Need help with 30 Multiple choice questions about Micro Econ

Dec 9th, 2015
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1) 
The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because 
1) 
_______

A) 
barriers to entry are very low. 
B) 
products are differentiated.

C) 
there are many firms in the market. 
D) 
entry into the market is blocked.

2) 
Which of the following characteristics is not common to monopolistic competition and perfect competition? 
2) 
_______

A) 
Firms act to maximize profit. 

B) 
The market demand curve is downward -sloping.

C) 
Firms take market prices as given.

D) 
Entry barriers into the industry are low.

3) 
A major difference between monopolistic competition and perfect competition is 
3) 
_______

A) 
the degree by which the market demand curves slope downwards.

B) 
that products are not standardized in monopolistic competition unlike in perfect competition.

C) 
the barriers to entry in the two markets.

D) 
the number of sellers in the markets.

4) 
Which of the following is true for a firm with a downward-sloping demand curve for its product? 
4) 
_______

A) 
Price equals average revenue but is greater than marginal revenue.

B) 
Price equals average revenue but is less than marginal revenue. 

C) 
Price, average revenue, and marginal revenue are all different.

D) 
Price, average revenue, and marginal revenue are all equal.

5) 
For a monopolistically competitive firm, marginal revenue  
5) 
_______

A) 
equals the price. 
B) 
and price are unrelated. 

C) 
is greater than the price. 
D) 
is less than the price.

Table 13-1

Quantity

Price

(dollars)

Total Revenue

(dollars)

1

$7.50

$7.50

2

  7.00

14.00

3

  6.50

19.50

4

  6.00

24.00

5

  5.50

27.50

6

  5.00

30.00

6) 
Refer to Table 13-1. What is the marginal revenue of the 3rd unit? 
6) 
_______

A) 
$6.50 
B) 
$5.50 
C) 
$1.83 
D) 
$0.50

7) 
Refer to Table 13-1. The Table shows 
7) 
_______

A) 
an inelastic segment of the demand curve.

B) 
an elastic segment of the demand curve.

C) 
a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment.

D) 
a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment. 

8) 
Refer to Table 13-1. What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect? 
8) 
_______

A) 
output effect = $6.00; price effect =-$1.50

B) 
output effect = $6.50; price effect = $2.00

C) 
output effect = $24.00; price effect = $19.50

D) 
output effect =-$0.50; price effect = $5.00

Figure 13-1

9) 
Refer to Figure 13-1. The marginal revenue from the increase in price from P0 to P1 equals  
9) 
_______

A) 
the area (A - D). 
B) 
the area (B + D - A).

C) 
the area A. 
D) 
the area (C - B).

Figure 13-2

10) 
Refer to Figure 13-2. The marginal revenue from selling the additional unit Qbinstead of Qa equals  
10) 
______

A) 
the area (H - E). 
B) 
the area G.

C) 
the area (E + F) - (G + H). 
D) 
the area (G + H).

11) 
Which of the following characterizes the market that Starbucks competes in? 
11) 
______

A) 
All coffeehouses face horizontal demand curves. 

B) 
Coffeehouses sell identical products. 

C) 
There are a small number of firms. 

D) 
Barriers to entry are low. 

12) 
The marginal revenue of a monopolistically competitive firm 
12) 
______

A) 
cannot be negative because the price the firm charges will always be greater than zero.

B) 
will equal average revenue. 

C) 
can be negative if the firm charges a high price. 

D) 
can be negative if the firm charges a low price. 

13) 
The demand curve of a monopolistically competitive firm  
13) 
______

A) 
is horizontal because the firm must cut its price to sell more. 

B) 
is downward-sloping because it must cut its price to sell more. 

C) 
is perfectly elastic. 

D) 
is downward-sloping because it sells an identical product. 

