1.If a profit-maximizing firm finds that, at its current level of production, MR < MC, itwill:

Select one:

a. decrease output.

b.shut down.

c. increase output

d.operate at a loss.

2. Domestic producers gain and domestic consumers lose as a result of the imposition of tariffs or quotas.

Select one:

True

False

3. What does excess capacity mean?

Select one:

a. The situation where a firm is producing an output above equilibrium.

b. The situation where a firm is producing an output below equilibrium.

c. The situation where a firm's output is above economic capacity.

d. The situation where a firm's output is below economic capacity.

4. What is the difference between a tariff and a quota?

Select one:

a. Both a tariff and a quota will affect the price, but a tariff has no effect on the quantity, whereas a quota will lead to a reduction.

b. Both a tariff and a quota will affect the price, but a tariff has no effect on the quantity, whereas a quota will lead to an increase.

c. A tariff affects all foreign producers equally, whereas a quota does not.

d. A quota affects all foreign producers equally, whereas a tariff does not

e. A tariff causes an increase in the price, whereas a quota does not affect the price.

5. If the price of a product rises, which of the following statements regarding the perfectly competitive firm is correct?

Select one:

a. Its total revenue curve will be flatter.

b. Its average revenue curve will be steeper.

c. Its average revenue curve will be flatter.

d. Its total revenue curve will be steeper.

6. If external benefits are not integrated into the market, insufficient quantities of a product will be produced.

Select one:

True

False

7. Suppose that the MRPL for a competitive firm is currently $50 and the hourly cost of labour is $40. Which of the following is the correct action for the firm?

Select one:

a. The firm should raise the wage rate of its labour.

b. The firm should hire more labour.

c. The firm should substitute labour for capital

d. Since the firm must be profitable, it need not doanything

8. If the prices of a country's exports decrease and the prices of its imports increase, then the terms of trade will move in its favor.

Select one:

True

False

9. What effect does a lump-sum profit tax have on a monopolist?

Select one:

a.

It causes the output to increase but has no effect on the price.

b. It has no effect on either the price or the output.

c. It causes the price to increase and the output to decrease.

d. It causes the price to increase but has no effect on the output.

e. It causes the output to decrease but has no effect on the price.

10. What does MES refer to?

Select one:

a. The biggest-size plant that is capable of achieving diseconomies of scale

b.The smallest-size plant capable of achieving the lowest long-run average cost of production

c. The marginal efficient size of a firm

d. The biggest-size plant that is capable of achieving economies of scale.

e. The smallest-size plant that is capable of achieving diseconomies of scale