Intermediate Microeconomics Practice Exam

Intermediate Microeconomics Practice Exam

 

Which of the following is true about consumer choice theory?

A) Consumers aim to maximize utility subject to their budget constraint
B) Consumers aim to minimize their utility
C) Budget constraints do not influence consumer choices
D) Utility is always maximized when income is spent equally across all goods

 

The law of demand states that:

A) As the price of a good rises, demand for the good increases
B) As the price of a good rises, demand for the good decreases
C) Demand for a good is not affected by changes in price
D) Demand for all goods is inelastic

 

The marginal rate of substitution (MRS) represents:

A) The rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility
B) The total utility gained from all goods
C) The change in the total utility from consuming an additional unit of a good
D) The point at which the consumer’s budget constraint intersects the indifference curve

 

If the price of a substitute good increases, the demand for the original good:

A) Decreases
B) Increases
C) Remains unchanged
D) Becomes perfectly elastic

 

Which of the following best describes the concept of utility?

A) The satisfaction or pleasure derived from consuming a good or service
B) The cost of producing a good or service
C) The price consumers are willing to pay for a good or service
D) The total revenue generated by the sale of goods

 

The total utility curve:

A) Shows the relationship between total utility and the price of the good
B) Is always upward sloping
C) Reflects diminishing marginal utility
D) Reflects the total cost of consumption

 

Which of the following best represents the law of diminishing marginal utility?

A) The more of a good a person consumes, the less utility they gain from each additional unit
B) Utility always increases as consumption increases
C) The more of a good a person consumes, the greater utility they gain from each additional unit
D) Utility does not change with additional consumption

 

A firm’s total cost curve is derived from:

A) The firm’s revenue function
B) The sum of fixed and variable costs
C) The marginal revenue of the firm
D) The firm’s marginal cost function

 

What is the definition of marginal cost (MC)?

A) The cost of producing one additional unit of output
B) The total cost divided by the quantity produced
C) The difference between total revenue and total cost
D) The total variable cost at the current level of output

 

The production function describes the relationship between:

A) Input prices and output prices
B) The total cost of production and output level
C) Inputs used in production and the resulting level of output
D) The marginal cost and output level

 

Which of the following is a characteristic of a perfectly competitive market?

A) Firms are price makers
B) There is easy entry and exit for firms
C) Products are highly differentiated
D) There is one dominant firm in the market

 

In the short run, a firm should shut down if:

A) The price is greater than average variable cost
B) Total revenue is equal to total cost
C) The price is less than average variable cost
D) The firm is earning positive economic profits

 

The point at which a firm’s marginal cost equals its marginal revenue is:

A) The break-even point
B) The profit-maximizing level of output
C) The shutdown point
D) The break-even price

 

In monopolistic competition, firms:

A) Sell homogeneous products
B) Have significant barriers to entry
C) Sell differentiated products
D) Are price makers with no competition

 

What is the key feature of an oligopoly market structure?

A) A large number of firms competing with identical products
B) A few firms dominate the market, and each firm’s decisions affect others
C) Firms are price takers
D) There are no barriers to entry

 

A natural monopoly occurs when:

A) The firm is the sole producer in the market due to the high costs of production
B) The firm has many competitors but no market power
C) There are significant economies of scale in the production process
D) The firm faces significant entry barriers

 

Which of the following is true about the production possibilities frontier (PPF)?

A) It shows the maximum output combinations of two goods that can be produced given a set of resources
B) It shows the minimum output combinations of two goods that can be produced
C) It reflects the efficiency of a monopoly
D) It shows the amount of income a firm can earn

 

Which of the following describes a firm in a perfectly competitive market?

A) It can influence the price of the product
B) It produces a unique product with no close substitutes
C) It is a price taker
D) It faces significant barriers to entry

 

A firm’s average total cost curve:

A) Is always upward sloping
B) Includes both fixed and variable costs
C) Represents the cost of producing an additional unit of output
D) Is irrelevant in determining profit-maximizing output

 

In the long run, perfectly competitive firms earn:

A) Positive economic profits
B) Zero economic profits
C) Negative economic profits
D) An unpredictable profit

 

A monopoly is characterized by:

A) Many firms selling differentiated products
B) A single firm that controls the entire market for a good or service
C) A few firms with significant market share
D) Free entry and exit from the market

 

The price elasticity of demand measures:

A) The responsiveness of quantity demanded to changes in price
B) The responsiveness of total revenue to price changes
C) The rate of change in supply as demand increases
D) The total number of units sold

 

If the price elasticity of demand for a good is greater than 1, the demand is:

