1.
The demand curve facing the firm in
_________ is the same as the whole market demand curve.
perfect competition
monopolistic competition
oligopoly
Monopoly
2.
In the short-run for a perfectly
competitive market, a manufacturer will stop production when:
the total revenue is less than
total costs
the contribution cannot cover any
fixed costs
the price is greater than AVC
operating at a negative economic
profit
3.
Economies of scale exist when
long-run average cost decreases as
output increases.
total cost decreases as output
increases.
marginal cost decreases as output
increases.
fixed cost decreases as output
increases.
4.
Individual cartel producers may find
it advantageous to cheat on the agreements by increasing production,
if the other producers obey the
agreements.
if every member cheats.
when the punishment on cheating is
severe.
when the market demand is
inelastic.
5.
In the perfectly competitive market,
a firmâs marginal revenue (MR) is equal to:
its total cost
its marginal profit
the market price
its total revenue
6.
The profit-maximizing monopolist
facing a negative-sloping demand curve will always produce
at an output greater than the
output where average total costs are minimized.
at an output short of that output
where average total costs are minimized.
at an output equal to industry
output under perfect competition.
at an output short of that output
where the profits are maximized.
7.
The Lerner index, (P-MC)/P, might be
an inappropriate measure for market power among firms in IT industry because
there are too many firms in the
industry.
most firms charge a high price for
their products.
all firmsâ marginal costs are very
low.
no firm has market power.
8.
In the
long-run, a firm in a monopolistically competitive industry will
earn a positive economic profit
tend to just cover its total
cost, maintaining a normal profit
charge a price equal to its
marginal cost
become a monopoly
9.
An
average variable cost function is estimated as
AVC
= 96? 2Q + 0.05Q2
When Q=100, the average variable cost is _________.
rising
falling
unknown.
greater than $400
10.
An average variable cost function is
estimated as
AVC
= 96? 2Q + 0.05Q2
Which of the following cost functions is associated with this estimate?
MC = ? 2Q
+ 0.1Q2
TVC = 96Q ? 2Q2 + 0.1Q3
TVC = 96Q ? 4Q2 + 0.15Q3
MC = 96? 4Q
+ 0.15Q2
11.
Refer to
the following table showing the total cost schedule for a perfectly
competitive firm:
Q
TC
($)
0
20
1
45
2
65
3
100
4
145
5
195
If market price is $40, how many
units of output will the firm produce for profit-maximization?
2 units of output
3 units of output
4 units of output.
5 units of output.
12.
Refer to the following table showing
the total cost schedule for a perfectly competitive
firm:
Q
TC
($)
0
20
1
45
2
65
3
100
4
145
5
195
If market price is $40, what is the maximum profit the firm can earn?
$15
$20
$25
$30
13.
Refer to the following table showing
the total cost schedule for a perfectly competitive
firm:
Q
TC
($)
0
20
1
45
2
65
3
100
4
145
5
195
If market price is $20, how many units of output will the firm produce?
0, the firm shuts down.
1
2
3
14.
Refer to
the following table showing the total cost schedule for a perfectly
competitive firm:
Q
TC
($)
0
20
1
45
2
65
3
100
4
145
5
195
If the firm shouts down, its short-run loss will be
$65.
$45.
$20.
unavailable because of
insufficient information.
15.
Which of the following is NOT a
market characteristic for monopoly?
One firm is the only supplier of a
product.
Entry into the market is blocked.
The firm can influence market
price though output decision-making.
The firmâs product has few close
substitutes.
16.
Which of
the flowing is the most complicated market structure because no single model
can explain the firmsâ behavior thoroughly?
Oligopoly
Monopolistic competition
Perfect competition
Monopoly
17.
Which of the following is the best
definition of fixed costs?
The costs associated with capital
input.
The long-run total costs paid by
an operating firm.
The short-run costs paid for labor
input.
The short-run total costs paid by
a shutting-down firm.
18.
The following table shows the demand
schedule for round-trip flights between Houston and Tokyo for business
travelers:
Demand
Schedule of Business Travelers
Price
QD
$2,000
500
$1,500
1,000
$1,000
1,500
$500
2,000
Suppose an airlineâ marginal cost per seat for the round-trip fight is $500.
