BUSC 1BF-15 HYBRID MICRO FINAL EXAM WITH PLEASANT QUESTIONS AND ANSWERS

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BUSC 1BF-15 HYBRID MICRO FINAL EXAM WITH PLEASANT QUESTIONS AND ANSWERS Multiple Choi... ces Identify the choice that best completes the statement or answers the question. ____ 1. Real-world markets that approximate the four assumptions of the theory of perfect competition include a. some agricultural markets. b. the soft drink market. c. the stock market. d. a and c e. a, b, and c ____ 2. The market demand curve in a perfectly competitive market is a. downward sloping. b. upward sloping. c. perfectly horizontal. d. perfectly vertical. e. downward or upward sloping depending upon the type of product offered for sale. Exhibit 23-1 (1) (2) (3) Price Quantity Sold Marginal Revenue $12 100 $12 101 (A) $12 102 (B) $12 103 (C) $12 104 (D) ____ 3. Refer to Exhibit 23-1. The dollar amounts that go in blanks (A) and (B) are, respectively, a. $1 and $12. b. $12 and $12. c. $8.42 and $8.50. d. $12 and $6. ____ 4. Refer to Exhibit 23-1. The data in this table are relevant to a perfectly competitive firm because a. its total revenue is different at different levels of quantities sold. b. its total revenue is the same at all levels of quantities sold. c. it doesn't have to lower price to sell additional units of the product. d. marginal revenue is greater than price. ____ 5. The profit-maximization rule is as follows: a. Produce the quantity of output at which price equals average total cost (unit cost). b. Produce as much output as can be sold. c. Produce the quantity of output at which marginal revenue equals marginal cost. d. Produce the quantity of output at which marginal revenue equals unit cost. e. Produce the quantity of output at which total cost is minimized. ____ 6. For a price taker, market equilibrium price is $100. At 50 units, MR = MC, ATC = $80, and AVC = $70. This price taker will a. earn $100 profits if it produces 50 units of the good. b. earn $1,000 profits if it produces 50 units. c. shut down its operation and by doing this minimize its losses. d. maximize its profits if it produces fewer than 50 units. e. maximize its profits if it produces more than 50 units. Exhibit 23-10 Output (Q) Total Revenue Total Cost 0 $ 0 $10 1 25 40 2 50 60 3 75 70 4 100 75 5 125 85 6 150 110 7 175 140 8 200 180 ____ 7. Refer to Exhibit 23-10. What quantity of output should the profit-maximizing firm produce? a. 0 b. 4 c. 6 d. 7 e. 8 ____ 8. Refer to Exhibit 23-10. What price does this firm charge for its product? a. $10 b. $20 c. $25 d. $30 e. There is not enough information to answer this question. ____ 9. Refer to Exhibit 23-10. What is the marginal revenue and marginal cost, respectively, of the 7th unit of output? a. $25 and $25 b. $30 and $20 c. $25 and $15 d. $25 and $30 e. There is not enough information to answer this question. ____ 10. Refer to Exhibit 23-10. Is it possible for this firm to produce “too much” output? a. Any quantity above 2 units is too much. b. Any quantity above 4 units is too much. c. Any quantity above 6 units is too much. d. none of the above ____ 11. Firm X is a single seller of good X. There are, however, two substitutes for good X. Given this, a. Firm X cannot be a monopolist because the theory of monopoly assumes there are no close substitutes for the good the single seller sells. b. Firm X can be a monopolist because we do not know if the two substitutes are close substitutes; additionally, it may be that Firm X acts as if the assumption of no close substitutes holds. c. Firm X cannot be a monopolist because if substitutes exist for the good it produces, its demand curve is horizontal and monopolists face downward-sloping demand curves. d. none of the above ____ 12. A natural monopoly exists when a. a monopolist produces a product, the main component of which is a natural resource. b. economies of scale are so large that only one firm can survive and achieve low unit costs. c. a firm is the exclusive owner of a key resource necessary to produce the firm’s product. d. there are no close substitutes for a firm's product. ____ 13. A monopoly may exist because a. government has refused to grant a public franchise. b. one firm has the exclusive ownership of a necessary resource. c. the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. d. a