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This set of Micro economics 2 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics 2 Set 4
Q1 | Market power is defined as
- the ability of a firm to charge any price it wants
- produce and sell as large a quantity as possible at high prices
- the ability of a seller or buyer to affect the market price of a good or service
- sell large a quantity at high prices
Q2 | Marginal revenue for a monopolist is equal to
- the increased revenue from the sale of an additional unit less the loss of revenue from selling previous units at a lower price
- the change in revenue resulting from a one unit change in output
- the change in revenue divided by the change in output
- all of the above are applicable
Q3 | For a monopolist, marginal revenue is always less than price because
- as output increases, the price of all units must fall to sell the additional unit
- because at lower prices, profit margins fall
- in order to sell additional quantities, the additional units much be sold at a lower price
- because monopolist is a price maker
Q4 | The profit maximizing output level for a monopolist is
- the output level where price elasticity of demand is −1 and total revenue is maximized
- the output level where price elasticity of demand is +1 and total revenue is maximized
- the output level where marginal revenue equals marginal cost
- where the difference between price and average total cost is the largest
Q5 | The supply curve for the monopolist
- does not exist
- is represented by the marginal cost curve above the average total cost curve
- is represented by the marginal cost curve above the average variable cost curve
- is represented by the marginal cost curve above the average cost curve
Q6 | The Lerner Index is a measure of __________
- perfect competition
- monopoly power
- competition
- market
Q7 | For the monopolist, at the profit maximizing level of output
- price is greater than marginal cost (p > mc)
- price is equal to marginal cost (p=mc)
- price may be greater than or equal to marginal cost,
- price is less than marginal cost (p
Q8 | A major source of monopoly power in a market is
- a low market elasticity of demand
- a high market price elasticity of demand
- aggressive rivalry between firms in a market
- the presence of many firms in a market
Q9 | According to economic pricing theory, the basic objective of every pricing strategy
- is to reduce prices in order to increase consumer surplus and the quantity sold
- to raise prices in order to reduce consumer surplus
- sell at a price and quantity where total revenue is maximized
- to capture consumer surplus and convert it to additional profit for the firm
Q10 | The practice of charging different prices to different consumers for the same goods or services is known as _____
- product differentiation
- marketing
- aggressive selling
- price discrimination
Q11 | Which of the following statements about industries that are oligopolies is false
- firms in these industries may attempt to cooperate
- firms in these industries are interdependent
- the fact that there is more than one firm in an oligopoly means that there are no barriers to entry
- an oligopoly with two firms is called a duopoly
Q12 | The price rigidity in an oligopolistic market is explained by _______
- price discrimination
- product differentiation
- bundling
- kinked demand curve
Q13 | Product differentiation is seen in
- perfect competition
- monopoly
- monopolistic competition
- pure competition
Q14 | Price discrimination is a strategy in
- monopoly
- perfect competition
- monopolistic competition
- pure competition
Q15 | Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firmis employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm
- the firm is in long-run equilibrium
- the firm is earning excess profits
- the firm should expand production
- the firm should contract production
Q16 | That the perfectly competitive firm will pick a combination of inputs where the ratio ofeach input’s marginal product to its price is equal follows from
- the need to use inputs in fixed proportions
- the backward bending supply curve of labour
- cost minimization
- the attempt to achieve a target rate of return
Q17 | If an additional worker costs you Rs. 15 per hour, and that person can add 25 units of output to the firm, you should hire that person as long as
- 25 remains above rs.15
- 25/rs.15 is greater than zero
- rs.15/25 is great than zero
- the value of the marginal product is above rs.15 .........................
Q18 | Entry is restricted under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q19 | Demand curve is perfectly elastic under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q20 | Demand curve is elastic under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q21 | Demand curve is inelastic under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q22 | Differentiated but close substitutes exist under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q23 | Selling cost is insignificant under:
- Perfect competition
- Monopoly
- Monopolistic competition
- All of the above
Q24 | Few firms exist under:
- Perfect competition
- Oligopoly
- Monopolistic competition
- Both perfect and monopolistic competition
Q25 | In which market structure, price and output solution is indeterminate?
- Oligopoly
- Monopolistic competition
- Perfect competition
- Monopoly