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Total questions: 37
Worksheet time: 19mins
The own price elasticity of demand is equal = -3 means that:
When price increase 1%, quantity demanded decrease 3%
When price increase 3%, quantity demanded decrease 3%
When price increase 1 unit, quantity demanded decrease 3 units
When price decrease 1%, quantity demanded decrease 3%
A market has 5 firms. One of them has a market share of 50%, a second 20%, and the other three 10% each.
Which of the following statements is true?
The 3-firm concentration ratio is 70%
The 4-firm concentration ratio is 80%
The market has a Herfindahl-Hirschman Index (measured from 1 to 10,000) of 3,200
The Herfindahl-Hirschman Index of the market is lower than in a market with 5 firms with a market
share of 20% each.
A product X has a demand function as: QD = 100 - 2P. In order to maximize the revenue, the price should be
equal:
20
25
30
50
Under perfect price discrimination:
consumers’ surplus is zero.
the monopolist makes zero profit
there is excess demand
there is a positive deadweight loss
A firm has a demand function: QD = 100 - 2P. At the price of $40, in order to increase the revenue, the firm
should:
Decrease price, decrease quantity
Increase price, decrease quantity
Decrease price, increase quantity
Increase price, increase quantity
The slope of the Iso-cost line is determined by
Prices of the two factors
Degree of substitutability of two factors
Productivity of the two factors
None of these
Which of the following forms of payment is NOT an incentive plan?
Commission plans for salesmen
Flat salary for a plant manager
Bonuses for managers that increase as profits increase
None of the statements is correct
Which of the following equations illustrates the optimal combination between 2 inputs A and B:
MP a/A = MP b/B
MPa = MPb
MPa /Pa = MPb /Pb
Both B and C
Which of the following is the best example of a perfectly competitive market?
diamonds
athletic shoes
soft drinks
farming
Under ordinary price discrimination, the monopolist charges a higher price in the market with:
rich consumers
unit elasticity of demand.
lower elasticity of demand.
higher elasticity of demand.
Economies of scale will happen when:
Long-run average cost increases as output increases
Long-run average cost decreases as output increase
Average fix cost decreases
Average fix cost remain constant
When a relationship-specific exchange occurs in complex contractual environments, the best way to purchase
input is through:
Spot markets
Vertical integration
Short-term agency agreement
Long-term contracts
Under the resettlement agreement, Mary received $1 million. She decided to use this amount of money to
establish a business in LA, America. If Mary had invested in bonds, she would have earned $100,000 annually.
She also quit at Lucky.Com Inc., spent all her time in the business, and her salary at the company was $75,000
per year. At the end of the first year of her business, the accountant announced the company's accounting profit
was $150,000. How much was the business’s economic profit?
Loss $25,000
Loss $50,000
Profit $25,000
Profit $150,000
The break-even point for a perfectly competitive firm occurs at that level of output:
Total revenue is equal to total variable costs.
Positive economic profits
The firm is experiencing a loss
The average total cost is minimum
A relationship-specific exchange occurs when:
A partnership is dissolved
Specialized investments are important
A partnership is initiated
Shareholders receive dividends
Which of the following is NOT a mean of avoiding opportunism?
Contracts
Spot exchange
Vertical Integration
Long-term contract
Which of the following is true:
Perfectly competitive firms are price setters, monopolists are price takers
Perfectly competitive firms are price takers, monopolists are price setters
Both perfectly competitive firms and monopolists are price takers
Both perfectly competitive firms and monopolists are price setters
An electricity firm offering electricity at 9.62 cents per kWh for the first 1000 kWh/month, and 5.10 cents per
kWh for each kWh beyond 1000 kWh/month is using:
Second-degree price discrimination
First-degree price discrimination
Two-part pricing
Commodity bundling.
Block pricing.
In general, most of the production functions measure
The economies of scale
The relation between the factors of production
The productivity of factors of production
The relations between change in physical inputs and physical output
In the short run, the firm will shut down when:
Price is lower than average variable costs
The firm has no profit
The firm is experiencing a loss
None of the above
If the marginal cost exceeds marginal revenue, the firm:
Is gaining maximum profit
Should increase its activity to gain larger profit
Is experiencing loss
May still be profitable
The optimal two-part pricing strategy involves:
Charging a lower price in the more elastic market.
Setting price equal to marginal cost and charging a fee to the less elastic consumers.
Allocating output such that marginal cost is equal across all markets.
Setting price equal to marginal cost and charging a fee equal to the remaining consumer surplus.
What is the difference between perfect competition and monopolistic competition?
Perfect competition has a large number of small firms while monopolistic competition does not.
In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce
slightly different goods.
Perfect competition has no barriers to entry, while monopolistic competition does.
Perfect competition has barriers to entry while monopolistic competition does not.
When a monopolist sells its products on 2 different markets with demand functions respectively, Market A: QA
= 10 – PA, Market B: QB = 6 – PB. The marginal cost of production is constant and equal to 1. The
monopolist’s optimal prices:
PA = PB = 8.5
PA = PB = 8
PA = 4.5 and PB = 2.5
PA = 5.5 and PB = 3.5
In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the
long run. Which of the following is an example of a perfectly competitive firm's short-run decision?
What price to charge buyers for the product
Whether or not to enter or exit an industry
The profit-maximizing level of output
How much to spend on advertising and sales promotion
A perfectly competitive firm gains a total revenue of $500, the marginal revenue of the firm is $10. Determine
the average revenue, and quantity of products sold.
$5 and 100
$10 and 50
$10 and 100
Cannot determine
AC equals 6 to produce 100 products. MC always remains constant and is equal 2. So, TC of producing 70
products is:
540
140
450
None of the above
The sales maximization model assumes that imperfectly competitive firms will produce a level of output where
Marginal revenue is equal to zero.
Marginal revenue is equal to marginal cost.
Marginal revenue is equal to zero if profit is satisfactory.
They will break even.
If a consumer's demand curve is given by P = 50 - Q, and the marginal cost of a good is 10, a monopolist using
block pricing would charge:
30 per unit for 40 units
30 per unit for 20 units.
40 per unit for 10 units
10 per unit for 40 units.
A monopolist sell its products on 2 different markets will:
Not base on demand elasticities to set price
Set the same price for both markets
Set higher price for the market with higher demand elasticity
Set higher price for the market with lower demand elasticity
Carolina Berries manufactures many varieties of jams and jellies. An increase in the price of their strawberry
jam can be expected to
increase the demand for their strawberry jelly because the two are complements.
increase the demand for their strawberry jelly because the two are substitutes.
decrease the demand for their strawberry jelly because the two are complements.
decrease the demand for their strawberry jelly because the two are substitutes.
Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive
industry?
100 percent
78 percent
0.25 percent
31 percent
As more inputs are used, the marginal product is usually
Increase first then start to decrease
Decrease first then start to increase
Always decrease
Always increase
Long-term contracts become longer:
When specialized investment becomes more important
When the exchange environment is more complex
When spot markets work well
When marginal costs are declining
MPx=10; MPy=8; Px=2; Py=1. In order to choose the level of optimal production, the producer should:
Decrease the utilization of goods Y
Increase the utilization of goods X
Increase the utilization of goods Y
Cannot determine
All of the following price discrimination policies allow a firm to some of the consumer's surplus, except
Third-degree price discrimination.
Two-part pricing.
Second-degree price discrimination
Bundle pricing.
Total revenue decreases as the price of a good increases if the absolute value of the price elasticity of demand is
greater than 1
lower than 1
equal 1
is ∞
