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

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

average total cost is minimized.

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

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.

will never exceed accounting profit.

is most often equal to accounting profit.

is always at least as large as accounting profit.

is a less complete measure of profitability than accounting profit.

The economic inefficiency of a monopolist can be measured by the:

number of consumers who are unable to purchase the product because of its high price.

excess profit generated by monopoly firms.

poor quality of service offered by monopoly firms.

Ha uses all of her income to purchase books and games. At any two points A and B on Ha's budget constraint:

Ha is spending all of her income on books and games.

Ha is spending one half of her income on books and the other half of her income on games.

The price of books relative to the price of games is different.

A perfectly competitive market:

promotes general economic well-being, whereas a monopoly market may not be in the best interests of society.

may not be in the best interests of society, whereas a monopoly market promotes general economic well-being.

and a monopoly market are equally likely to promote general economic well-being.

is less likely to promote general economic well-being than a monopoly market.

To determine whether a good is considered normal or inferior, one could examine the value of the:

income elasticity of demand for that good.

price elasticity of demand for that good.

price elasticity of supply for that good.

cross-price elasticity of demand for that good.

A perfectly competitive firm produces where:

marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

marginal cost equals price, while a monopolist produces where marginal cost exceeds price.

price exceeds marginal cost, while a monopolist produces where marginal cost equals price.

marginal cost exceeds price, while a monopolist produces where marginal cost equals price.

If a firm in a perfectly competitive market doubles the quantity of output sold, then total revenue will:

Any of the above may be true depending on the firm's labor productivity.

The theory of consumer choice examines how:

consumers make utility-maximizing decisions.

firms make profit-maximizing decisions.

Wages are determined in competitive labor markets

Prices are determined in competitive goods markets.

Which of the following statements regarding a perfectly competitive firm is correct?

For all firms, average revenue equals the price of the good.

Because demand curve is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.

If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.

By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.

For a firm, the production function represents the relationship between:

quantity of inputs and quantity of output.

implicit costs and explicit costs.

quantity of inputs and total cost.

quantity of output and total cost.

The smaller the price elasticity of demand, the:

smaller the responsiveness of quantity demanded to a change in price.

more likely the product is a luxury.

more substitutes the product has.

greater the responsiveness of quantity demanded to a change in price.

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

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

average total cost is minimized.

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

Which of the following is an example of a barrier to entry?

Larry obtains a copyright for the new computer game that he invented.

Tom charges a higher price than his competitors for his golf lessons.

Dick charges a lower price than his competitors for his lawn-mowing services.

Harry offers free concerts on Sunday afternoons as a form of advertising.

A total-cost (TC) curve shows the relationship between the:

quantity of output produced and the total cost of production.

quantity of an input used and the total cost of production.

total cost of production and profit.

total cost of production and total revenue.

A $$\$$ 2$ tax per gallon of paint placed on the buyers of paint will shift the demand curve:

downward by less than $$\$$ 2$.

The short-run supply curve for a firm in a perfectly competitive market is:

the portion of its marginal cost curve that lies above its average variable cost.

determined by forces external to the firm.

the demand curve is downward-sloping.

the demand curve is horizontal.

When marginal product is greater than average product:

marginal product is decreasing.

the firm should stop producing.

The important reason why households and societies face many decisions is that:

goods and services are not scarce.

incomes fluctuate with business cycles.

people, by nature, tend to disagree.

Hai used to work as a high school teacher for $$\$$ 40{,}000 $$ per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $$ \ $$20{,}000$$ from his savings, which paid 3 percent interest, and borrowed $$\$$ 30{,}000 $$ from his uncle, whom he pays 3 percent interest per year. Last year Hai paid $$ \ $$25{,}000$$ for supplies and had revenue of $$\$$ 60{,}000$. Hai asked Hai the accountant and Long the economist to calculate his painting business's profit:

Hai says his profit is $$\$$ 34{,}100 $$, and Long says he lost $$ \ $$6{,}500$$ .

Hai says his profit is $$\$$ 25{,}900 $$, and Long says his profit is $$ \ $$66{,}500$$ .

Hai says his profit is $$\$$ 35{,}000 $$, and Long says he lost $$ \ $$5{,}900$$ .

Hai says his profit is $$\$$ 34{,}100 $$, and Long says his profit is $$ \ $$34{,}100$$ .

If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption will:

shift outward relative to the original optimum.

move leftward along the original budget constraint.

shift inward relative to the original optimum.

Which of the following is not a characteristic of a perfectly competitive market?

There are many barriers to entry.

There are many buyers and sellers.

When a shortage exists in a market, sellers:

raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated.

lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated.

lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would:

slope downward for low output levels and upward for high output levels.

PART 1: THEORY

Authored by Như Lê

Social Studies

University

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49 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The fundamental source of monopoly power is:

many buyers and sellers

low fixed costs

rising average total costs

barriers to entry

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

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