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Multiple Choice Question of Principles of Microeconomics - Exam | ECON 206, Exams of Microeconomics

Material Type: Exam; Class: Prin of Microeconomics; Subject: Economics; University: Shepherd University; Term: Unknown 1989;

Typology: Exams

Pre 2010

Uploaded on 08/16/2009

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SAMPLE THIRD EXAM
ECON 206
PART I. MULTIPLE CHOICE.
1. What is the most likely response by a rival when an oligopoly firm cuts its price
to increase sales?
a. Raise their prices.
b. Ignore the changes.
c. Cut their prices.
d. Reduce their costs.
2. The measure of market power found by adding the market shares of the largest
four firms is:
a. the concentration ratio.
b. the sales of the market.
c. the monopoly price index.
d. the barriers to entry.
3. A kinked demand curve indicates that rival oligopolists match all:
a. increases in advertising.
b. price increases.
c. advertising reductions.
d. price reductions.
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SAMPLE THIRD EXAM

ECON 206

PART I. MULTIPLE CHOICE.

  1. What is the most likely response by a rival when an oligopoly firm cuts its price to increase sales? a. Raise their prices. b. Ignore the changes. c. Cut their prices. d. Reduce their costs.
  2. The measure of market power found by adding the market shares of the largest four firms is: a. the concentration ratio. b. the sales of the market. c. the monopoly price index. d. the barriers to entry.
  3. A kinked demand curve indicates that rival oligopolists match all: a. increases in advertising. b. price increases. c. advertising reductions. d. price reductions.

Use the graph of the oligopoly firm below to help you answer questions 4 and 5. P MC 4 P 1 A MC 3 MC 2 MC 1 D = P MR Q 1 Q

  1. Given the demand curve above, price and output will not change for the oligopolist as long as: a. new firms do not enter the market. b. marginal cost does not rise above MC 3 or fall below MC 1. c. demand remains inelastic above the market price. d. fixed costs do not change.
  2. Given the demand curve in the graph above, a shift upward in marginal cost from MC 2 to MC 4 will: a. no longer maximize profit at any level of output. b. necessitate raising price and reducing output to maximize profit. c. have no effect on the price or output of the oligopolist. d. permit the oligopolist to reduce price and increase market share.
  1. "Product differentiation" refers to: a. Features that make one product appear different from competing products in the same market. b. Different prices for the same product in a certain market. c. The selling of identical products in different markets. d. The charging of different prices for the same product in different markets.
  2. A monopolistically competitive firm can raise its price somewhat without fear of a large change in sales because of: a. Customer loyalty. b. Economies of scale. c. Large market shares of firms in the market. d. All of the above.
  3. A monopolistically competitive firm maximizes profits or minimizes losses in the short-run by: a. Setting price equal to marginal cost. b. Producing output at the level where ATC is minimized. c. Producing output at the level where P equals ATC. d. Producing output at the level where MR equals MC.
  4. In monopolistic competition, firms compete on the basis of: a. price only. b. non-price competition. c. efficiency. d. profit.
  5. Which of the following markets has a monopolistically competitive market structure? a. Cable TV in a county. b. Major city newspapers. c. Retail gasoline. d. Airplane production.
  6. Entry into a market characterized by monopolistic competition: a. is rare because firms have market power. b. is frequent because barriers to entry are low. c. occurs when a firm's demand is everywhere below its long-run average cost curve. d. results from economies of scale.
  1. The existence of external costs implies that: a. Foreigners only bear the costs of an economic activity. b. The costs of a market activity are borne by a third party. c. Social costs are less than private costs. d. Both b and c are correct. USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 14, 15, 16. Emissions of sulfur dioxide, an air pollutant, can in principle be reduced by imposing atax on the output of factories that emit sulfur dioxide,by introducing a program of tradable permits to pollute, orby mandating that all producers that emit sulfur dioxide cut their emissions by a given amount.
  2. Which of the three options for reducing emissions of sulfur dioxide is a market- based option? a. a tax on the output of factories that emit sulfur dioxide. b. a program of tradable permits to pollute. c. a mandate that all producers that emit sulfur dioxide cut their emissions by a given amount. d. all of the above. e. a and b only.
  3. Which of the three options for reducing emissions of sulfur dioxide is a command-control option? a. a tax on the output of factories that emit sulfur dioxide. b. a program of tradable permits to pollute. c. a mandate that all producers that emit sulfur dioxide cut their emissions by a given amount. d. all of the above. e. a and b only.
  4. Of the three options, economists would be least likely to favor : a. a tax on the output of factories that emit sulfur dioxide. b. a program of tradable permits to pollute. c. a mandate that all producers that emit sulfur dioxide cut their emissions by a given amount. d. Economists would favor all three about equally.

PART II. PROBLEMS.

  1. Suppose that the Japan and the U.S. have the following labor productivity in the production of TVs and bicycles, which imply the production possibilities curves given. Labor Productivity: Output per unit of labor TVs Bicycles Japan .8 4 U.S. .5 4 Japan U.S. TVs Bicycles TVs Bicycles 0 200 0 320 10 150 10 240 20 100 20 160 30 50 30 80 40 0 40 0 a. Which country has absolute advantage in the production of TVs? Of bicycles? Explain your reasoning. b. Calculate the opportunity cost of TVs in each country. Show calculations.

c. Which country has comparative advantage in the production of TVs? Of bicycles? Explain your reasoning. d. If each country decides to specialize in the production of the good for which it has comparative advantage and trade freely for the other good, which of the following could be the international (or world) terms of trade : i. 1 TV for 1 bicycle -or- ii. 1 TV for 6 bicycles? Explain your reasoning fully.