PART 1: THEORY

The fundamental source of monopoly power is:

• many buyers and sellers

• low fixed costs

• rising average total costs

• barriers to entry

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product?

• 2 houses

• 3 houses

• 5 houses

• 8 houses

The line that relates the price of a good and the quantity demanded of that good is called the demand:

• schedule, and it usually slopes upward.

• schedule, and it usually slopes downward.

• curve, and it usually slopes upward.

• curve, and it usually slopes downward.

Which of the following would not shift the demand curve for a good?

• a change in the price of the good.

• a change in expectations about the future price of the good.

• a change in the price of a related good.

• a change in income.

Suppose that Britney owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Britney most likely considers:

• both labor and capital to be fixed.

• both labor and capital to be variable.

• capital to be variable and labor to be fixed.

• labor to be variable and capital to be fixed.

Which of the following costs would be accounting costs to ABC company?

• raw material costs

• salaries paid to owners who work for the company

• interest paid on the company's debt

• All of the above are correct.

Suppose that a firm's long-run average total cost increases as output increases. The firm experiences:

• economies of scale.

• constant returns to scale.

• diseconomies of scale.

• an efficient use of resources.

When a firm is experiencing economies of scale, long-run:

• average total cost is minimized.

• average total cost is greater than long-run marginal cost.

• average total cost is less than long-run marginal cost.

• marginal cost is minimized.

• $30

• $140

• $170

• $300

When considering her budget, the highest indifference curve that a consumer can reach is the:

• one that is tangent to the budget constraint.

• indifference curve farthest from the origin.

• indifference curve that intersects the budget constraint in at least two places.

• None of the above is correct.