Question 1 (2 points)

Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect

Question 1 options:

1)	lower apple prices due to the exit of some existing firms

2)	lower apple prices due to the entry of new firms

3)	no change in the price of apples due to entry/exit of firms

4)	higher apple prices due to the exit of some existing firms

Question 2 (2 points)

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $6, Mikail's output is 3,000 cards a month, and his monthly average total cost is $7, what are his monthly profits?

Question 2 options:

1)

$21,000

2)

$18,000

3)

$3,000

4)	-$3,000 (loss)

Question 3 (Mandatory) (2 points)

Perfect competition is characterized by:

Question 3 options:

	fierce quality competition
	widely recognized brands
	rivalry in advertising
	the inability of any one firm to influence price

Question 4 (Mandatory) (2 points)

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

Question 4 options:

	greater than the average fixed cost, AFC
	less than marginal cost, MC
	greater than average variable cost (AVC), but less than average total cost (ATC)
	greater than average total cost, ATC

Question 5 (Mandatory) (2 points)

The short-run supply curve for a perfectly competitive firm is:

Question 5 options:

	the marginal cost curve above the shut-down price
	the average total cost curve above the break-even price
	the marginal cost curve above the break-even price
	the average variable cost curve above the shut-down price

Question 6 (Mandatory) (2 points)

De Beers became a monopoly by:

Question 6 options:

	establishing control over diamond mines
	technological superiority
	economies of scale
	ownership of a patent

Question 7 (Mandatory) (4 points)

Because tourist demand for airline flights is relatively ________, small ________ in ticket price will result in relatively ________ in additional tourists

Question 7 options:

	elastic; reductions; large increases
	inelastic; reductions; small increases
	elastic; increases; small increases
	inelastic; increases; small decreases

Question 8 (Mandatory) (2 points)

The demand curve facing a monopolist is:

Question 8 options:

	downward sloping, the same as that facing a perfectly competitive firm
	upward sloping, the same as that facing a perfectly competitive firm
	horizontal, the same as that facing a perfectly competitive firm
	downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm

Question 9 (Mandatory) (2 points)

If a monopolist is producing a quantity that generates MC < MR, then profit:

Question 9 options:

	can be increased by increasing production
	is maximized only if MC = P
	can be increased by decreasing production
	is maximized

Question 10 (Mandatory) (2 points)

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a ________ for bus service than other passengers

Question 10 options:

	more elastic demand
	lower demand
	less elastic demand
	greater demand

Question 11 (Mandatory) (2 points)

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

Question 11 options:

	output prioritizing
	monopolizing
	privatizing
	price discrimination

Question 12 (Mandatory) (2 points)

Oligopoly is a market structure that is characterized by a:

Question 12 options:

	large number of relatively small independent firms producing differentiated products
	large number of relatively small independent firms producing identical products
	small number of independent firms producing identical or differentiated products
	small number of interdependent firms producing identical or differentiated products

Question 13 (Mandatory) (2 points)

The largest HHI possible is ________ and the industry is a(n) ________

Question 13 options:

	100,000; oligopoly
	100,000; monopoly
	10,000; monopoly
	10; monopoly

Question 14 (Mandatory) (2 points)

Which of the following scenarios best describes an oligopolistic industry?

Question 14 options:

	Thousands of soybean farmers sell their output in a global commodities market
	A single cable company serves customers in a small town
	Coca-Cola and Pepsi sell most of the soft drinks consumed around the world
	A college has one bookstore selling textbooks to students

Question 15 (Mandatory) (2 points)

Microsoft sets prices for its new line of computers, and Dell and HP follow. This practice is known as________.

Question 15 options:

	price extortion
	price leadership
	kinked demand behavior
	antitrust pricing

Question 16 (Mandatory) (2 points)

The market for dentists in most communities can be considered a ________ because there are a large number of similar but not identical substitutes in the market

Question 16 options:

	an oligopoly
	perfect competition
	a monopoly
	monopolistic competition

Question 17 (Mandatory) (2 points)

In a monopolistically competitive industry:

Question 17 options:

	a firm maximizes profits when MR = MC yet P > MC
	to maximize profits, firms set MR = MC, and people would be better off if output were reduced
	people would be better off if output were reduced
	output could be increased without an increase in total cost

Question 18 (Mandatory) (2 points)

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by:

Question 18 options:

	quality
	location
	style
	type

Question 19 (Mandatory) (2 points)

Toby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Toby will produce where:

Question 19 options:

	price equals marginal cost, P = MC
	price equals marginal revenue, P = MR
	marginal revenue equals marginal cost, MR= MC
	price equals minimum average total cost, P = Min ATC

Question 20 (Mandatory) (2 points)

In the United States in the early twenty-first century, 70% of total income, by far the largest share, took the form of:

Question 20 options:

	interest income
	rental income
	corporate profits
	compensation of employees

Question 21 (Mandatory) (2 points)

Over the past several years, the demand for phone operators has fallen dramatically. Which of the following would be a reason for this development?