A) Elastic
B) Inelastic
C) Unitary
D) Perfectly inelastic

 

The short-run cost curve of a firm is:

A) Constant and independent of output levels
B) Always higher than the long-run cost curve
C) Equal to the average fixed cost curve
D) A U-shaped curve that reflects increasing and then decreasing marginal costs

 

The efficient scale of a firm occurs when:

A) Marginal cost equals average total cost
B) Average variable cost is minimized
C) The firm’s profit is maximized
D) Total revenue equals total cost

 

A competitive market will result in the most efficient allocation of resources when:

A) The market is regulated by the government
B) There are externalities present
C) Firms can freely enter and exit the market
D) There is a monopoly

 

Which of the following is a characteristic of the indifference curve?

A) It slopes upward and to the right
B) It shows all the combinations of goods that give the consumer the same level of satisfaction
C) It is a straight line
D) It intersects the origin

 

The firm’s supply curve in a perfectly competitive market is:

A) The portion of the marginal cost curve above the average total cost curve
B) The entire marginal cost curve
C) The entire average variable cost curve
D) The portion of the marginal cost curve above the average variable cost curve

 

Which of the following is true about monopolistic competition in the long run?

A) Firms produce at the efficient scale
B) There is no entry of new firms into the market
C) Firms earn positive economic profits
D) Firms earn zero economic profits

 

In a perfectly competitive market, the price and output are determined by:

A) The government
B) The firm’s production capabilities
C) The intersection of the supply and demand curves
D) The monopolist

 

 

The income effect refers to:

A) The change in the quantity demanded of a good due to a change in the good’s price
B) The change in a consumer’s income due to changes in the economy
C) The change in a consumer’s purchasing power due to a price change
D) The increase in income resulting from the consumption of more goods

 

If the cross-price elasticity of demand between two goods is negative, the goods are:

A) Substitutes
B) Complements
C) Independent
D) Perfect substitutes

 

Which of the following would cause a shift in the supply curve for a good?

A) A change in the price of the good
B) A change in the price of related goods
C) A change in the technology used to produce the good
D) A change in consumer preferences

 

A firm’s average variable cost curve typically:

A) Slopes downward initially, then upward after a certain level of output
B) Slopes upward only
C) Is constant regardless of output
D) Is always below the average total cost curve

 

In a perfectly competitive market, firms produce at the point where:

A) Marginal revenue equals average total cost
B) Marginal cost equals marginal revenue
C) Average variable cost equals marginal cost
D) Marginal cost equals average fixed cost

 

Which of the following is true about the long-run equilibrium in a perfectly competitive market?

A) Firms produce at a level where marginal cost exceeds price
B) Firms cannot enter or exit the market
C) Firms produce at the point where marginal cost equals marginal revenue and price equals average total cost
D) Firms earn positive economic profits

 

If a firm in a monopolistically competitive market is producing at an output level where average total cost exceeds price, the firm:

A) Is maximizing its profits
B) Should exit the market in the long run
C) Is earning a positive economic profit
D) Is producing at the efficient scale

 

The marginal product of labor is:

A) The total output produced by the labor force
B) The increase in output from hiring one more unit of labor
C) The total revenue generated by each worker
D) The total cost of hiring labor

 

Which of the following is a feature of the perfectly competitive firm in the long run?

A) The firm can set its own prices
B) The firm experiences economies of scale
C) The firm produces at the point where average total cost is minimized
D) The firm earns positive economic profits

 

The demand curve for a perfectly competitive firm’s product is:

A) Downward sloping
B) Horizontal at the market price
C) Vertical
D) Upward sloping

 

The theory of consumer choice assumes that consumers:

A) Have unlimited resources to buy goods
B) Always make irrational decisions
C) Seek to maximize utility given their budget constraints
D) Have perfect information about all products

 

What does the term “economic profit” refer to?

A) Total revenue minus total costs, including both explicit and implicit costs
B) Total revenue minus only explicit costs
C) Total revenue minus total costs, including only explicit costs
D) Total revenue minus variable costs

 

In the short run, a firm will continue to produce as long as:

A) Its total revenue exceeds total cost
B) Its price exceeds average total cost
C) Its price exceeds average variable cost
D) Its marginal revenue is greater than marginal cost

 

A firm’s marginal revenue product (MRP) is defined as:

A) The additional revenue a firm earns from producing one more unit of output
B) The additional revenue a firm earns from hiring one more unit of labor
C) The total revenue a firm earns from selling one unit of output
D) The cost of hiring an additional worker

 

A monopoly maximizes profit by:

