1. Which market model has the least number of firms?
Correct : C. pure monopoly
2. If the demand curve facing a firm is perfectly elastic, then:
Correct : A. its marginal revenue will equal price.
3. A profit-maximizing firm in the short run will expand output:
Correct : D. as long as marginal revenue is greater than marginal cost.
4. Price is constant or "given" to the individual firm selling in a purely competitive market
because:
Correct : C. each seller supplies a negligible fraction of total supply.
5. In pure competition, the marginal revenue of a firm always equals:
Correct : A. product price.
6. A firm should always continue to operate at a loss in the short run if:
Correct : C. it can cover its variable costs and some of its fixed costs.
7. The purely competitive firm's supply curve:
Correct : C. is upward sloping when some inputs are fix
8. Which is true of normal profits
Correct : A. they are necessary to keep a firm in the industry in the long run.
9. The representative firm in a purely competitive industry:
Correct : D. will earn an economic profit of zero in the long run.
10. Allocative efficiency occurs when the:
Correct : C. marginal cost equals the marginal benefit to society.
11. When a purely competitive firm is in long-run equilibrium, price is equal to:
Correct : B. minimum average cost, and also to marginal cost.
12. Under conditions of pure monopoly:
Correct : D. entry is blocked.
13. A monopoly is most likely to emerge and be sustained when:
Correct : D. economies of scale are large relative to market demand.
14. Which is a barrier to entry?
Correct : A. patents
15. The pure monopolist who is nondiscriminating must decrease price on all units of a
product sold in order to sell additional units. This explains why:
Correct : C. marginal revenue is less than average revenue.
16. A nondiscriminating monopolist will find that marginal revenue:
Correct : D. is less than average revenue or price.
17. At the profit-maximizing level of output, a monopolist will always operate where:
Correct : A. price is greater than marginal cost.
18. In the short run, a monopolist's profits:
Correct : A. may be positive, negative, or zero.
19. Monopolists are said to be allocatively inefficient because:
Correct : D. at the profit-maximizing output the marginal benefit to society of additional output is
20. The economic incentive for price discrimination depends on:
Correct : D. differences among buyers\ demand elasticities.
21. Which would definitely not be an example of price discrimination?
Correct : D. an electric power company charges less for electricity used during off-peak hours when
22. A market is clearly NOT perfectly competitive if which of the following is true in
equilibrium
Correct : A. price exceeds marginal cost.
23. If a perfectly competitive industry is in long-run equilibrium, which of the following is
most likely to be true
Correct : C. firms are earning a return on investment that is equal to their opportunity costs.
24. Which of the following is NOT a characteristic of a competitive market
Correct : D. firms set the price (price makers)
25. Which of the following statements is true, regarding the revenues of a firm under perfect
competition
Correct : A. the marginal revenue and the average revenue are equal to the price
26. A firm under perfect competition will maximize profits when its
Correct : B. marginal revenue is equal to its marginal cost
27. The short-run supply curve of a firm in perfect competition is the segment of its:
Correct : C. marginal cost curve that lies above the minimum average variable cost
28. In perfect competition the shutdown point is defined by
Correct : A. where price = avc
29. The demand curve faced by a monopoly is:
Correct : D. downward sloping
30. A monopoly is a ________
Correct : C. price maker
31. A monopoly is a ________, therefore the demand curve it faces is ________
Correct : C. price setter, downward-sloping
32. As output increases in a monopoly, the firm's total revenue:
Correct : A. first increases and then decreases
33. Marginal revenue in a monopoly is:
Correct : C. always smaller than the price
34. Which of the following statements is true regarding a profit maximizing monopoly
Correct : D. all of the above
35. In India, which law deals with monopolies
Correct : C. mrtp
36. Which of the following is NOT a characteristic of monopolistic competition?
Correct : D. the goods are identical
37. The diagram depicting monopolistic competition in the short run:
Correct : A. is very similar to the short run monopoly diagram
38. If the Average Total Cost curve of a firm in monopolistic competition happens to be
above the demand curve, it means:
Correct : D. that firms in that industry will be incurring losses in the short run
39. If firms in monopolistic competition are enjoying positive economic profits, in the long
run
Correct : C. this will attract new firms into the industry, causing prices to drop and profits to disappear
40. Firms in monopolistic competition in long run equilibrium ________ than firms in perfect
competition.
Correct : A. produce less
41. In monopolistic competition in long run equilibrium, the price will be equal to:
Correct : D. average total cost
42. A major critique of advertising is that
Correct : B. it manipulates people\s tastes, leading people to make bad choices
43. A major argument in favour of advertising is that:
Correct : A. it provides information to consumers that allows them to make better choices
44. Branding can be good for society because:
Correct : C. it provides useful information to consumers about the quality of branded goods
45. Which of the following statements is FALSE?
Correct : D. monopolistic competition is an industry with only a few sellers
46. Monopsony is a market with
Correct : A. one buyer
47. A bilateral monopoly is a market structure consisting of
Correct : D. one buyer and one seller
48. A bilateral monopoly is a market structure consisting of both a ______and a _____
Correct : B. monopoly and monopsony
49. Monopsony is a market with ______ buyers
Correct : C. one
50. A ___________occurs in an industry where there is only one producer of a good and only
one supplier.