and b e. a, b, and c ____ 14. Suppose a monopolist practices perfect price discrimination. Its marginal revenue curve a. will lie below the demand curve. b. will lie above the demand curve. c. will coincide with the demand curve. d. has no definite relationship with the demand curve. ____ 15. Suppose the local pharmacy charges lower prices to senior citizens than it charges to younger customers. The pharmacy is practicing a. perfect price discrimination. b. second-degree price discrimination. c. arbitrage. d. third-degree price discrimination. e. non-cost discrimination. Exhibit 24-3 ____ 16. Refer to Exhibit 24-3. The profit-maximizing single-price monopolist charges price a. P1. b. P2. c. P3. d. P4. e. P5. ____ 17. Refer to Exhibit 24-3. The profit of the single-price monopolist is a. positive. b. zero. c. negative. d. uncertain without more information. ____ 18. Refer to Exhibit 24-3. The level of output the profit-maximizing perfectly price-discriminating monopolist produces is a. q1. b. q2. c. q3. d. q4. ____ 19. To engage in price discrimination, it is necessary that a. a seller be a price searcher. b. there be no arbitrage. c. a seller incur different costs for servicing different customers. d. a and b e. all of the above ____ 20. Which of the following is not an assumption of the theory of monopolistic competition? a. There are high barriers to entry. b. There are many sellers and few buyers. c. Each firm in the industry produces and sells a homogeneous product. d. a and b e. all of the above ____ 21. In a monopolistic competitive industry, a. each firm in the industry produces a slightly differentiated product. b. there are barriers to entry. c. there are barriers to exit. d. there are few sellers. ____ 22. The excess capacity theorem states that a monopolistic competitor a. will produce an output level smaller than the one that would minimize its unit costs. b. will produce an output level where MR > MC. c. generally does not attain long run equilibrium, and thus charges a higher price than it should. d. typically produces too much of a good at too low a quality. ____ 23. A firm in a monopolistic competitive market will produce a level of output at which a. P < MR. b. P = MR. c. P > MR. d. P = MC. ____ 24. In the real-world, which of these industries is most clearly an oligopoly? a. wheat b. electricity generation c. cereal breakfast foods d. restaurants ____ 25. The key behavioral assumption of the cartel theory is that oligopolists in an industry a. try to maximize sales instead of profits. b. act as if they are perfect competitors. c. act in a manner consistent with there being only one firm in the industry. d. try to create a demand for their products by way of advertising. e. none of the above ____ 26. In the long run, new firms will enter a monopolistic competitive industry until a. minimum average total cost is achieved. b. all firms are incurring losses. c. economic profits in the industry are zero. d. a and b Exhibit 25-3 ____ 27. Refer to Exhibit 25-3. Profits of this profit maximizing monopolistic competitor is represented by the area a. 0P4DQ3. b. P5P3CE. c. P3P1AC. d. 0Q1 times P2P4. e. 0Q1 times P2P5. ____ 28. Refer to Exhibit 25-3. Total revenue of this profit maximizing monopolistic competitor is represented by the area a. 0P1AQ2. b. 0P5EQ2. c. P3P1AC. d. 0P4DQ3. ____ 29. Refer to Exhibit 25-3. Total cost of this profit maximizing monopolistic competitor is represented by the area a. 0P1AQ2. b. 0P3CQ2. c. P3P1AC. d. P4P1AD. Exhibit 25-9 Market Structure Number of Sellers Type of Product Barriers to Entry Perfect competition (A) (D) (H) Monopolistic Competition (B) (E) (I) Oligopoly (C) (F) (J) Monopoly one (G) (K) ____ 30. Refer to Exhibit 25-9. The number of sellers in a perfectly competitive market is ___________ [blank (A)], the number of sellers in a monopolistic competitive market is ____________ [blank (B)], and the number of sellers in an oligopoly is _________ [blank (C)]. a. many; many; few b. many; few, few c. few; many; many d. few; few many ____ 31. Refer to Exhibit 25-9. The type of product sold in a perfectly competitive market is ___________ [blank (D)]. The type of product sold in a monopolistic competitive market is ____________ [blank (E)]. The type of product sold in an oligopoly