Question 21 options:

	a decrease in the technology associated with phone equipment
	an increase in the supply of phone operators
	an increase in the number of automated answering services
	higher prices for long-distance service

Question 22 (Mandatory) (2 points)

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling

Question 22 options:

	there is a decrease in quantity demanded
	there is an increase in quantity demanded
	it is inefficient
	we say that the transaction takes place on a black market

Question 23 (Mandatory) (2 points)

When the minimum wage increases

Question 23 options:

	fewer workers are willing to work off the books
	unemployment among skilled workers decreases
	employment of unskilled workers increases
	unemployment among unskilled workers increases

Question 24 (Mandatory) (2 points)

Which of the following is more likely to increase your own labor productivity?

Question 24 options:

	a law that prohibits firms to layoff
	the creation of a labor union with the consent of the firm
	an increase in the minimum wage paid by the firm
	more training and education investment paid by the firm

Question 25 (2 points)

Two goods, X and Y are substitutes if

Question 25 options:

	price of y goes up when demand of X goes down
	demand of Y goes down if price of x goes down
	price of Y goes down when demand of X goes up
	demand of Y goes up when price of X goes down

Question 26 (2 points)

The price-quantity relationship between two complementary goods is

Question 26 options:

	positive
	neutral
	unknown
	negative

Question 27 (2 points)

Assume the elasticity of demand of good X is 1, and it is put on sale for 40% less. This will lead to

Question 27 options:

	increase in total revenue
	decrease in total revenue
	no change in total revenue
	none of the above

Question 28 (2 points)

If E_x,y = -2

Question 28 options:

	X and Y are relatively inelastic substitute goods
	X and Y are relatively elastic complementary goods
	X and Y are relatively inelastic complementary goods
	X and Y are relatively elastic substitute goods

Question 29 (2 points)

Income elasticity of good X is -.63

Question 29 options:

	X is an elastic good
	X is an inelastic good
	X is an inferior good
	X is a normal good

Question 30 (6 points)

The equilibrium price and quantity of good X are $10 and 100 respectively. Government reduced the price of X to $8. As a result, quantity demanded increased to 150 but quantity supplied went down to 80_. So, the market outcome is

Question 30 options:

	surplus of 50
	shortage of 50
	shortage of 1600
	shortage of 560

Question 31 (2 points)

Minimum wage is a

Question 31 options:

	positive concept
	normative concept
	market concept
	equilibrium concept

Question 32 (3 points)

Production function is

Question 32 options:

	a technological relationship between inputs and output
	expressed as a dependent-independent relationship between output and one or more inputs
	may be a short run or a long run concept
	all of the above

Question 33 (5 points)

Assume the following production function: Q = f(L,K), where, Q= output, L = units of labor, K = units of capital. Now assume the producer found the following result in the short run

MP_L > MP_K

In order to maximize profit,the produce should

Question 33 options:

	continue production with the same quantity of labor and capital
	should substitute labor for capital until MPL = MPK
	should substitute capital for labor until MPL = MPK
	should continue production until MPK > MPL

Question 34 (2 points)

In which of the four output markets P = MC?

Question 34 options:

	perfect competition
	monopolistic competition
	oligopoly
	monoply

Question 35 (2 points)

In a perfectly competitive market, pure profit does not exist in the long run because of the assumption of

Question 35 options:

	large number of buyers and sellers
	homogeneous product
	single price
	free entry and exit of firms

Question 36 (2 points)

In which of the four markets, the producer may charge demand price?

Question 36 options:

	perfect competition
	monopolistic competition
	oligopoly
	monopoly

Question 37 (2 points)

Which economic condition must be satisfied for price discrimination to be possible?

Question 37 options:

	Segmenting the market
	no resale of the product
	different elasticity of demand of the product
	all of the above

Question 38 (2 points)

In an oligopoly market, price is not determined at the point of

MR =MC because

Question 38 options:

	oligopolies are big business and they have significant market power
	oligopolies usually collude explicitly to fix price
	there is no unique MR curve
	all of the above

Question 39 (2 points)

The basis for international trade is

Question 39 options:

	mutual interdependence
	agreement between two or more countries
	comparative advantage
	absolute advantage

Question 40 (2 points)

The most common types of trade protection are quota, tariff and non-tariff barriers. If protection is necessary, economists favor tariff as a measure of protection because

Question 40 options:

	it does not distort consumer choice
	it generates revenue
	it benefits producers of domestic goods
	all of the above

Question 41 (2 points)

Which Federal Act outlawed monopolistic business practices?

Question 41 options:

	Federal Trade Commission Act
	Clayton Antitrust Act
	Sherman Antitrust Act
	Robinson-Patman Act

Question 42 (2 points)

Balance of trade is

Question 42 options:

	total exports of capital and merchandise goods minus total imports of capital and merchandise goods
	balance of mercahndise goods only
	balance of tariff between two countries
	balance of agreed upon quota of certain goods of two countries

Question 43 (2 points)

Which account is associated with balance of trade?

Question 43 options:

	balance of payment account
	current account
	capital account
	international transaction account

Question 44 (2 points)

The important reason why United States will continue to have a negative balance of payment is

Question 44 options:

	ability of U.S. consumers to buy more foreign goods than the ability of foreign consumers to buy U.S. goods
	Historically, U.S. government has not resorted to restricting imports
	Historically, U.S. has not devalued the dollar to boost exports
	All of the above

Question 45 (2 points)

Saved

Compared to a competitive firm, a monopolist

Question 45 options:

	produces less
	charges higher price
	may not follow MR = MC rule in setting price
	all of the above