A) Producing at the point where marginal cost equals marginal revenue
B) Setting its price equal to marginal cost
C) Producing at the point where average total cost equals marginal cost
D) Setting output to where price equals average total cost

 

A kinked demand curve is often associated with:

A) Perfectly competitive markets
B) Monopoly markets
C) Oligopolistic markets with price rigidity
D) Firms that experience price discrimination

 

In the short run, a perfectly competitive firm’s supply curve is:

A) The portion of the marginal cost curve above average variable cost
B) The entire marginal cost curve
C) The portion of the marginal cost curve above average total cost
D) The entire average total cost curve

 

A monopolist’s price and output decision is determined by:

A) The market supply curve
B) The demand curve and its marginal cost curve
C) The marginal cost curve only
D) The average total cost curve and the price elasticity of demand

 

In an oligopoly, firms typically:

A) Compete by selling homogeneous products with no market power
B) Have little control over market prices
C) Act independently and do not consider the actions of other firms
D) Take into account the potential reactions of rival firms when making pricing decisions

 

Which of the following is an example of a public good?

A) A national defense system
B) A concert ticket
C) A luxury vehicle
D) A competitive market product

 

The concept of “producer surplus” refers to:

A) The difference between the price a producer is willing to accept and the price actually received
B) The difference between total revenue and total cost
C) The amount producers receive after all costs are paid
D) The total profits of a firm

 

What is price discrimination?

A) Charging different prices for the same product to different customers based on willingness to pay
B) Charging a uniform price for all customers regardless of their characteristics
C) Charging lower prices to customers who buy in bulk
D) Setting a price above marginal cost

 

In a monopoly, the marginal revenue curve:

A) Is the same as the demand curve
B) Lies above the demand curve
C) Lies below the demand curve
D) Is vertical

 

In the long run, firms in a perfectly competitive market:

A) Earn zero economic profits
B) Will exit the market
C) Will maximize profits
D) Will earn positive economic profits

 

Which of the following is a characteristic of an economic good?

A) It is free for consumers to use
B) It has a cost of production
C) It cannot be consumed by more than one person at a time
D) It is produced in unlimited quantities

 

 

The marginal cost (MC) curve of a perfectly competitive firm is upward sloping due to:

A) Diminishing marginal returns to labor
B) Decreasing total costs as output increases
C) The law of supply
D) Perfect elasticity in the supply curve

 

In a monopoly, the firm’s demand curve is:

A) Perfectly elastic
B) Downward sloping
C) Vertical
D) Horizontal

 

Which of the following would result in a rightward shift of the demand curve for a good?

A) An increase in the price of a substitute good
B) A decrease in consumer income (if the good is inferior)
C) A decrease in the price of a complement
D) An increase in the price of a complement

 

The short-run supply curve for a perfectly competitive firm is the portion of the:

A) Average variable cost curve above the average total cost curve
B) Marginal cost curve above the average variable cost curve
C) Average total cost curve above the average variable cost curve
D) Marginal revenue curve above the average total cost curve

 

The “law of demand” states that:

A) The quantity demanded increases as income increases
B) The quantity demanded increases as the price of a good increases
C) The quantity demanded decreases as the price of a good increases
D) The quantity demanded remains the same regardless of price

 

The marginal revenue product (MRP) of labor is equal to:

A) The wage rate multiplied by the number of workers hired
B) The change in total revenue resulting from hiring an additional unit of labor
C) The price of the product multiplied by the marginal cost of labor
D) The increase in total cost resulting from hiring one more worker

 

Which of the following describes a situation in which a firm in perfect competition makes economic profits in the short run?

A) Price is greater than average total cost
B) Price is less than average variable cost
C) Marginal revenue equals marginal cost at output level
D) Average fixed cost equals price at the optimal output

 

In the short run, if a monopolist is earning economic profits, it:

A) Will always reduce production in the long run
B) Can continue to earn economic profits if entry into the market is blocked
C) Must eventually reduce prices to eliminate profits
D) Will lose market share to competitors

 

The point where a firm’s marginal revenue equals its marginal cost is called:

A) The point of profit maximization
B) The break-even point
C) The minimum efficient scale
D) The point of highest total revenue

 

If a firm is experiencing economies of scale, it means that:

A) Average total cost is increasing as output increases
B) Average total cost is decreasing as output increases
C) Marginal cost is greater than average total cost
D) Total cost remains constant as output increases

 

The “demand curve” for labor slopes downward because:

A) As wages increase, the quantity of labor supplied decreases
B) As wages increase, the opportunity cost of labor increases
C) Firms demand less labor at higher wages because it becomes more expensive to hire workers
D) Firms demand more labor at higher wages because labor becomes more productive

 

Which of the following is NOT true for a monopolistically competitive market?