is _________ [blank (F)]. The type of product sold in a monopoly is ___________ [blank (G)]. a. unique; homogeneous or differentiated; differentiated; homogeneous b. differentiated; homogeneous; homogeneous or differentiated; unique c. homogeneous; homogeneous; differentiated; unique d. homogeneous; differentiated; homogeneous or differentiated; unique ____ 32. Refer to Exhibit 25-9. There ___________ barriers to entry in a perfectly competitive market. There ____________ barriers to entry in monopolistic competition. There ____________ barriers to entry in oligopoly. There ____________ barriers to entry in monopoly. [Your answers should fill in blanks (H), (I), (J) and (K), respectively.] a. are; are; are no; are no b. are no; are; are; are no c. are no; are no; are; are d. are no; are; are; are ____ 33. The term "derived demand" refers to the idea that a change in the a. demand for one good, say, tennis racquets, will affect the demand for related goods, say, tennis balls. b. demand for a good is affected by the supply of that good. c. demand for a good will affect the demand for the factors used to produce that good. d. supply of a factor will affect the demand for that factor. ____ 34. The firm's factor demand curve is the a. MRP curve if the firm is a price taker (perfectly competitive firm). b. MFC curve if the firm is a price taker (perfectly competitive firm). c. VMP curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). d. MFC curve if the firm is a price searcher (monopolist, monopolistic competitor, oligopolist). Exhibit 27-5 Units of Labor Quantity of Output Marginal Revenue 0 0 $6 1 100 6 2 180 6 3 250 6 4 310 6 5 330 6 ____ 35. Refer to Exhibit 27-5. The data illustrate that the firm in question is a a. price searcher (monopolist, oligopolist, etc.). b. price taker (perfectly competitive firm). c. factor price searcher. d. factor price taker. ____ 36. Refer to Exhibit 27-5. Marginal physical product of the fourth unit of labor a. equals 60. b. equals 40. c. equals 24. d. equals 310. e. cannot be determined. ____ 37. Refer to Exhibit 27-5. The marginal revenue product of the fifth unit of labor is a. $270. b. $20. c. $330. d. $120. ____ 38. Refer to Exhibit 27-5. Assume the firm is a factor price taker and that the price of a unit of labor is constant at $360. The firm should hire __________ of labor. a. one unit b. two units c. three units d. four units e. five units Exhibit 27-7 Market A Market B ____ 39. Refer to Exhibit 27-7. The exhibit shows two markets in which labor of identical skills is employed. Assume that both markets are in equilibrium with Q1 and Q2 quantities of labor employed at the respective prices of $4 and $6 per unit. If labor is costlessly mobile between the markets, which of the following pairs of shifts of the respective labor supply curves is to be expected? a. S1 to S5 and S2 to S6 b. S1 to S5 and S2 to S4 c. S1 to S3 and S2 to S6 d. S1 to S3 and S2 to S4 ____ 40. Refer to Exhibit 27-7. The exhibit shows two markets in which labor of identical skills is employed. Assume that both markets are in equilibrium with Q1 and Q2 quantities of labor employed at the respective prices of $4 and $6 per unit. If this equilibrium persists in the long run, an economist would suspect that a. nonpecuniary benefits are higher in market A. b. nonpecuniary benefits are higher in market B. c. there is discrimination in market A. d. there is no cost of moving across markets. e. b and c ____ 41. If the market supply of labor increases, the total wage income will increase if the a. demand for labor is elastic. b. demand for labor is inelastic. c. supply of labor is elastic. d. supply of labor is inelastic. ____ 42. "Screening" is the process by which a. wages tend to be equalized as workers move from one labor market to another. b. firms calculate the point of MRP = MFC. c. firms try to increase the probability of hiring good employees. d. discrimination is claimed to be an "information problem." ____ 43. The elasticity of demand for labor is 2.16. It follows that if the a. wage rate changes by 10 percent, the demand for labor changes by 2.16 percent. b. demand for labor changes by 2.16 percent, the wage rate changes by 1.0 percent. c. wage rate changes by 10 percent, the quantity demanded of labor changes by 21.6 percent. d. wage rate