14) 
What is the profit-maximizing rule for a monopolistically competitive firm? 
14) 
______

A) 
to produce a quantity that maximizes market share 

B) 
to produce a quantity such that price equals marginal cost

C) 
to produce a quantity such that marginal revenue equals marginal cost

D) 
to produce a quantity that maximizes total revenue

Table 13-2

Quantity

(cases)

Price

(dollars)

Total Revenue

(dollars)

Total Cost

(dollars)

1

$75

$75

$60

2

  70

140

  85

3

  65

195

105

4

  60

240

115

5

  55

275

130

6

  50

300

155

7

  45

315

190

8

  40

320

230

9

  35

315

280

Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules.

15) 
Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged?  
15) 
______

A) 
P=$55; Q=5 cases 
B) 
P=$50; Q=6 cases

C) 
P=$45; Q=7 cases 
D) 
P=$40; Q=8 cases

16) 
Refer to Table 13-2. What is Eco Energy's profit? 
16) 
______

A) 
$125 
B) 
$140 
C) 
$145 
D) 
$150

17) 
Refer to Table 13-2. What is likely to happen to the product's price in the long run?  
17) 
______

A) 
It will remain constant. 

B) 
It will fall.

C) 
It will increase.

D) 
This cannot be determined without information on its long-run demand curve.

Figure 13-4

Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.

18) 
Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged? 
18) 
______

A) 
P0 
B) 
P1 
C) 
P2 
D) 
P3

19) 
Refer to Figure 13-4.What is the area that represents the total revenue made by the firm? 
19) 
______

A) 
0P3dQa 
B) 
0P2cQa 
C) 
0P0aQa 
D) 
0P1bQa

20) 
Refer to Figure 13-4.What is the area that represents the total fixed cost of production? 
20) 
______

A) 
P0adP3

B) 
P1bdP3

C) 
0P1aQa

D) 
That information cannot be determined from the graph.

21) 
Refer to Figure 13-4.What is the area that represents the loss made by the firm? 
21) 
______

A) 
the area P0adP3 
B) 
the area P2cdP3 
C) 
the area P0acP2 
D) 
the area P1bcP2

22) 
In the short run, a profit-maximizing firm's decision to produce should be guided by whether  
22) 
______

A) 
its total revenue covers its variable cost. 
B) 
its total revenue exceeds its fixed cost.

C) 
it makes a profit. 
D) 
its marginal profit is maximized.

23) 
Assume price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should 
23) 
______

A) 
increase output. 
B) 
decrease output.

C) 
continue to produce the same quantity. 
D) 
shutdown.

24) 
Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18. If the average total cost at this output is $16.55, then its total profit is  
24) 
______

A) 
$1,188. 
B) 
$1,092.30. 
C) 
$95.70. 
D) 
$1.45.

25) 
In the long run, if price is less than average cost 
25) 
______

A) 
the market must be in long-run equilibrium.

B) 
there is an incentive for firms to exit the market.

C) 
there is no incentive for the number of firms in the market to change.

D) 
there is profit incentive for firms to enter the market.

26) 
A monopolistically competitive firm that is earning profits will, in the long run, experience all of the following except 
26) 
______

A) 
a decrease in demand for its product.

B) 
demand for the firm's product becomes more elastic.

C) 
new rivals entering the market.

D) 
a decrease in the number of rival products.

27) 
In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?  
27) 
______

A) 
The demand curve will shift to the right and became more elastic.

B) 
The demand curve will shift to the right and became less elastic. 

C) 
The demand curve will shift to the left and became less elastic.

D) 
The demand curve will shift to the left and became more elastic.

Figure 13-11

28) 
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing output?  
28) 
______

A) 
Q1 units 
B) 
Q2 units 
C) 
Q3 units 
D) 
Q4 units

29) 
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price?  
29) 
______

A) 
P1 
B) 
P2 
C) 
P3 
D) 
P4

30) 
Refer to Figure 13-11. What is the productively efficient output for the firm represented in the diagram?  
30) 
______

A) 
Q1 units 
B) 
Q2 units 
C) 
Q3 units 
D) 
Q4 units

                 


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