For profit-maximization, the airline should charge $_____ per round-trip (Hint:
Apply the âhalf-way ruleâ of MR in graph).
500
1,000
1,500
2,000
19.
Which of the following
profit-maximizing equilibrium condition is correct for a monopoly with positive
profit?
P = ATC = MR = MC
P > ATC > MR > MC
P > ATC > MR = MC
P = ATC > MR > MC
20.
The Prisonerâs Dilemma 2X2 game can
be used to explain why oligopolists
tend easily to achieve collusion
in games.
choose the best strategy to
benefit the whole industry.
are suspicious that other players
may double cross them.
can rely on cooperative behavior
by all parties.
21.
A firm is using 20 units of capital
and 100 units of labor to produce 1,000 units of output. Capital costs $150 per
unit and labor $20 per unit. The last unit of capital added 50 units of output,
while the last unit of labor added 10 units of output. The firm
is using the cost?minimizing
combination of capital and labor.
should use more of both inputs in
equal proportions.
should use less of labor and more
of capital for cost minimization.
could produce the same level of
output at a lower cost by using more labor and less capital.
22.
In the short-run cost analysis, if a
firmâs marginal cost (MC) is unavailable, the best alternative of MC is its
average total cost (ATC)
average fixed cost (AFC)
total variable cost (TVC)
average variable cost (AVC)
23.
When we use the Lerner index to
define the market power for two firms which are all price searchers, one firm
charging at a price in which the demand is more elastic compared with another
firmâs implies that the firm has
no market power.
less market power .
greater market power.
the same market power as the
another.
24.
A monopolyâs _______ changes with
the shift of demand curve, when all the other factors remain.
total cost (TC) curve
marginal cost (MC) curve
average cost (AC) curve
marginal revenue (MR) curve
25.
Use the following figure to answer
the next 2 questions (25~26).
The figure shows the demand and cost curves facing a monopoly.
.0/msohtmlclip1/01/clip_image001.png”>
The maximum profit for the monopoly is
$80.
$100.
$120.
$140.
26.
The figure shows the demand and cost
curves facing a monopoly.
The total fixed cost for the monopoly should be
$40
$60
$80
unavailable from the figure
27.
A production function using K
(capital) and L (labor) inputs, Q=2K+3L, exhibits
increasing return to scale.
decreasing return to scale.
constant return to scale.
economies of scale.
28.
Suppose that Intel and AMD are the only sellers
of computer CPU in the United States. They are deciding how much to charge for
similar products. The two choices are âLowâ and âHighâ. The payoff (profit as
million) 2X2 matrix is as follows:
.0/msohtmlclip1/01/clip_image002.png”>
If Intel is both the price leader
and the first mover, then the Nash equilibrium in the game will be
(Intel-High, AMD-High)
(Intel-High, AMD-Low)
(Intel-Low, AMD-High)
(Intel-Low, AMD-Low)
29.
A firm will shutdown in the
short-run if
it makes a negative profit.
the market price is lower than its
average total cost (ATC).
the market price is lower than its
average variable cost (AVC).
the fixed cost can be only covered
partially.
30.
A firm can choose the optimal usage
of input to maximize the profit by employing the amount of input where
the input price equals the
marginal revenue product (MRP).
the input price equals the
marginal revenue (MR).
the input price equals the
marginal cost (MC).
the input price equals the average
total cost (ATC).
31.
When a manager of manufacturing
factory said, âI will achieve the maximum amount of output given the current
combination of inputs,â then the manager is trying to achieve
economic efficiency.
technical efficiency.
cost minimization.
production minimization.
32.
United States Postal Service (USPS)
is a monopoly in the _____ market because it _______.
parcel delivery; exhibits
economies of scale in production
ordinary mail delivery; charges a
lower price than competitors
ordinary mail delivery; is granted
by the public franchise to open every houseâs mailbox
parcel delivery; charges a lower
price than competitors
33.