A) Firms differentiate their products to some degree
B) There is free entry and exit in the market
C) Firms earn positive economic profits in the long run
D) There are many firms in the market

 

If the income elasticity of demand for a good is positive and greater than 1, the good is:

A) A luxury good
B) A necessity
C) An inferior good
D) A complementary good

 

A firm’s total cost (TC) is the sum of:

A) Fixed cost and average cost
B) Marginal cost and variable cost
C) Fixed cost and variable cost
D) Average cost and marginal revenue

 

In the long run, a firm in a perfectly competitive market will:

A) Produce at the point where average total cost is minimized
B) Produce at a loss
C) Earn positive economic profits
D) Have the ability to influence market prices

 

If a firm is operating at a point where its marginal cost is greater than its marginal revenue, the firm should:

A) Increase production
B) Decrease production
C) Maintain the current level of output
D) Increase prices

 

In a perfectly competitive market, the firm’s total revenue is:

A) Equal to the price multiplied by the quantity sold
B) Less than the price multiplied by the quantity sold
C) Equal to the fixed costs
D) The same as its total cost

 

A firm’s average total cost curve is U-shaped because:

A) It reflects diminishing marginal returns in the short run
B) The firm’s fixed costs are increasing
C) The firm is experiencing economies of scale
D) It is determined by market demand conditions

 

The total product curve shows:

A) The relationship between output and the amount of labor used
B) The relationship between total cost and total revenue
C) The relationship between labor and capital in production
D) The firm’s total cost at each level of output

 

The price elasticity of supply measures:

A) The responsiveness of the quantity supplied to changes in consumer demand
B) The responsiveness of the quantity supplied to changes in price
C) The relationship between the price and quantity demanded
D) The relationship between the price and income

 

Which of the following best describes the concept of “diminishing marginal returns”:

A) As more of a variable input is added to a fixed input, the marginal product of the variable input decreases
B) The cost of production decreases as more labor is hired
C) Total cost remains constant as output increases
D) The average cost decreases as output increases

 

A monopolist’s price is typically:

A) Equal to marginal cost
B) Greater than marginal cost
C) Lower than marginal cost
D) Equal to average total cost

 

Which of the following is an example of price discrimination?

A) A firm charges a higher price for a product during the peak season
B) A firm charges a different price based on the quantity purchased
C) A firm sets its prices equal to the market rate
D) A firm charges a uniform price for all consumers

 

The production function shows:

A) The relationship between input prices and output levels
B) The cost of producing different levels of output
C) The relationship between input quantities and output quantities
D) The demand curve for a firm’s product

 

The market structure in which a firm has some control over the price but faces competition from similar products is:

A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) Oligopoly

 

 

The law of diminishing marginal utility states that:

A) As a consumer consumes more of a good, the total utility from that good increases at an increasing rate.
B) As a consumer consumes more of a good, the marginal utility of each additional unit of the good decreases.
C) The total utility of a good is constant regardless of the quantity consumed.
D) Marginal utility is always positive, but it declines over time.

 

In the short run, a firm in perfect competition will produce at the level of output where:

A) Marginal cost equals average fixed cost.
B) Marginal cost equals average total cost.
C) Marginal cost equals marginal revenue.
D) Average total cost equals average variable cost.

 

If a firm is operating in a perfectly competitive market, in the long run it will earn:

A) Zero economic profits due to free entry and exit in the market.
B) Positive economic profits due to high barriers to entry.
C) Negative economic profits if the market is efficient.
D) Economic profits equal to its fixed costs.

 

The marginal rate of technical substitution (MRTS) measures:

A) The rate at which a firm can substitute labor for capital without affecting the level of output.
B) The increase in total output when one more unit of labor is added.
C) The point where the firm’s marginal cost equals its marginal revenue.
D) The cost of producing one more unit of output.

 

A natural monopoly occurs when:

A) The firm can produce all output at a constant average cost.
B) There are many firms in the market producing a homogeneous product.
C) A single firm can supply the entire market at a lower cost than two or more firms.
D) The government forces the firm to restrict its output.

 

The cross-price elasticity of demand between two goods is negative, which means that the two goods are:

A) Substitutes.
B) Complements.
C) Unrelated.
D) Normal goods.

 

Which of the following is an example of a price ceiling?

A) A government-imposed maximum price on a good, such as rent control.
B) A minimum price that a firm can charge for a product.
C) The equilibrium price set by the market.
D) A price that results in excess supply in the market.

