# Check Your Knowledge On Microeconomics With This Quiz

50 Questions  Settings  There are certain topics in life that we just know more about than anybody else, but just because you’re the master in a certain field doesn’t mean you shouldn’t brush up on it every now and again! In the following quiz, we’re going to see how much you know about microeconomics and check to see if your knowledge is up to scratch! Think you can answer every question correctly? Let’s find out!

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• 1.
• A.

All inputs are variable and no inputs are fixed

• B.

Some inputs are variable and some inputs are fixed

• C.

No inputs are variable and no inputs are fixed

• D.

No inputs are variable and some inputs are fixed

• 2.
• 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

• 3.
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 cost

• 4.
A busniess produces 300 itemsand sells them for \$15 each. The total cost of producing the items is \$2000 explicit cost and \$1000 implicit cost. Economic Profit is?
• A.

\$0

• B.

\$500

• C.

\$1000

• D.

\$1500

• 5.
• A.

The law of supply

• B.

The law of diminishing marginal utility

• C.

The law of diminishing marginal productivity

• D.

The law of demand

• 6.
• A.

Total variable costs are \$800; total costs are \$8000

• B.

Total variable costs are \$4040; total costs are \$11, 240

• C.

Total variable costs are \$800; total costs are \$11, 240

• D.

Total variable costs are \$3240; total costs are \$11, 240

• 7.
A firm producing 200 units of output at a total cost of \$84,000. The firm's fixed cost is \$34,000. What is the average variable cost?
• A.

\$250

• B.

\$500

• C.

\$600

• D.

\$640

• 8.
• A.

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

• 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 production by one unit

• 9.
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 the 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.

• 10.
Examining the four figures below : Pg. 3 Problem 10
• A.

Only figures A and D appear plausible, Figure B and C cannot be correct.

• B.

Only figures A and C seem plausible, Figures B and D cannot be correct

• C.

Only figures A, B and C are plausible, Figure D cannot be correct

• D.

They all look plausible

• 11.
• 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.

• 12.
For a firm, its LRAC is \$50/unit when output is 2000 units/day, but increases to \$52/unit when output is 2500 units/day. This is an example of....
• A.

Economies of scale

• B.

Diseconomies of scale

• C.

Increasing returns

• D.

Economies of scope

• 13.
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

• 14.
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

• 15.
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

• 16.
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

• 17.
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

• 18.
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

• 19.
A perfectly competitive firm is charging in the market price of \$18 to sell its product. The firm is producing and selling the proft-maximizing quantity of 50 units at this price. It's 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

• 20.
• A.

A total revenue exceeds total coast at that level of output

• B.

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

• C.

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

• D.

It's marginal cost of production does not exceed its fixed cost per unit.

• 21.
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.

• 22.
Using graphs on page 5: This firm can make positive profits only in:
• A.

Case A

• B.

Case B

• C.

Case C

• D.

Cases B and C

• 23.
Using graphs on page 5; This firm should produce only in:
• A.

Case A

• B.

Case B

• C.

Case C

• D.

Cases B and C

• 24.
Using graphs on page 5: This firm should stop production in:
• A.

Case A

• B.

Case B

• C.

Case A and B

• D.

None of the Above

• 25.
• 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

• 26.
New reports indicate that eacting spinach causes hairloss. This news shifts the demand curve for spinach leftward. In response, some farms exit the (perfectly competitive) spinach industry. During the period in which these exisiting farms are exiting , the price of spinach___ and the total profit of the remaining farm___.
• A.

Falls; falls

• B.

Falls; rises

• C.

Rises; falls

• D.

Rises; rises

• 27.
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 that 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

• 28.
Which of these could constitute an entry barrier?
• A.

Patents

• B.

Technological superiority

• C.

Economies of scale

• D.

All of the above

• 29.
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

• 30.
A monopoly:
• A.

Faces a perfectly elastic demand curve

• B.

Can ignore the demand curve and charge any price to sell any quantity 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

• 31.
For a monopolist, marginal revenue is:
• A.

Equal to price

• B.

Greater than price

• C.

Below price

• D.

Constant

• 32.
If a monopolitst 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

• 33.
If MR < MC, the monopolist should:
• A.

Decrease production

• B.

Increase production

• C.

Maintain the same level of production

• D.

Stop producing

• 34.
For the monopolist in the short 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

• 35.
Market Entry tends to  be restricted under
• A.

Monopoly

• B.

Monopolistic competition

• C.

Both A and B

• D.

Neither A nor B

• 36.
Compared to the perfectly competitive industry, a monopolist:
• A.

Produces a large quantity

• B.

Charges a higher price

• C.

Creates more consumer surplus

• D.

All of the above

• 37.
One of the major differences between a monopolist and a perfectly competitive firm is that the monopolist has a___ demans curve, while the perfectly competitive firm has a ___ demand curve.
• A.

Downward-sloping; perfectly elastic

• B.

Perfectly inelastic; perfectly elastic

• C.

Downward-sloping; perfectly inelastic

• D.

Perfectly elastic; downward-sloping

• 38.
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 loses

• 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

• 39.
Price discrimination is the practice of charging different prices to:
• A.

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

• B.

Different customers because the costs of selling are different

• C.

The same customers because of changes in cost

• D.

Different countries because of tariffs and transportation costs

• 40.
Price discrimination is not possible unless:
• A.

All buyers have the same preferences

• B.

The market is perfectly competitive

• C.

The product sold to each customer has a different cost

• D.

Resale can be prevented

• 41.
The fact that airlines charge business travelers more for the same airline seat than leisure travelers is an example od ____ discrimination where the carrier charges those with higher demand elasticity a _____fare.
• A.

Price; lower

• B.

Price; higher

• C.

Demand; higher

• D.

Demand; lower

• 42.
The downward-sloping demand curve for a monopolistically competitive 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

• 43.
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

• 44.
There are many restaurants in Cincinnati, each one offering food and services that differ from those of competitors. There is also free entry if sellers in 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 best categorized as:
• A.

An oligopoly

• B.

A pure monopoly

• C.

Monopolistically competitive

• D.

Perfectly competitive

• 45.
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 is equal to MC and economic profit is equal to zero

• D.

The given market price is equal to MC

• 46.
In an oligopoly:
• A.

There are a few sellers

• B.

There are some barriers to entry

• C.

Firms recognize their interdependence

• D.

All of the above are true

• 47.
The model that assumes that oligopolies act jointly as if they were monopolists is the:
• A.

Cartel method

• B.

Kinked demand curve model

• C.

Monopolistically competitive model

• D.

Competitive model

• 48.
One difficulty of a cartel is:
• A.

How to divide profits fairly

• B.

How to enforce cartel agreement

• C.

How to make sure that each member do not cheat

• D.

All of the above

• 49.
The "prisoners 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

• 50.
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 price increase

• C.

The firm with the kinked demand curve will always behave noncooperatively

• D.

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