
    One of the major differences between a monopolist and a perfectly competitive firm is that the monopolist has a ___ demand curve, while the perfectly competitive firm as a ___ demand curve
    • A. 

      Downward-sloping; perfectly elastic

    • B. 

      Perfectly inelastic; perfectly elastic

    • C. 

      Downward-sloping; perfectly inelastic

    • D. 

      Perfectly elastic; downward-sloping

  • 41. 
    A major difference between profit-maximizing perfectly competitive firms and monopolies in the long run is the following
    • A. 

      Unlike the former, monopolies will not stay in business while making losses

    • B. 

      Unlike the former, monopolies will not stay in business while making zero profits

    • C. 

      Unlike the former, monopolies might make positive profits permanently

    • D. 

      All of the above

  • 42. 
    Price discrimination is the practice of charging different price to 
    • A. 

      Different customers even though cost of selling to each is the same

    • B. 

      Different customers because the cost of selling are different

    • C. 

      The same customers because of changes in cost

    • D. 

      Different countries because of tariffs and transportation costs

  • 43. 
    Price discrimination is not possible unless
    • A. 

      All buyers have the same preference

    • B. 

      The market is perfectly competitive

    • C. 

      The product sold to each customer has a different cost

    • D. 

      Resale can be prevented

  • 44. 
    The fact that airlines charge business travelers more for the same airplane seat than leisure travelers is an example of ___ discrimination where the carrier charges those with higher demand elasticity a ___ fair.
    • A. 

      Price; lower

    • B. 

      Price; higher

    • C. 

      Demand; higher

    • D. 

      Demand; lower

  • 45. 
    The downward- sloping demand curve for a monopolistically competitve firm
    • A. 

      Reflects product differentiation

    • B. 

      Eventually will become perfectly elastic as more firms enter

    • C. 

      Indicates collusion among firms in the industry

    • D. 

      Ensures that the firm will produce at minimum average cost in the long run

  • 46. 
    Under monopolistic competition
    • A. 

      Sellers earn economic profits in the long-run

    • B. 

      New firms cannot enter in the long-run

    • C. 

      Sellers have some monopoly power

    • D. 

      Sellers are not maximizing profits

  • 47. 
    There are many restaurants in Cincinnati, each one offereing food and services that differ from those of its competitors. There is also free entry of sellers into the market and each seller serves a very small fraction of the total number of meals served each day. The restaurant industry in Cincinnati is bes categorized as
    • A. 

      An oligopoly

    • B. 

      A pure monopoly

    • C. 

      Monopolistically competitive

    • D. 

      Perfectly competitive

  • 48. 
    In the short run, a firm in monopolistic competition produces where
    • A. 

      MR=MC and economic profit is always equal to zero

    • B. 

      MR=MC

    • C. 

      The given market price is equal to MC and economic profit is equal to zero

    • D. 

      The given market price is equal to MC

  • 49. 
    In an oligopoly
    • A. 

      There are few sellers

    • B. 

      There are some barriers to entry

    • C. 

      Firms recognize their interdependence

    • D. 

      All of the above are true

  • 50. 
    The model that assumes that oligopolies act jointly as if they were monopolists is the
    • A. 

      Cartel modle

    • B. 

      Kinked demand curve model

    • C. 

      Monopolistically competitive model

    • D. 

      Competitive model

  • 51. 
    One difficulty of a cartel is
    • A. 

      How to divide profits fairly

    • B. 

      How to enface cartel agreement

    • C. 

      How to make sure that each member do not cheat

    • D. 

      All of the above

  • 52. 
    The prisoner's dilemma is the difficulty
    • A. 

      Facing a prisoner in deciding whether or not to escape

    • B. 

      Never faced by a law-abiding business

    • C. 

      That only a monopoly has to encounter

    • D. 

      Due to the lack of trust

  • 53. 
    The kinked demand curve model assumes that
    • A. 

      Rivals will follow a price increase but not a price decrease

    • B. 

      Rivals will follow a price decrease but not a rice increase

    • C. 