 

A perfectly competitive firm’s supply curve is the portion of its:

A) Average total cost curve that lies above the price.
B) Average variable cost curve that lies above the price.
C) Marginal cost curve that lies above the average variable cost curve.
D) Marginal cost curve that lies above the average total cost curve.

 

A monopolist will produce at the point where:

A) Price equals marginal cost.
B) Marginal cost equals marginal revenue.
C) Average total cost is minimized.
D) Average revenue equals total cost.

 

Which of the following is a characteristic of monopolistic competition?

A) Firms produce identical products.
B) There are high barriers to entry.
C) Each firm has some degree of market power due to product differentiation.
D) Firms earn economic profits in the long run.

 

The marginal utility per dollar spent on a good is:

A) The total utility divided by the price of the good.
B) The marginal utility divided by the price of the good.
C) The price of the good divided by the total utility.
D) The change in total utility divided by the change in the price of the good.

 

A firm’s short-run cost curve will shift upward if:

A) The price of the firm’s output increases.
B) The cost of one of the firm’s inputs increases.
C) The firm increases its production level.
D) The firm experiences economies of scale.

 

The “deadweight loss” in a monopoly is:

A) The reduction in total surplus that occurs when the market is not in equilibrium.
B) The total surplus in a perfectly competitive market.
C) The area of producer surplus above the equilibrium price.
D) The amount by which monopolists increase their output in the long run.

 

In the short run, a firm should continue to operate if:

A) Its average total cost is greater than the price.
B) It is able to cover its average variable cost.
C) Its marginal cost is greater than its average variable cost.
D) Its average fixed cost is greater than its average total cost.

 

A firm experiences diminishing marginal returns when:

A) The marginal product of an input increases as more units of that input are used.
B) The total product of an input decreases as more units of that input are used.
C) The marginal product of an input decreases as more units of that input are used.
D) The average product of an input remains constant as more units are used.

 

A firm in a perfectly competitive market will shut down in the short run if:

A) Its marginal cost is equal to its marginal revenue.
B) The price is below its average variable cost.
C) The price is below its average total cost.
D) The price is above its average total cost.

 

The Lerner Index of monopoly power is calculated as:

A) (Price – Marginal Cost) / Price
B) (Price – Marginal Revenue) / Price
C) Marginal Cost / Price
D) Marginal Revenue / Price

 

A firm in a perfectly competitive market will achieve productive efficiency when:

A) Marginal cost equals average total cost.
B) The price is equal to marginal cost.
C) Marginal revenue equals marginal cost.
D) Total cost is minimized.

 

In a competitive labor market, the equilibrium wage is determined by:

A) The government.
B) The marginal revenue product of labor.
C) The total number of workers employed.
D) The total output produced.

 

A firm is said to be in long-run equilibrium in a perfectly competitive market when:

A) Price equals marginal cost, and firms are earning positive economic profits.
B) Price equals marginal cost, and firms are earning zero economic profits.
C) The firm is minimizing average variable cost.
D) The firm is producing at its minimum average total cost.

 

 

In a perfectly competitive market, the price of a good is determined by:

A) The government through price controls.
B) The market demand and supply forces.
C) The monopolist’s price-setting ability.
D) The firm’s average total cost.

 

A firm’s long-run average cost curve is typically:

A) U-shaped because of increasing and then decreasing returns to scale.
B) Constant because there are no economies or diseconomies of scale.
C) Horizontal because the firm experiences constant returns to scale.
D) Increasing because of increasing returns to scale.

 

The marginal revenue product (MRP) of labor is calculated by:

A) The change in total revenue divided by the change in labor.
B) The wage rate paid to workers divided by the quantity of labor.
C) The change in marginal cost as labor increases.
D) The price of the good times the marginal product of labor.

 

In the theory of consumer choice, the substitution effect refers to:

A) The change in consumption when a good becomes cheaper due to a decrease in income.
B) The change in consumption when the price of a good changes relative to other goods, holding utility constant.
C) The increase in demand when the price of a good rises.
D) The increase in income that leads to higher demand for all goods.

 

If a monopolist faces a downward-sloping demand curve, then:

A) Marginal revenue is always equal to the price.
B) Marginal revenue is less than the price for all positive quantities of output.
C) Marginal revenue is greater than the price for all quantities of output.
D) The firm can charge any price it wants without reducing the quantity demanded.

 

Which of the following is true for the short-run production function?

A) It represents the relationship between the quantity of inputs and the total output produced, assuming that some inputs are fixed.
B) It only holds when all inputs are variable.
C) It shows the long-run equilibrium output for the firm.
D) It assumes diminishing returns to all factors of production.

