A price floor means that:

government is imposing a minimum legal price

In the short run a pure monopolist's profit:

may be positive, zero, or negative.

Which is NOT a characteristic of long run equilibrium under monopolistic competition?

price equals minimum average total cost

The monopolistically competitive seller's demand curve will become more elastic the:

larger the number of competitors.

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded.

Which of the following is correct?

purely competitive firm price taker; monopolist price maker

Nonprice competition refers to:

advertising and changes in characteristics of a product.

If products C and D are close substitutes, an increase in the price of C will:

shift the demand curve of D to the right.

The law of supply indicates that:

producers will offer more of a product at high prices

Monopolistic competition means:

many firms producing differentiated products.

The mutual interdependence that characterizes oligopoly arises because:

a small number of firms produce a large amount of output.

A market is in equilibrium:

if the amount producers is equal to the amount consumers.

S1 and D1 represent the original curves and S2 and D2 are the new curves. In this market:

demand has increased and equilibrium price has decreased.

Purely competitive firms and pure monopolists are similar in that:

both maximize profit where MR = MC.

The demand curve faced by a pure monopolist:

less elastic than faced by a single purely competitive firm.

In which of the following instances will total revenue decline?

price rises and demand is elastic

Economics may best be defined as the:

social science concerned with optimal choices.

If two goods are complements:

a decrease in price of one increases the demand of the other

Points A, B, C, D, and E show:

Combinations society can produce using resources efficiently

In the resource market:

households sell resources to businesses.

If a product is in surplus supply, its price:

is above the equilibrium level.

In the simple circular flow model:

businesses are sellers of final products.

Monopolistically competitive firms:

realize profits/losses in short run; breakeven in long run

A rightward shift in the demand curve for product C might be caused by:

a decrease in the price of a product complementary to C.

In this market the indicated shift in supply may have been caused by

development of more efficient machinery for producing.

The term oligopoly indicates:

firms producing a differentiated or a homogeneous product.

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Micro Economics Final Review