changes by 2.16 percent, the quantity demanded of labor changes by 2.16 percent. e. none of the above ____ 44. Is there a difference between the terms interest and interest rate? a. No. Interest is simply a shorthand version of interest rate. b. Yes. Interest refers to the return that capital earns, whereas interest rate is the payment to someone who lends money to someone else. c. Yes. Interest is what one earns by placing funds in a savings account, whereas interest rate is the rate that the U.S. Treasury pays for borrowed funds when the government incurs a deficit. d. Yes. Interest is a dollar payment for the use of funds, whereas interest rate is the ratio of that dollar amount to the total amount of funds borrowed. ____ 45. Approximately how much is $25,000 to be received a year from now worth today at an interest rate of 6 percent? a. $26,500 b. $85,556 c. $23,585 d. $20,385 ____ 46. The English economist David Ricardo argued that a. grain prices were high because land rents were high. b. land rents were high because grain prices were high. c. grain prices were high because land rents were low. d. land rents were high because grain prices were low. e. none of the above Exhibit 30-1 ____ 47. Refer to Exhibit 30-1. Suppose the supply curve is S1 and the price is A. Pure economic rent equals area a. ABD. b. EBA. c. ODBC. d. EBD. e. none of the above ____ 48. Refer to Exhibit 30-1. Suppose the supply curve is S2 and the price is A. Economic rent equals area a. EBD. b. ABD. c. ODBC. d. EBA. e. none of the above ____ 49. Jim Smith made his fortune by buying and selling real estate. Which of the following theories on the source of profits best describes the reason behind his success? a. Uncertainty is a source of profits. b. Profit is the reward for alertness to arbitrage opportunities. c. Profit is the return to the entrepreneur as innovator. d. Land is always a source of economic rent and profit. e. If one works hard enough, one will be rewarded. ____ 50. Risk a. is the result of economic rent seeking. b. is the same as uncertainty. c. exists when the probability of a given event can be estimated. d. exists when a potential occurrence is so unpredictable that a probability cannot be estimated. e. none of the above ____ 51. Which of the following is a theory of the source of profit? a. uncertainty is the source of profit b. the alertness to broadly defined arbitrage opportunities is the source of profit c. the return to the entrepreneur for innovation is the source of profit d. a and c e. a, b and c ____ 52. A "revaluation" occurs when a. a nation's currency appreciates under a flexible exchange rate system. b. the official price of a currency is lowered. c. a nation's currency depreciates under a flexible exchange rate system. d. the official price of a currency is raised. e. none of the above ____ 53. If, under a fixed exchange rate system, the dollar price of Mexican pesos is below its equilibrium level, then the a. dollar is undervalued. b. peso is undervalued. c. dollar has depreciated. d. peso has appreciated. e. a and c Exhibit 35-4 ____ 54. Refer to Exhibit 35-4. Under a fixed exchange rate system, at the exchange rate of E1, the dollar is __________ and there is a __________ of pesos. a. overvalued; surplus b. undervalued; surplus c. overvalued; shortage d. undervalued; shortage ____ 55. Refer to Exhibit 35-4. Under a fixed exchange rate system, at the exchange rate of E3, the dollar is __________ and there is a __________. a. overvalued; surplus of dollars b. undervalued; shortage of pesos c. overvalued; shortage of dollars d. undervalued; surplus of pesos True/False Indicate whether the statement is true or false. ____ 56. Price discrimination occurs when a seller charges different prices for its product and the price differences result from differences in the costs of production. ____ 57. One of the conditions necessary for price discrimination is that the seller be a price searcher. ____ 58. What looks like discrimination in the labor markets is always just a problem of the high cost of information. ____ 59. Employers use screening mechanisms, such as GPA, because they lack complete information about job applicants. ____ 60. Without savers, there would be no supply of loanable [Show More]

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