 

The marginal cost curve of a firm in a perfectly competitive market:

A) Lies below the average total cost curve.
B) Is upward sloping and intersects the average total cost curve at its minimum.
C) Lies above the average variable cost curve.
D) Slopes downward as the firm experiences economies of scale.

 

The firm in monopolistic competition maximizes profit by producing the quantity of output at which:

A) Marginal cost equals marginal revenue.
B) Marginal cost equals average total cost.
C) Marginal revenue equals price.
D) Average revenue equals average total cost.

 

A firm’s total fixed cost is:

A) The cost of labor.
B) The total cost of all inputs in the short run.
C) The cost that does not change with the level of output in the short run.
D) The cost that varies with the level of output.

 

In the short run, a firm should continue to produce if:

A) The price is greater than or equal to average total cost.
B) The price is greater than average variable cost, even if it is less than average total cost.
C) The price is equal to average fixed cost.
D) The price is less than average variable cost.

 

In monopolistic competition, firms:

A) Sell identical products but have market power.
B) Are price takers and cannot set their own prices.
C) Sell differentiated products and can set prices to some extent.
D) Operate in the long run with zero economic profit.

 

The main difference between a monopoly and a perfectly competitive market is:

A) The number of firms in the market.
B) The pricing power of the firms.
C) The level of government intervention.
D) The degree of market concentration.

 

The efficiency condition for a competitive market occurs when:

A) Marginal cost equals marginal revenue.
B) Price equals marginal cost.
C) Price equals average variable cost.
D) Average total cost is minimized.

 

If a consumer’s budget constraint is represented by the equation 2X + 4Y = 100, and the prices of X and Y are 2 and 4 respectively, then:

A) The consumer can buy a maximum of 50 units of X.
B) The consumer can buy a maximum of 25 units of Y.
C) The consumer has an income of 50.
D) The consumer’s budget constraint does not fit the prices given.

 

The substitution effect refers to:

A) The impact on consumption when a consumer’s income changes.
B) The change in consumption due to a price change, holding utility constant.
C) The increase in the consumer’s total utility when income rises.
D) The reduction in utility due to a price increase.

 

A firm that is a price taker in a perfectly competitive market:

A) Has control over the price of its product.
B) Accepts the market price as given.
C) Can charge any price for its product.
D) Produces a unique product that no other firm produces.

 

A firm experiencing economies of scale:

A) Has an increasing average total cost as it expands production.
B) Can reduce its per-unit costs as it increases the scale of production.
C) Will experience diminishing returns to scale.
D) Can only expand by increasing the number of firms in the market.

 

The total product curve shows the relationship between:

A) The price of the good and the quantity of output.
B) The number of workers hired and the total output produced.
C) The amount of capital and the total cost.
D) The price of the good and the marginal cost.

 

A firm’s short-run supply curve is:

A) The portion of the marginal cost curve above the average total cost curve.
B) The portion of the marginal cost curve above the average variable cost curve.
C) The entire marginal cost curve.
D) The portion of the average total cost curve above the price.

 

In a monopolistically competitive market, firms:

A) Produce identical products.
B) Have no control over the price of their products.
C) Engage in non-price competition, such as advertising and product differentiation.
D) Produce at the minimum average total cost in the long run.

 

 

If the price elasticity of demand for a product is -1.5, then a 10% increase in price will lead to:

A) A 15% decrease in quantity demanded.
B) A 10% decrease in quantity demanded.
C) A 15% increase in quantity demanded.
D) A 10% increase in quantity demanded.

 

In the context of utility theory, the law of diminishing marginal utility states that:

A) As consumption of a good increases, the total utility continues to increase.
B) As consumption of a good increases, the marginal utility decreases.
C) The total utility of a good reaches its maximum when consumption is zero.
D) The marginal utility of all goods is constant.

 

The short-run production function of a firm is characterized by:

A) Fixed inputs and variable outputs.
B) All inputs are variable.
C) At least one input is fixed, and output is variable.
D) The ability to increase output without any increase in input.

 

A perfectly competitive firm maximizes its profit by producing the level of output where:

A) Price equals marginal cost.
B) Marginal revenue equals marginal cost.
C) Marginal cost equals average total cost.
D) Total revenue exceeds total cost by the greatest amount.

 

In the theory of consumer choice, an indifference curve represents:

A) The level of utility a consumer receives from a combination of goods.
B) The consumer’s budget constraint.
C) The number of goods a consumer is willing to buy at a given price.
D) The demand curve for a good.

 

A monopolist will continue to produce as long as:

A) The price is greater than average total cost.
B) The price is greater than average variable cost.
C) The marginal revenue is equal to marginal cost.
D) The price is less than marginal cost.