      The firm with the kinked demand curve will always behave non cooperatively

    • D. 

      The firm with the kinked demand curve will face a prisoner's dilemma

  • 54. 
    The short run is a period during which
    • A. 

      Some impost are variable and no inputs are fixed

    • B. 

      Some inputs are variable and some inputs are fixed

    • C. 

      No inputs are variable and al inputs are fixed

    • D. 

      No inputs are variable and some inputs are fixed

  • 55. 
    How long is the long run?
    • A. 

      Long enough for the firm to make a profit

    • B. 

      Long enough that all costs can become variable

    • C. 

      Long enough for diminishing returns to set in

    • D. 

      Must always be longer than ten years

  • 56. 
    The increase in output obtained by hiring an additional work is known as
    • A. 

      The average product

    • B. 

      The total product

    • C. 

      The marginal product

    • D. 

      Value added

  • 57. 
    A business produces 400 items and sells them for $15 each for a total of $6000. The total cost of producing th items is $4,500 explicit cost and $1,000 implicit cost. Economic profit i
    • A. 

      0

    • B. 

      500

    • C. 

      1000

    • D. 

      1500

  • 58. 
    Suppose that a firms output increases from 910 to 1060 unis when it increases the labor input from 63 to 64 workers. the mrginal product of the last worker is 
    • A. 

      150

    • B. 

      64

    • C. 

      1970

    • D. 

      1060

  • 59. 
    Daisy incurves $7200 per month in fixed costs operating her floral shop. She pays her employees 9.00 per hour and has three assistants ech working 120 hours per month. her other variable costs are 800 per month. what are daisy's total variable costs and total costs each month
    • A. 

      Total variable costs are 800; total costs are 8000

    • B. 

      Total variable costs are 4040; total costs are 11240

    • C. 

      Total variable costa re 800; total costs are 11240

    • D. 

      Totoal variable sots are 3240; total costs are 11240

  • 60. 
    A firm is producing 100 units of output at a total cost of $84,000. the firm's fixed cost is $24,000. What is the average variable cost. 
    • A. 

      240

    • B. 

      840

    • C. 

      600

    • D. 

      640

  • 61. 
    Marginal cost
    • A. 

      Can be calculated by dividing average total cost by the number of units produce

    • B. 

      Can be calculated by dividing average variable cost by the number of units produced

    • C. 

      Is the increase in fixed costs that results from increasing production by one unit

    • D. 

      Is the increase in total costs that results from increasing reduction by one unit

  • 62. 
    When a firm's output is zero
    • A. 

      Total fixed cost and total variable cost are both zero

    • B. 

      Total fixed cost is zero, but tool variable cost may be positive

    • C. 

      Total variable cost is zero, but total fixed cost may be positive

    • D. 

      Both total fixed cost and total variable cost may be positive

  • 63. 
    The three main criteria used by economists to classify market structures are
    • A. 

      Nationality; size; ownership

    • B. 

      Number of firms; entry and exit barriers; whether the product is homogenous or differentiated

    • C. 

      Agriculture; industry; or services

    • D. 

      Old; new; in-between

  • 64. 
    The long-run average total cost of producing 10 units of output is $56; the long- run average total cost of producig 11 units is $58 . these numbers imply that
    • A. 

      Economies of scale are present

    • B. 

      Diseconomies of scale are present

    • C. 

      Economies of scope are present

    • D. 

      Diminishing marginal productivity is present

  • 65. 
    Each firm in perfect competition
    • A. 

      Sets quantity based on market price

    • B. 

      Follows the pricing decisions of other firms

    • C. 

      Follows the output of other firms

    • D. 

      Follows the reactions of competitors

  • 66. 
    A perfectly competitive firm is charging the market price of $18 to sell its product. the firm is producing and selling the profit maximizing quanitity of 50 units at this price. its average total cost is $17 and its average variable cost is $15. which of the following statments is then true
    • A. 

      This firm should shut down

    • B. 

      The firm is earning and economic profit of 50

    • C. 

