Microeconomics 50 question pretest

Need a VERY high score on this 50 question test

Pre Test 2 – VERSION A

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Figure 7.4

1) Refer to Figure 7.4. The deadweight loss associated with the monopoly would be represented by the area:
A) abe. B) ace. C) ade. D) efg.

2) Suppose that Figure 7.4 shows an industry’s market demand, its marginal revenue, and the production costs of
a representative firm. If the industry was perfectly competitive, a representative firm would charge a price of:

A) $35. B) $25. C) $20. D) $16.

3) Suppose that Figure 7.4 shows a monopolist’s demand curve, marginal revenue, and its costs. The monopolist
would maximize its profit by producing a quantity of:

A) 30 units. B) 50 units.
C) 60 units. D) There is not sufficient information.

4) Suppose that Figure 7.4 shows a monopolist’s demand curve, marginal revenue, and its costs. The monopolist
would maximize its profit by charging a price of:

A) $35. B) $25. C) $20. D) $16.

5) Refer to Figure 7.4. If the market was a monopoly, the consumer surplus would be:
A) $625. B) $450. C) $300 D) $225.

6) Suppose that Figure 7.4 shows an industry’s market demand, its marginal revenue, and the production costs of
a representative firm. If the industry was perfectly competitive, a representative firm’s profit would be:

A) $1,250. B) $450.
C) $250. D) There is not sufficient information.

A as in Apple1

7) Suppose that Figure 7.4 shows an industry’s market demand, its marginal revenue, and the production costs of
a representative firm. If the industry was perfectly competitive, it would produce a quantity of:

A) 30 units. B) 50 units.
C) 60 units. D) There is not sufficient information.

8) Refer to Figure 7.4. If the market was perfectly competitive, the consumer surplus would be:
A) $850. B) $625. C) $300. D) $100.

9) Suppose that Figure 7.4 shows a monopolist’s demand curve, marginal revenue, and its costs. At the profit
maximizing output level, the monopolist’s profit would be:

A) $730. B) $570. C) $320. D) $150.

10) Price discrimination is when a firm charges:
A) different prices for different goods to different consumers.
B) different prices for the same goods to different consumers.
C) the same price to all consumers.
D) None of the above are correct.

Number of Figs VC MC AVC FC TC ATC
0 100
1 90 90
2 135
3 80
4 400

Table 5.4

11) Table 5.4 presents the cost schedule for David’s Figs. If David produces zero fig, David’s total costs are:
A) $0. B) $90. C) $100. D) $130.

12) Table 5.4 presents the cost schedule for David’s Figs. If David produces three figs, David’s total variable costs
are:

A) $0. B) $41.67. C) $80. D) $240.

13) Table 5.4 presents the cost schedule for David’s Figs. If David produces two figs, David’s average variable costs
are:

A) $80. B) $85. C) $90. D) $170.

14) Table 5.4 presents the cost schedule for David’s Figs. If David produces four figs, David’s average total costs
are:

A) $60. B) $75. C) $100. D) $400.

15) Table 5.4 presents the cost schedule for David’s Figs. If David produces two figs, David’s marginal costs are:
A) $80. B) $90. C) $100. D) $170.

16) If profits in a monopolistically competitive market are positive, we can conclude that:
A) the market is in long-run equilibrium. B) price is greater than average cost.
C) price is equal to average cost. D) price is less than average cost.

A as in Apple2

17) Which one of the following is the best example of an oligopolistic industry?
A) wheat growers B) soft drinks C) apple growers D) public utilities

Number of Cakes VC MC AVC FC TC ATC
0 50
1 30
2 50
3 25
4 155

Table 5.3

18) Table 5.3 presents the cost schedule for Candy’s Cakes. If Candy produces zero cake, Candy’s total costs are:
A) $0. B) $50. C) $100. D) $150

19) Table 5.3 presents the cost schedule for Candy’s Cakes. If Candy produces one cake, Candy’s total variable
costs are:

A) $0. B) $30. C) $50. D) $80.

20) Table 5.3 presents the cost schedule for Candy’s Cakes. If Candy produces two cakes, Candy’s marginal cost is:
A) $0. B) $20. C) $25. D) $50.

21) Table 5.3 presents the cost schedule for Candy’s Cakes. If Candy produces three cakes, Candy’s marginal costs
are:

A) $0. B) $25. C) $41.67. D) $75.

Labor (workers) Output (bikes) Total fixed
costs (dollars)

Total variable
cost (dollars)

Total cost
(dollars)

0 0 200
1 20 100
2 50
3 60
4 64

22) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been spotty. Each
worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total fixed cost of
producing 64 bikes?

A) $500 B) $200 C) $300 D) $400

23) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been spotty. Each
worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total cost of
producing 50 bikes?

A) $200 B) $300 C) $100 D) $400

24) The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been spotty. Each
worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost
of producing 60 bikes?

A) $400 B) $500 C) $300 D) $200

A as in Apple3

25) Which of the following is NOT a characteristic of a monopolistically competitive market?
A) Firms have some control over price.
B) There are no artificial barriers to entry.
C) The products that firms sell are slightly different.
D) Firms hold patents on their products.