 

In the context of production, the marginal product of labor refers to:

A) The change in total output from hiring one additional unit of labor.
B) The total output produced by all units of labor.
C) The average amount of output produced per unit of labor.
D) The cost of hiring one additional unit of labor.

 

The average total cost curve is U-shaped due to:

A) The law of diminishing returns and economies of scale.
B) The constant returns to scale at all levels of output.
C) Increasing average fixed costs as output increases.
D) Decreasing variable costs as output increases.

 

A monopolist’s price-setting ability is influenced by:

A) The elasticity of demand for the good.
B) The level of competition in the market.
C) The government’s price control regulations.
D) The firm’s ability to create economies of scale.

 

Which of the following best describes the long-run equilibrium in a perfectly competitive market?

A) Firms are making economic profits.
B) Firms are making zero economic profits, and price equals marginal cost.
C) Firms are incurring losses, and price equals marginal cost.
D) Firms are maximizing profits by setting price equal to average total cost.

 

In the theory of production, economies of scale refer to:

A) The decrease in average total cost as a firm produces more output.
B) The increase in marginal cost as output increases.
C) The increase in average fixed cost as a firm expands production.
D) The increase in output per unit of input as a firm produces more.

 

The price discrimination strategy that charges different prices based on the consumer’s willingness to pay is called:

A) First-degree price discrimination.
B) Second-degree price discrimination.
C) Third-degree price discrimination.
D) Monopolistic pricing.

 

A firm in perfect competition produces the output level where:

A) Marginal cost equals average total cost.
B) Marginal revenue equals price.
C) Average variable cost equals price.
D) Marginal cost equals marginal revenue.

 

If a firm’s average total cost curve is above the market price in a perfectly competitive market, the firm:

A) Should continue to produce in the short run.
B) Should shut down in the short run.
C) Will maximize profit by producing at the lowest point of the average total cost curve.
D) Will earn a positive economic profit.

 

Which of the following is true about the market structure of oligopoly?

A) Firms in an oligopoly are price takers.
B) There are many firms in an oligopoly market, and each firm produces identical products.
C) There are few firms in an oligopoly, and firms may produce differentiated products.
D) Firms in an oligopoly compete based on non-price factors only.

 

In the long run, in a perfectly competitive market, firms produce at the:

A) Profit-maximizing output level.
B) Output level where marginal cost equals average total cost.
C) Output level where average total cost is minimized.
D) Output level where marginal revenue equals marginal cost.

 

A price ceiling is effective only when:

A) The market price is above the ceiling.
B) The market price is below the ceiling.
C) The government sets it above the equilibrium price.
D) The price elasticity of demand is perfectly inelastic.

 

The income effect refers to:

A) The change in consumption due to a change in a consumer’s income.
B) The change in consumption due to a change in the price of a good.
C) The reduction in the demand for a good when the price rises.
D) The change in the total utility from a price change.

 

Which of the following best describes a natural monopoly?

A) A monopoly that arises due to government intervention.
B) A monopoly that occurs when firms merge and reduce competition.
C) A monopoly that occurs because a single firm can supply the entire market at a lower cost than multiple firms.
D) A monopoly that is created through exclusive ownership of a key resource.

 

If a firm is experiencing diminishing marginal returns to labor, it means that:

A) The marginal product of labor increases as more workers are hired.
B) The total product is increasing, but at a decreasing rate.
C) The average total cost is increasing.
D) The firm has reached the optimal scale of production.

 

 

In the case of a perfectly competitive market, if firms are earning positive economic profits in the short run, what is likely to happen in the long run?

A) Firms will continue to earn positive economic profits.
B) New firms will enter the market, increasing supply and lowering prices.
C) Firms will exit the market, reducing supply and increasing prices.
D) Firms will reduce production and increase prices to maintain profits.

 

If a firm’s marginal cost curve lies above its average variable cost curve, this indicates that:

A) The firm should shut down in the short run.
B) The firm is making a profit.
C) The firm is covering its variable costs but not its fixed costs.
D) The firm is in the long run.

 

The marginal revenue product of labor (MRP) is:

A) The additional revenue generated from hiring an additional unit of labor.
B) The wage paid to a worker.
C) The total cost of hiring labor.
D) The change in total cost when hiring an additional worker.

 

A firm in a perfectly competitive market maximizes profit when:

A) Price equals marginal cost.
B) Price equals average total cost.
C) Price equals marginal revenue.
D) Marginal revenue equals marginal cost.

 

The elasticity of supply is defined as:

A) The percentage change in quantity demanded divided by the percentage change in price.
B) The percentage change in quantity supplied divided by the percentage change in price.
C) The change in supply due to a change in demand.
D) The percentage change in income divided by the percentage change in price.

