Mock Test - Assignment Essays

question

Consider the labor market for heath care workers. Because of the aging population in the United States, the output price for health care services has increased. Holding all else equal, in the labor market for health care employees the equilibrium wage

increases, and the equilibrium quantity of labor increases.
increases, and the equilibrium quantity of labor decreases.
decreases, and the equilibrium quantity of labor increases.
decreases, and the equilibrium quantity of labor decreases.

answer

increases, and the equilibrium quantity of labor increases.

question

Which one of the following statements is TRUE for BOTH perfect competition and monopolistic competition?

Each type of firm faces a downward sloping demand curve.
Each type of firm produces a homogeneous product.
In the long run, firms in both industries make zero economic profit.
Each type of firm competes on product quality and price.

answer

In the long run, firms in both industries make zero economic profit.

question

The principal-agent problem incentivizes management to

find ways for managers to get people to buy stock in their company.
devise compensation rules to induce principals to act in the best interest of agents.
devise compensation rules to induce agents to act in the best interest of principals.
find efficient agents who will negotiate fair compensation rules for a firm's principal managers.

answer

find efficient agents who will negotiate fair compensation rules for a firm's principal managers.

question

"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is

true because price exceeds marginal revenue in monopolistic competition.
true because there is little incentive to innovate in monopolistic competition.
false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic.
false because there is so much product differentiation in monopolistic competition.

answer

true because price exceeds marginal revenue in monopolistic competition.

question

For the monopoly shown in the figure above, the markup is
1 point
zero.
$1.
$2.
$4.

answer

question

Which of the following statements is FALSE?

In the short run, a monopolist might operate even though it is incurring an economic loss, but in the short run a perfectly competitive firm always shuts down if it is incurring an economic loss.
A monopoly can earn an economic profit in the long run, but a perfectly competitive firm cannot.
A monopoly can set its price while a perfectly competitive firm cannot.
A monopoly is protected by barriers to entry while a perfectly competitive firm is not.

answer

In the short run, a monopolist might operate even though it is incurring an economic loss, but in the short run a perfectly competitive firm always shuts down if it is incurring an economic loss.

question

"Diminishing marginal returns" refer to a situation in which the

marginal cost of the next worker hired is less than the marginal cost of the previous worker hired.
average cost of the next worker hired is less than the average cost of the previous worker hired.
marginal product of the next worker hired is less than the marginal product of the previous worker hired.
average product of the next worker hired is less than the average product of the previous worker hired.

answer

marginal product of the next worker hired is less than the marginal product of the previous worker hired.

question

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

increases in production costs resulting from more firms coming into the market.
a breakdown of the "free entry and exit" feature of competition.
a breakdown of the "price taking" feature of competition.
a stable demand curve for the good, that is, a demand curve that never shifts.

answer

increases in production costs resulting from more firms coming into the market.

question

Which of the following statements about the Herfindahl-Hirschman Index is correct?
I. It is the square of the percentage market share of each firm summed over the largest 50 firms (or summed over all the firms if there are fewer than 50) in a market.
II. A small index is indicative of a high degree of competition.
III. The index is used to measure the degree of competition.
1 point
I only
I, II only
I, III only
I, II, and III

answer

I, II, and III

question

As the number of firms in an oligopoly increases,

each seller becomes more concerned about its impact on the market price.
the output effect decreases.
the total quantity of output produced by firms in the market gets closer to the socially efficient quantity
the oligopoly has more market power and firms earn a greater profit.

answer

the total quantity of output produced by firms in the market gets closer to the socially efficient quantity

question

Which of the following pairs of market types are both characterized by having a large number of firms?

monopoly and oligopoly
perfect competition and monopolistic competition
perfect competition and oligopoly
monopoly and monopolistic competition

answer

perfect competition and monopolistic competition

question

Which of the following models is the best to explain price wars?

dominant firm oligopoly
a game of chicken
a repeated duopoly game
a sequential entry game in a contestable market

answer

a repeated duopoly game

question

A cartel tries to ________ its members' economic profit and thereby the cartel ________ consumer surplus.

increase; increases
increase; decreases
decrease; increases
decrease; decreases

answer

increase; decreases

question

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

P > MR and P = MC
ATC = demand and MR = MC
P < MC and demand = ATC
P > ATC and demand > MR

answer

ATC = demand and MR = MC

question

Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 2 cents per page, what is Fast Copy's economic profit?

zero
between 0 and $0.50 per hour
between $0.51 and $1.00 per hour
more than $1.00 per hour

answer

question

The a firm's short-run cost curves shifts when there is a change in

technology
the prices of factors of production
the quantity of outputs
Both answers A and B are correct.

answer

Both answers A and B are correct.

question

In some industries it is important for each firm to predict how all the other firms will react to their decisions.