26) Oligopoly differs from monopoly and perfect competition in that:
A) there are a few firms in the industry.
B) firms act strategically.
C) firms consider each others actions when choosing price and quantity.
D) all of the above

Figure 14-3

Figure 14-3 shows the cost and demand curves for a monopolist.

27) Refer to Figure 14-3. The monopolist’s total cost is
A) $1,116. B) $1,240. C) $1,660. D) $1,726.40.

28) Refer to Figure 14-3. The monopolist earns a profit of
A) $0. B) $170. C) $248. D) $372.

29) Refer to Figure 14-3. The profit-maximizing output and price for the monopolist are
A) output = 62; price = $18. B) output = 83; price = $22.
C) output = 62; price = $24. D) output = 104; price = $20.80.

30) Refer to Figure 14-3. The monopolist’s total revenue is
A) $1,116. B) $1,488. C) $1,726.40 D) $1,826.

A as in Apple4

31) Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any
other basketball shoe. Nike is attempting to:

A) lower the marginal cost of producing Air Jordan basketball shoes.
B) differentiate Air Jordan basketball shoes from other types of basketball shoe.
C) convince consumers that Air Jordan basketball shoes are identical to other basketball shoes.
D) sell fewer Air Jordan basketball shoes so they can raise the price.

32) A market where individual firms cannot affect the market price of their good is most likely:
A) a monopoly market. B) a monopolistically competitive market.
C) a perfectly competitive market. D) an oligopoly market.

33) A perfectly competitive market is one where:
A) each firm controls the price charged for its product by changing the quantity they produce.
B) each firm sells at the government mandated price.
C) a firm can affect market price by increasing output.
D) each firm within the market must sell its good at the market price.

34) Why do pharmaceutical firms benefit most from patent protection?
A) Because only physicians can legally prescribe pharmaceutical drugs.
B) Because pharmaceutical companies pay large taxes to the government.
C) Because research and development of drugs require large expenditures that need to be recouped while

the patent is still valid.
D) Because pharmaceutical drugs need to be controlled by the government.

35) If the demand curve faced by a firm is horizontal, then the firm is ________ and a ________.
A) monopoly; price maker B) perfectly competitive; price maker
C) perfectly competitive; price taker D) a monopoly; price taker

36) An oligopoly might occur as a result of:
A) economies of scale in production. B) advertising.
C) government barriers to entry. D) all of the above

37) Diminishing marginal returns implies that:
A) marginal costs are constant.
B) marginal costs are decreasing.
C) marginal costs are increasing.
D) marginal costs may be increasing or decreasing.

38) In the mid 1990s, Coke introduced a new soda in the soft drink market. Coke then used a new advertising
campaign to associate the new soda with youth and strength. Coke was trying to:

A) lower the market price of soft drinks.
B) create a perfectly competitive market for soft drinks.
C) shift the demand curve for competing soft drinks to the left.
D) maximize its per unit costs through advertising.

39) In the short run, ________ factors of production are fixed, while in the long run, ________ of them are.
A) some; none B) all; at least some C) no; at least some D) all; none

A as in Apple5

40) Accountants include ________ costs as part of a firm’s costs, while economists include ________ costs.
A) explicit; no explicit B) explicit and implicit; implicit
C) implicit; no implicit D) explicit; explicit and implicit

41) Ernie’s Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he
increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is
Ernie’s marginal cost per earmuff?

A) $5 B) $35 C) $9.55 D) $105

42) Diminishing marginal returns implies that:
A) marginal product is increasing.
B) marginal product is constant.
C) marginal product is decreasing.
D) marginal product may be increasing or decreasing.

43) A monopoly firm’s demand curve
A) is the same as the market demand curve.
B) is perfectly inelastic.
C) is inelastic at high prices and elastic at lower prices.
D) is more inelastic than the demand curve for the product.

44) Which of the following is a characteristic of a perfectly competitive market?
A) selling a base product hint “just tomatoes” B) no barriers to entry
C) a large number of firms in a market D) all of the above

45) In which of the following can a firm apply for a patent?
A) Michael Jackson, a recording artist, releases a new album in the market.
B) A firm develops a new tool that makes cutting grass much easier.
C) An author publishes a new novel.
D) All of the above are activities that can be patented.

A as in Apple6

Figure 14-2

46) Refer to Figure 14-2. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize
loss in the short run, it should

A) shut down because price is less than average total cost.
B) continue to produce because price is greater than average variable cost.
C) continue to produce because a monopolist always earns a profit.
D) shut down because price is greater than marginal cost.

47) The barrier to entry that sustains a natural monopoly is
A) government regulation. B) patent protection.
C) economies of scale. D) implicit price fixing agreements.

48) A public utility is a classic example of
A) perfect competition. B) an oligopoly.
C) a natural monopoly. D) monopolistic competition.

49) Market power is the power to
A) control prices. B) gain another firm’s customers.
C) control output. D) reduce price below cost to deter entry.

50) In which of the following market structures can you find differentiated products?
A) monopolistic competition and oligopoly B) monopoly
C) oligopoly D) perfect competition

A as in Apple7