# The Ultimate Microeconomics Knowledge Test!

50 Questions | Total Attempts: 160  Settings  Related Topics
• 1.
The long run is a perdiod during which:
• 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.
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

• 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.
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 doubled 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

• 6.
Daisy incurs \$7200 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 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 \$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.
Marginal Costs:
• 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.
If a company  produces only shirts, each shirt would cost \$10, if it produces only pants, each pant would cost \$20, if it produces both shirts and pants, each shirt would cost \$9 and each pant \$19. Economists would say that:
• 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.
For  a profit-maximizing firm , an additional unit of output should be produced only if:
• 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.
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