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This set of Micro economics 2 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics 2 Set 1
Q1 | Which market model has the least number of firms?
- monopolistic competition
- pure competition
- pure monopoly
- oligopoly
Q2 | If the demand curve facing a firm is perfectly elastic, then:
- its marginal revenue will equal price.
- its marginal revenue schedule will decrease at an increasing rate.
- its marginal revenue schedule decreases twice as fast as the demand curve.
- it can increase its total revenue by lowering the price of its product.
Q3 | A profit-maximizing firm in the short run will expand output:
- until marginal cost begins to rise.
- until total revenue equals total cost.
- until marginal cost equals average variable cost.
- as long as marginal revenue is greater than marginal cost.
Q4 | Price is constant or "given" to the individual firm selling in a purely competitive marketbecause:
- the firm\s demand curve is downward sloping.
- there are no good substitutes for the firm\s product.
- each seller supplies a negligible fraction of total supply.
- product differentiation is reinforced by extensive advertising.
Q5 | In pure competition, the marginal revenue of a firm always equals:
- product price.
- total revenue.
- average total cost.
- marginal cost.
Q6 | A firm should always continue to operate at a loss in the short run if:
- the firm will show a profit.
- the owner enjoys helping her customers.
- it can cover its variable costs and some of its fixed costs.
- the firm cannot produce any other products more profitably.
Q7 | The purely competitive firm's supply curve:
- is perfectly inelastic in the short run.
- is horizontal in the long run.
- is upward sloping when some inputs are fix
Q8 | Which is true of normal profits
- they are necessary to keep a firm in the industry in the long run.
- they are zero under pure competition in the long run.
- they are excluded from a firm\s costs of production.
- they are greater than the opportunity cost to the firm.
Q9 | The representative firm in a purely competitive industry:
- will always earn a profit in the short run.
- may earn either an economic profit or a loss in the long run.
- will always earn an economic profit in the long run.
- will earn an economic profit of zero in the long run.
Q10 | Allocative efficiency occurs when the:
- minimum of average total cost equals average revenue.
- minimum of average total cost equals marginal revenue.
- marginal cost equals the marginal benefit to society.
- marginal revenue equals marginal benefit to society.
Q11 | When a purely competitive firm is in long-run equilibrium, price is equal to:
- marginal cost, but may be greater or less than average cost.
- minimum average cost, and also to marginal cost.
- minimum average cost, but may be greater or less than marginal cost.
- marginal revenue, but may be greater or less than both average and marginal cost.
Q12 | Under conditions of pure monopoly:
- there are close substitutes.
- there is no advertising.
- the firm is a price taker.
- entry is blocked.
Q13 | A monopoly is most likely to emerge and be sustained when:
- output demand is relatively elastic.
- firms have u-shaped, average-total-cost curves.
- fixed capital costs are small relative to total costs.
- economies of scale are large relative to market demand.
Q14 | Which is a barrier to entry?
- patents
- revenue maximization
- profit maximization
- elastic product demand
Q15 | The pure monopolist who is nondiscriminating must decrease price on all units of aproduct sold in order to sell additional units. This explains why:
- there are barriers to entry in pure monopoly.
- a monopoly has a perfectly elastic demand curve.
- marginal revenue is less than average revenue.
- total revenues are greater than total costs at the profit maximizing level of output.
Q16 | A nondiscriminating monopolist will find that marginal revenue:
- exceeds average revenue or price.
- is identical to price.
- is sometimes greater and sometimes less than price.
- is less than average revenue or price.
Q17 | At the profit-maximizing level of output, a monopolist will always operate where:
- price is greater than marginal cost.
- price is greater than average revenue.
- average total cost equals marginal cost.
- total revenue is greater than total cost.
Q18 | In the short run, a monopolist's profits:
- may be positive, negative, or zero.
- are positive because of the monopolist\s market power.
- are positive if the monopolist\s elasticity of demand is less than 1.
- are positive if the monopolist\s selling price is above average variable cost.
Q19 | Monopolists are said to be allocatively inefficient because:
- they produce where mr > mc.
- at the profit-maximizing output price is greater than avc.
- they produce only the type of product they desire and do not consider the consumer.
- at the profit-maximizing output the marginal benefit to society of additional output is
Q20 | The economic incentive for price discrimination depends on:
- prejudices of business managers.
- differences among sellers\ costs.
- a desire to evade antitrust legislation.
- differences among buyers\ demand elasticities.
Q21 | Which would definitely not be an example of price discrimination?
- a theater charges children less than adults for a movie.
- universities charge higher tuition for out-of-state residents.
- a doctor charges for services according to the income of patients.
- an electric power company charges less for electricity used during off-peak hours when
Q22 | A market is clearly NOT perfectly competitive if which of the following is true inequilibrium
- price exceeds marginal cost.
- price exceeds average variable cost.
- price exceeds average fixed cost.
- price equals opportunity cost
Q23 | If a perfectly competitive industry is in long-run equilibrium, which of the following ismost likely to be true
- some firms can be expected to leave the industry.
- individual firms are not operating at the minimum points on their average total cost curves.
- firms are earning a return on investment that is equal to their opportunity costs.
- some factors are not receiving a return equal to their opportunity costs.
Q24 | Which of the following is NOT a characteristic of a competitive market
- it has many buyers
- it has many sellers
- the products traded are identical
- firms set the price (price makers)
Q25 | Which of the following statements is true, regarding the revenues of a firm under perfectcompetition
- the marginal revenue and the average revenue are equal to the price
- the marginal revenue is greater than the average revenue
- the marginal revenue is greater than the total revenue
- the total revenue is less than the average revenue