      At this current level of production the firms marginal cost is 15

    • D. 

      At this current level of production the firms marginal cost is 17

  • 67. 
    For a profit maximizing firm, an additional unit of output should be produced only if
    • A. 

      The marginal revenue it brings exceeds the marginal cost of producing it

    • B. 

      Total revenue exceeds total cost at the level of output

    • C. 

      The addition to output would increase fixed costs more than it would increase marginal cost

    • D. 

      Its marginal cost of production does not exceed its fixed cost per nut

  • 68. 
    A competitive firm facing a price of $12 decides to produce 100 widgests. if its marginal cost of producing the last widget is $10 what would you advise the firm to do?
    • A. 

      Produce more widgets

    • B. 

      Produce fewer widegets

    • C. 

      Shut down

    • D. 

      Not enough information to answer this question. we need to know the firms' average variable cost too

  • 69. 
    The supply curve of a perfectly competitive firm is
    • A. 

      The segment of the marginal cost curve that lies above the average variable cost curve

    • B. 

      The segment of the marginal cost curve that lies above the average total cost curve

    • C. 

      The sement of the average total cost curve that lies above the average variable cost cureve

    • D. 

      Nonexisitent

  • 70. 
    New reports indicate that eating turnips cures baldness. the news shifts the demand curve for turnips rightward. In response, new farms nter the perfectly competitive turnip industry. During the period in which the new farms are entering, the price of a trunip ___ and the proift of each exisiting farm ___
    • A. 

      Falls; falls

    • B. 

      Falls; rises

    • C. 

      Rises; falls

    • D. 

      Rises; rises

  • 71. 
    The demand curve for a monopoly is
    • A. 

      The same for a firm as for the industry

    • B. 

      Greater for the industry than for the firm

    • C. 

      Flatter for the firm than for the industry

    • D. 

      Non of the above

  • 72. 
    • A. 

      The older of a public franchise

    • B. 

      A pharmaceutical company which a patent on a drug

    • C. 

      The sole owner of an occupational license

    • D. 

      A store in a large shopping mall

  • 73. 
    If a monopolist is presently producing an output at which marginal revenue exceeds marginal cost, he or she can increase profits y
    • A. 

      Reducing output and raising prices

    • B. 

      Reducing output and holding prices unchanged

    • C. 

      Expanding output and lowering prices

    • D. 

      Reducing barriers to entry

  • 74. 
    If a monopolist increases output from 4 to 5 by lowering its price from 10 to 9 marginal revinue is 
    • A. 

      5

    • B. 

      18

    • C. 

      80

    • D. 

      0

  • 75. 
    If MR>MC monopolist should
    • A. 

      Decrease production

    • B. 

      Increase production

    • C. 

      Maintain the same level of production

    • D. 

      Stop producing

  • 76. 
    Compared to a perfectly competitive industry, a monopolisty
    • A. 

      Produces a large quantity

    • B. 

      Charges a higher price

    • C. 

      Increases consumer surplus

    • D. 

      All

  • 77. 
    Price discrimination is the practice of charging different prices to
    • A. 

      Different customers even though cost of selling to each is the sam

    • B. 

      Different customers because the cost of selling are different

    • C. 

      The same customers because of changes in cost

    • D. 

      Different countries because of tariffs ad trans portion costs

  • 78. 
    A price discriminating monoplistich will charge
    • A. 

      A lower price to individuals with more inelastic demand

    • B. 

      A lower price to individuals with more elastic demand

    • C. 

      A lower price to women

    • D. 

      A lower price to minorities

  • 79. 
    In an oliigopoly
    • A. 

      There are few sellers

    • B. 

      There are some barriers to entry

    • C. 

      Firms recognize their interdependence

    • D. 

      All of the above

  • 80. 
    If there are two gas stations int he town of smalltown, then the gasoline industry in smalltown is probably best characterized as
    • A. 

      Perfect competitive

    • B. 

      Monopolistic competitive

    • C. 

      Monopolistic

    • D. 

      Oligopolistic