When participants in a game choose
to take actions that represent Nash equilibrium,
no single participant has an
incentive to change its action.
each participant has chosen the
best action possible, given what the others have chosen.
no other set of actions could make
all participants better off.
both a and b
34.
Which of the following is INCORRECT
in the MS Excel operation for constructing a short-run production function with
labor input (L)?
The regression model should be a
cubic function such as Q = AL3+BL2.
The independent variables should
be L3, L2 and L.
We need to choose âConstant as
zeroâ in regression operation.
None of the above
35.
A cubic specification for a
short-run total cost (TC) function is appropriate when the scatter diagram
indicates
a U-shaped total cost (TC) curve.
a S-shaped average variable cost
(AVC) curve.
a L-shaped marginal cost (MC)
curve.
a U-shaped marginal cost (MC)
curve.
36.
The U-shaped marginal cost and
average cost curves come from
the law of diminishing marginal
utility.
the law of diminishing return
(marginal product).
the law of demand
the fixed cost.
37.
Suppose that Nike and Adidas are the
only sellers of athletic footwear in the United States. They are deciding how
much to charge for similar shoes. The two choices are âLowâ and âHighâ. The
payoff (profit as million) 2X2 matrix is as follows:
.0/msohtmlclip1/01/clip_image004.jpg”>
Does Nike have the dominant strategy in the game? _____. Does Adidas have the
dominant strategy in the game? _____.
Yes; Yes
No; Yes
No; No
Yes; No
38.
Which of the following about âprice
leadershipâ in oligopoly is INCORRECT?
Price leader is generally the firm
with the largest market share or the lowest average costs.
Price followers set up the same
price as the leader does.
It is one kind of cooperative
behavior in oligopoly.
It requires explicit agreements
among firms.
39.
When we construct the cubic total
variable cost, TVC = aQ + bQ2
+ cQ3, in order to confirm the theoretical properties, the
parameters must satisfy
a > 0, b > 0, and c < 0. a < 0, b > 0, and c < 0. a > 0, b < 0, and c > 0.
a < 0, b < 0, and c > 0.
40.
Economies of âscopeâ means that
the average cost declines when
output increases.
the joint cost of producing two
goods is less than the sum of the separate costs of producing the two goods.
economies of scale also exhibits.
two goods can be produced more
efficiently if their production processes are separate.
41.
What is the most special market
characteristic of oligopoly different from the other market structures?
firms have market power
product differentiation
barriers to entry
interdependence of decision making
42.
Which of the following is most
likely to be qualified as a perfectly competitive market?
Airline industry
Stock market
Gas station
Power utility industry
43.
Under the Lerner Index of market
power definition, an existing perfectly competitive
firm
has zero market power because its
marginal cost equal the market price.
has a positive market power
because it makes a positive profit.
has the same market power as a
monopoly.
is not qualified to apply the
Lerner index.
44.
Assume that a monopoly faces the
inverse market demand as P = 100 â 2Q and the monopolyâs marginal cost function
is MC = 40âQ. The monopolyâs optimal output should be
20
30
40
60
45.
If a firm can influence the market
price by changing its quantity of output, then the firm
must be a monopoly
has market power
will set the price equal to its
average total costs
earns a normal profit in both short-run
and long-run
46.
Suppose that Ford and GM are the only auto
makers in the United States. They are deciding how much to charge for similar
models. The two choices are âLowâ and âHighâ. The payoff (profit as million)
2X2 matrix is as follows:
.0/msohtmlclip1/01/clip_image005.png”>
How many Nash equilibrium in this
game?
0
1
2
4
47.
Refer to the following table with
demand and cost schedule for a
monopoly:
Price
($)
Q
TC
($)
20
4
75
19
5
88
18
6
103
17
7
120
16
8
139
15
9
159
For profit maximization, what price
should the monopoly charge?
$19
$18
$17
$16
48.
Refer to the following table with
demand and cost schedule for a
monopoly:
Price
($)
Q
TC
($)
20
4
75
19
5
88
18
6
103
17
7
120
16
8
139
15
9
159
The marginal revenue (MR) for the 9th
unit of output (Q) is
$10
$9
$8
$7
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