This is not true for monopolistic competition because there are too many firms and no barriers to entry.
This is not true of any industry with barriers to entry.
This is not true for monopolistic competition because firms do not sell homogeneous goods.
This is true for oligopoly because these firms sell a homogeneous good.

answer

This is not true for monopolistic competition because there are too many firms and no barriers to entry.

question

Entry in a perfectly competitive market

shifts the market supply curve rightward.
decreases the market price.
shifts the market supply curve leftward.
Both answers A and B are correct.

answer

Both answers A and B are correct.

question

Monopolistic competition is a market structure in which a ________ number of firms compete and each firm produces ________ product.

large; an identical
small; an identical
large; a differentiated
small; a differentiated

answer

large; a differentiated

question

Which of the following events would bring about a change in the value of the marginal product of labor?

technological progress that alters the amount a worker can produce
a change in the marginal product of labor
a change in the price of the product that the firm sells
All of the above are correct.

answer

question

The profit maximizing condition for any competitive firm is

MR = P.
MC = MR.
P = ATC.
None of the above answers is correct because each type of competitive firm has a different condition of maximizing its profit.

answer

MC = MR.

question

Which of the following events would shift a labor supply curve?
(i) immigration of high-skilled workers
(ii) immigration of low-skilled workers
(iii) changes in the number of women willing to work full time

answer

i ii iii

question

Which of the following statements regarding brand names in advertising is not correct?

Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase.
Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm.
Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.
Brand names can cause consumers to perceive differences in products that do not actually exist.

answer

Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.

question

Which of the following types of economic regulation is most likely to encourage a natural monopoly to NOT inflate its costs?

average cost pricing rule
rate of return regulation
price cap regulation
None of the above encourages cost cutting.

answer

price cap regulation

question

A perfectly competitive industry is in long-run equilibrium. Some firms in the industry adopt new technology that reduces the average total cost of producing the good. In the long run, the price is ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

lower; zero; exit the industry
lower; zero; switch to the new technology or exit the industry
constant; a positive; make normal profit
constant; zero; exit the industry

answer

lower; zero; switch to the new technology or exit the industry

question

Suppose that due to a severe drought in Roi Et, 100,000 farmers relocate from Roi Et to Nakhon Sawan. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners in Nakhon Sawan?

Both wages and rents would increase.
Both wages and rents would decrease.
Wages would increase, and rents would decrease.
Wages would decrease, and rents would increase.

answer

Wages would decrease, and rents would increase.

question

The existence of economies of scale can create ________.

a natural monopoly
a government monopoly
a legal monopoly
a market in which many firms make identical products

answer

a natural monopoly

question

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $4,000.

TRUE
False

answer

False

question

Limit pricing refers to

the fact that a monopoly firm always sets the highest price possible.
how the price is determined in a kinked demand curve model of oligopoly.
a situation in which a firm might lower its price to keep potential competitors from entering its market.
none of the above

answer

a situation in which a firm might lower its price to keep potential competitors from entering its market.

question

One benefit of monopolistic competition over perfect competition is

economic profit.
product variety.
excess capacity.
efficiency.

answer

product variety.

1 of 30

question

answer

increases, and the equilibrium quantity of labor increases.

question

answer

In the long run, firms in both industries make zero economic profit.

question

answer

find efficient agents who will negotiate fair compensation rules for a firm's principal managers.

question

answer

true because price exceeds marginal revenue in monopolistic competition.

question

For the monopoly shown in the figure above, the markup is
1 point
zero.
$1.
$2.
$4.

answer

question

answer

In the short run, a monopolist might operate even though it is incurring an economic loss, but in the short run a perfectly competitive firm always shuts down if it is incurring an economic loss.

question

answer

marginal product of the next worker hired is less than the marginal product of the previous worker hired.

question

answer

increases in production costs resulting from more firms coming into the market.

question

answer

I, II, and III

question

answer

the total quantity of output produced by firms in the market gets closer to the socially efficient quantity

question

answer

perfect competition and monopolistic competition

question

Which of the following models is the best to explain price wars?

dominant firm oligopoly
a game of chicken
a repeated duopoly game
a sequential entry game in a contestable market

answer

a repeated duopoly game

question

A cartel tries to ________ its members' economic profit and thereby the cartel ________ consumer surplus.

increase; increases
increase; decreases
decrease; increases
decrease; decreases

answer

increase; decreases

question

answer

ATC = demand and MR = MC

question

answer

question

The a firm's short-run cost curves shifts when there is a change in

technology
the prices of factors of production
the quantity of outputs
Both answers A and B are correct.

answer

Both answers A and B are correct.

question

answer

This is not true for monopolistic competition because there are too many firms and no barriers to entry.

question

Entry in a perfectly competitive market

shifts the market supply curve rightward.
decreases the market price.
shifts the market supply curve leftward.
Both answers A and B are correct.

answer

Both answers A and B are correct.

question

answer

large; a differentiated

question

answer

question

answer

MC = MR.

question

answer

i ii iii

question

answer

Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.

question

answer

price cap regulation

question

answer

lower; zero; switch to the new technology or exit the industry

question

answer

Wages would decrease, and rents would increase.

question

The existence of economies of scale can create ________.

a natural monopoly
a government monopoly
a legal monopoly
a market in which many firms make identical products

answer

a natural monopoly

question

answer

False

question

answer

a situation in which a firm might lower its price to keep potential competitors from entering its market.

question

One benefit of monopolistic competition over perfect competition is

economic profit.
product variety.
excess capacity.
efficiency.

answer

product variety.

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