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Questions 44

Answers

1
A price floor means that:
sellers are artificially restricting supply to raise price.
inflation is severe in this particular market.
government is imposing a minimum legal price
government is imposing a maximum legal price
2
A price of $20 in this market will result in:
a surplus of 50 units.
a shortage of 100 units.
a shortage of 50 units.
a surplus of 100 units.
3
In the short run a pure monopolist's profit:
may be positive, zero, or negative.
are always positive.
will be maximized where price equals average total cost.
will be zero.
4
Which is NOT a characteristic of long run equilibrium under monopolistic competition?
price is equal to average total cost
price equals minimum average total cost
price exceeds marginal cost
marginal cost equals marginal revenue
5
Which of the following will not cause the demand for product K to change?
an increase in consumer incomes
a change in the price of K
a change in consumer tastes
a change in the price of closesubstitute product J
6
Which of the following is not an economic cost?
rents.
normal profits.
economic profits.
wages.
7
Game theory is best suited to analyze the pricing behavior of:
pure monopolists.
oligopolists.
pure competitors.
monopolistic competitors.
8
Which of the following is a unique feature of oligopoly?
mutual interdependence
product differentiation
advertising expenditures
nonprice competition
9
The monopolistically competitive seller's demand curve will become more elastic the:
smaller the number of competitors.
greater the degree of product differentiation.
larger the number of competitors.
more significant the barriers to entering the industry.
10
If we say that a price is too high to clear the market, we mean that:
quantity demanded exceeds quantity supplied.
the price of the good is likely to rise.
quantity supplied exceeds quantity demanded.
the equilibrium price is above the current price.
11
This economy will experience unemployment if it produces at point:
A
D
C
B
12
If a regulatory commission seeks to achieve efficient allocation of resources, P=?
P1
P4
P3
P2
13
Which of the following is correct?
purely competitive firm price maker; monopolist price taker
purely competitive firm price taker; monopolist price maker
purely competitive and monopolistic firms are "price makers"
purely competitive and monopolistic firms are "price takers"
14
Nonprice competition refers to:
price increases by a firm that are ignored by its rivals.
competition between products of different industries,
reductions in production costs
advertising and changes in characteristics of a product.
15
The two basic markets shown by the simple circular flow model are:
product and resource.
household and business.
capital goods and consumer goods.
free and controlled.
16
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curves of both products to the right.
tend to cause the price of D to fall.
shift demand curve C to left and demand curve D to right.
shift the demand curve of D to the right.
17
If the commission seeks to provide the monopolistwith a "fair return," it will set price at:
P1
P3
P4
P2
18
The law of supply indicates that:
producers will offer more of a product at high prices
consumers will purchase less of a good at high prices.
producers will offer more of a product at low prices
the product supply curve is downsloping.
19
Monopolistic competition means:
a few firms producing a standardized product
many firms producing differentiated products.
a market situation where competition is based on advertising
a large number of firms producing a standardized product
20
The price elasticity of demand is relatively elastic:
in the $3-$1 price range.
over the entire $6-$1 price range.
in the $6-$4 price range.
in the $6-$5 price range only.
21
The location of the product supply curve depends on:
the location of the demand curve.
production technology.
the tastes of buyers.
the number of buyers in the market.
22
The mutual interdependence that characterizes oligopoly arises because:
the products of various firms are homogeneous.
the products of various firms are differentiated.
demand curves of firms are kinked at the prevailing price.
a small number of firms produce a large amount of output.
23
A price of $60 in this market will result in:
equilibrium.
a surplus of 50 units.
a surplus of 100 units.
a shortage of 50 units.
24
The profit maximizing output for this firm will be:
100
210
160
180
25
A market is in equilibrium:
demand curve is downsloping and supply curve is upsloping.
if the amount producers is equal to the amount consumers.
at all prices shown by the intersection of supply and demand
provided there is no surplus of the product.
26
Which of the following is most likely to be a fixed cost?
property insurance premiums
shipping charges
wages for unskilled labor
expenditures for raw materials
27
S1 and D1 represent the original curves and S2 and D2 are the new curves. In this market:
demand has increased and equilibrium price has increased.
supply has decreased and equilibrium price has increased.
demand has increased and equilibrium price has decreased.
demand has decreased and equilibrium price has decreased.
28
Purely competitive firms and pure monopolists are similar in that:
both are price makers.
both maximize profit where MR = MC.
the demand curves of both are perfectly elastic.
significant entry barriers are common to both.
29
The demand curve faced by a pure monopolist:
same elasticity as faced by a single purely competitive firm
more elastic than faced by a single purely competitive firm.
more or less elastic than a single purely competitive firm.
less elastic than faced by a single purely competitive firm.
30
In which of the following instances will total revenue decline?
price rises and demand is elastic
price falls and demand is elastic
price rises and demand is inelastic
price rises and supply is elastic
31
Economics may best be defined as the:
social science concerned with optimal choices.
use of policy to refute facts and hypotheses.
empirical testing of value judgments
interaction between macro and micro considerations.
32
The price elasticity of demand is relatively inelastic:
in the $6 $4 price range.
in the $6 $5 price range only.
over the entire $6 $1 price range.
in the $3 $1 price range.
33
If two goods are complements:
they are consumed independently.
a decrease in price of one increases the demand of the other
they are necessarily inferior goods.
an increase in price of one increases demand of the other
34
Society produces 9 bicycles and 4 computers; it increases computer output to 6, the cost:
will be zero because unemployed resources are available.
will be 2 units of bicycles.
will be 4 units of bicycles.
of doing so cannot be determined from the information given.
35
Points A, B, C, D, and E show:
opportunity cost of computers increases, bicycle is constant
opportunity cost of bicycles increases, computer is constant
society's demand for computers is greater than for bicycles.
Combinations society can produce using resources efficiently
36
In the resource market:
households sell resources to businesses.
firms sell raw materials to households.
businesses sell services to households.
businesses borrow financial capital from households.
37
Long run equilibrium for a monopolistically competitive firm(economic profits=0) results from:
a perfectly elastic product demand curve.
product differentiation and development.
rising marginal costs.
relatively easy entry.
38
If a product is in surplus supply, its price:
is below the equilibrium level.
is in equilibrium.
will rise in the near future.
is above the equilibrium level.
39
In the simple circular flow model:
businesses are sellers of final products.
households are sellers of final products.
households are buyers of resources.
there are flows of goods and services, but not money flows.
40
If firms leave a monopolistically competitive industry, demand curves of remaining firms will:
become more elastic.
be unaffected.
shift to the left.
shift to the right.
41
Monopolistically competitive firms:
persistently realize economic profits in short and long run.
incur persistent losses in both the short run and long run.
realize normal profits in the short run; losses in long run.
realize profits/losses in short run; breakeven in long run
42
A rightward shift in the demand curve for product C might be caused by:
a decrease in the price of a product complementary to C.
an increase in income if C is an inferior good.
a decrease in income if C is a normal good.
a decrease in the price of a close substitute for C.
43
In this market the indicated shift in supply may have been caused by
this product becoming less fashionable.
development of more efficient machinery for producing.
increase in the wages paid to workers producing this good.
an increase in consumer incomes.
44
The term oligopoly indicates:
an industry whose fourfirm concentration ratio is low.
a one firm industry.
many producers of a differentiated product.
firms producing a differentiated or a homogeneous product.

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