Correct : A. bilateral monopoly
51. Perfect completion means _____ rivalry
Correct : B. absence of
52. _______ is situation in which a single company or group owns all or nearly all of the
market for a given type of product or service.
Correct : D. monopoly
53. _______ is situation in which a particular market is controlled by a small group of firms.
Correct : B. oligopoly
54. ________ is a market in which there are only a few large buyers for a product or service.
Correct : C. oligopsony
55. ________ is one organization created from a formal agreement between a group of producers of a good or service, to regulate supply in an effort to regulate or manipulate
prices.
Correct : D. cartel
56. Which of the following statements is true
Correct : C. oligopolies sell more output than monopolies
57. The larger the number of firms in an oligopoly, the ________ the price and the ________
the output of the industry.
Correct : A. lower, greater
58. Factors of production are:
Correct : C. the inputs used to produce goods and services
59. The property of diminishing marginal product applies:
Correct : B. applies to workers and any other variable inputs in the short run
60. All of the following will cause the value of the marginal product of labor to increase,
EXCEPT:
Correct : C. an increase in the number of workers employed by the firm
61. If the supply curve for labor is backward bending, and if the wage of a worker increases,
she might choose to work:
Correct : A. fewer hours per week, since she can earn the same income working fewer hours
62. If many students choose to study to become accountants, when all of these students
eventually graduate, we can expect accountant's wages to ________, and the equilibrium number of accountants will ________
Correct : B. drop, increase
63. If there is a permanent increase in the demand for cars, car manufacturers will want to
hire ________ workers, which will cause wages in the industry to ________.
Correct : A. more, rise
64. As firms gradually acquire ever more technology, machinery and equipment, workers'
productivity gradually ________, and workers wages gradually ________.
Correct : D. rises, increase
65. The price paid for any factor of production tends to be equal to:
Correct : B. the value of the marginal product of that input
66. In a perfectly competitive market
Correct : D. none of the above. in a perfectly competitive market, firms sell homogenous products and
67. The three primary characteristics of a perfectly competitive market are
Correct : B. the firms\ products are homogenous, the firms are price takers and can freely enter and exit the market
68. Microeconomic theory assumes that all firms maximize profits because
Correct : D. both (b) and (c)
69. Profits are maximized when the firm
Correct : C. produces at the output level where marginal revenue equals marginal cost
70. The demand curve for a perfectly competitive firm
Correct : B. is a horizontal, perfectly elastic demand curve at the market price
71. Profit maximization for a perfectly competitive firm is at the quantity where
Correct : C. price equals marginal cost
72. A firm may decide to shut down in the short run
Correct : A. if profit maximization occurs at an output level where price is less than average variable cost
73. If a perfectly competitive firm finds that the profit maximizing output level occurs where
price is equal to marginal cost but is less than average variable cost
Correct : D. the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing
74. In the long run, a perfectly competitive firm earning zero economic profits
Correct : B. is earning a normal rate of return on its investments
75. In the long run, a constant cost industry
Correct : C. can expand in response to an increase in demand without input costs changing, and so the long run supply curve is horizontal
76. Market power is defined as
Correct : C. the ability of a seller or buyer to affect the market price of a good or service
77. Marginal revenue for a monopolist is equal to
Correct : D. all of the above are applicable
78. For a monopolist, marginal revenue is always less than price because
Correct : A. as output increases, the price of all units must fall to sell the additional unit
79. The profit maximizing output level for a monopolist is
Correct : C. the output level where marginal revenue equals marginal cost
80. The supply curve for the monopolist
Correct : A. does not exist
81. The Lerner Index is a measure of __________
Correct : B. monopoly power
82. For the monopolist, at the profit maximizing level of output
Correct : A. price is greater than marginal cost (p > mc)
83. A major source of monopoly power in a market is
Correct : A. a low market elasticity of demand
84. According to economic pricing theory, the basic objective of every pricing strategy
Correct : D. to capture consumer surplus and convert it to additional profit for the firm
85. The practice of charging different prices to different consumers for the same goods or services is known as _____
Correct : D. price discrimination
86. Which of the following statements about industries that are oligopolies is false
Correct : C. the fact that there is more than one firm in an oligopoly means that there are no barriers to entry
87. The price rigidity in an oligopolistic market is explained by _______
Correct : D. kinked demand curve
88. Product differentiation is seen in
Correct : C. monopolistic competition
89. Price discrimination is a strategy in
Correct : A. monopoly
90. Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firm
is employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm
Correct : C. the firm should expand production
91. That the perfectly competitive firm will pick a combination of inputs where the ratio of
each input’s marginal product to its price is equal follows from
Correct : C. cost minimization
92. If an additional worker costs you Rs. 15 per hour, and that person can add 25 units of output to the firm, you should hire that person as long as
Correct : D. the value of the marginal product is above rs.15 .........................
93. Entry is restricted under:
Correct : B. Monopoly
94. Demand curve is perfectly elastic under:
Correct : A. Perfect competition
95. Demand curve is elastic under:
Correct : C. Monopolistic competition
96. Demand curve is inelastic under:
Correct : B. Monopoly
97. Differentiated but close substitutes exist under:
Correct : C. Monopolistic competition
98. Selling cost is insignificant under:
Correct : B. Monopoly
99. Few firms exist under:
Correct : B. Oligopoly
100. In which market structure, price and output solution is indeterminate?