1) You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q

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1) You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q. Your costs are C = 10 + 3Q. The profit-maximizing output for your firm is:

a) 4.

b) 6.

C) 3.

d) 5.

 

2) When firm 1 enjoys a first-mover advantage in a Stackelberg duopoly, it will produce:

 

 

a) more output and charge the same price as firm 2.

b) output and charge a lower price than firm 2.

c) less output and charge the same price as firm 2.

d) less output and charge a higher price than firm 2.

 

3)

n the long run, perfectly competitive firms produce a level of output such that:

 

Multiple Choice

a)P = MC and P = minimum of AC.

b)P = minimum of AC.

c)P = MC.

d)None of the answers is correct

 

4)

If firms are in Cournot equilibrium:

 

 

a) each firm could increase profits by unilaterally decreasing output.

b)each firm could increase profits by unilaterally increasing output.

c)firms could increase profits by jointly reducing output.

d)firms could increase profits by jointly increasing output.

 

5)

In a Sweezy Oligopoly, a decrease in a firm's marginal cost generally leads to:

 

 

• reduced output and a higher price.
• increased output and a lower price.
• None of the answers is correct.
• higher output and a higher price.

 

6)

Which of the following is true?

 

 

• A monopolist always earns an economic profit.
• The more inelastic the demand, the closer marginal revenue is to price.
• A monopolist produces on the inelastic portion of its demand.
• In the short run, a monopoly will shut down if P < AVC.

 

7)

The decline in marginal productivity experienced when input usage increases, holding all other inputs constant, is known as:

 

multiple choice 1

• The law of diminishing marginal returns.
• The law of diminishing marginal rate of technical substitution.
• The law of diminishing marginal labor.
• The law of diminishing marginal utility.

8)

A property of a production function stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output, is known as:

 

• The law of diminshing marginal rate of technical substitution.
• The law of diminishing marginal returns.
• The law of diminishing marginal utility.
• The law of diminishing marginal labor.

 

9)

Firm A has a higher marginal cost than firm B. They compete in a homogeneous product Cournot duopoly. Which of the following results will NOT occur?

 

Multiple Choice

• Q_A < Q_B
• Price_A < Price_B
• Revenue of firm A < Revenue of firm B
• Profit_A < Profit_B

 

10)

Which of the following measures market structure?

 

Multiple Choice

• Herfindahl-Hirschman index
• All of the choices may be used to make inferences about market structure.
• Lerner index
• Four-firm concentration ratio

11)

With a linear production function there is a:

 

Multiple Choice

• variable-proportion relationship between all inputs.
• fixed-proportion relationship between all inputs.
• perfect substitutable relationship between all inputs.
• perfect complementary relationship between all inputs.

12)

Which of the following market structures would you expect to yield the greatest product variety?

 

Multiple Choice

• Monopoly
• Monopolistic competition
• Perfect competition
• Bertrand oligopoly

13)

When economies of scale are large, firms can reduce their average total cost by:

 

Multiple Choice

• hiring professional managers.
• selling off their subsidiaries.
• merging into even larger firms.
• eliminating the bureaucratic costs.

14)

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MP_L = 20, and MP_K = 40 the firm:

 

Multiple Choice

• is profit maximizing but not cost minimizing.
• is cost minimizing.
• should use less L and more K to cost minimize.
• should use more L and less K to cost minimize.

15)

Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?

 

Multiple Choice

• 9
• 2
• 4
• 8

16)

For the cost function C(Q) = 100 + 2Q + 3Q², the marginal cost of producing 2 units of output is:

 

Multiple Choice

• 12.
• 14.
• 3.
• 2.

17)

The industry elasticity of demand for gadgets is −2, while the elasticity of demand for an individual gadget manufacturer's product is −2. Based on the Rothschild approach to measuring market power, we conclude that:

 

Multiple Choice

• the Herfindahl index for this industry is 2.
• there is significant monopoly power in this industry.
• the Herfindahl index for this industry is −2.
• there is little monopoly power in this industry.

18)

If a firm's production function is Leontief and the wage rate goes up, the:

 

Multiple Choice

• firm must use more capital in order to minimize the cost of producing a given level of output.
• firm must use more labor in order to minimize the cost of producing a given level of output.
• firm must use less labor in order to minimize the cost of producing a given level of output.
• cost minimizing combination of capital and labor does not change.

19)

Which of the following is an example of monopoly?

Multiple Choice

• Local utility industry in a small town
• Newspaper industry in New York City
• Shoe industry in the United States
• Bread industry in New York City