 

The marginal utility of a good decreases as:

A) The quantity of the good consumed increases.
B) The price of the good decreases.
C) The consumer’s income increases.
D) The price of a substitute good increases.

 

A monopolist maximizes profit by setting:

A) Marginal cost equal to marginal revenue.
B) Marginal cost equal to price.
C) Average total cost equal to price.
D) Marginal revenue equal to price.

 

A firm is experiencing economies of scale if:

A) The average cost of production increases as output increases.
B) The marginal cost is increasing as output increases.
C) The firm can produce more output at a lower cost per unit as production increases.
D) The firm produces at the point where marginal cost equals average total cost.

 

In a perfectly competitive market, the long-run supply curve is:

A) Horizontal.
B) Upward sloping.
C) Downward sloping.
D) Vertical.

 

The shutdown point for a firm in the short run occurs when:

A) Total revenue equals total cost.
B) Price equals average total cost.
C) Price equals average variable cost.
D) Marginal cost equals marginal revenue.

 

A firm experiencing increasing marginal returns will have:

A) A marginal cost curve that is downward sloping.
B) A marginal cost curve that is upward sloping.
C) A total cost curve that is linear.
D) A production function that exhibits diminishing returns.

 

The Herfindahl-Hirschman Index (HHI) is used to measure:

A) The price elasticity of demand in a market.
B) The concentration of market power in an industry.
C) The total output produced by firms in a market.
D) The economic profit earned by firms in a competitive market.

 

The price elasticity of supply is likely to be more elastic:

A) In the short run than in the long run.
B) When producers can easily adjust the quantity supplied.
C) When the price of a good is inelastic.
D) When the firm faces a perfectly competitive market.

 

The marginal product of labor equals:

A) The total product divided by the number of workers employed.
B) The change in output resulting from one more unit of labor.
C) The total cost of employing labor.
D) The fixed cost per unit of labor.

 

In the short run, a firm will continue to operate as long as:

A) Price is greater than average total cost.
B) Price is greater than average variable cost.
C) Marginal cost equals marginal revenue.
D) Total revenue exceeds total cost.

 

A firm in monopolistic competition:

A) Has a horizontal demand curve.
B) Has significant barriers to entry.
C) Can influence the price of its product.
D) Earns zero profit in the long run due to entry and exit of firms.

 

The concept of consumer surplus is best defined as:

A) The difference between the price a consumer is willing to pay and the price they actually pay.
B) The total amount of satisfaction a consumer gets from consuming a good.
C) The total revenue earned by a firm from selling a product.
D) The amount of consumer income spent on a particular good.

 

If the price of a substitute good increases, the demand for a product will:

A) Increase.
B) Decrease.
C) Remain the same.
D) Become perfectly elastic.

 

In a perfectly competitive market, if firms are producing at a level where price is greater than average variable cost but less than average total cost, the firm:

A) Will exit the market in the short run.
B) Will continue to operate in the short run but incur a loss.
C) Will increase output to reach long-run equilibrium.
D) Will produce at the profit-maximizing level.

 

Which of the following best describes a Giffen good?

A) A good for which the demand decreases as income increases.
B) A good for which the demand increases as the price increases.
C) A good that is always a necessity.
D) A good for which income elasticity of demand is greater than one.

 

 

The cross-price elasticity of demand between two goods is positive. This implies that:

A) The goods are substitutes.
B) The goods are complements.
C) The goods are inferior goods.
D) The goods have no relationship.

 

In the long run, a perfectly competitive firm will:

A) Earn positive economic profits.
B) Produce at the point where marginal cost equals average total cost.
C) Charge a price greater than average total cost.
D) Maximize revenue rather than profit.

 

A monopolist’s price-setting behavior is based on:

A) The intersection of supply and demand curves.
B) The marginal revenue curve.
C) The marginal cost curve.
D) The demand curve alone.

 

If the marginal product of labor is greater than the average product of labor, then:

A) The average product of labor is increasing.
B) The average product of labor is decreasing.
C) The firm is experiencing diminishing returns to labor.
D) The firm should reduce its workforce.

 

The law of diminishing marginal returns applies when:

A) Marginal product increases with additional units of input.
B) The total product curve is linear.
C) The marginal product of an input decreases as more of the input is used.
D) The firm’s output increases at a constant rate.

 

Which of the following is true about a perfectly competitive firm in the long run?

A) It has the ability to set prices.
B) It produces at the minimum point of the average total cost curve.
C) It operates at a level of output where marginal cost equals price.
D) It earns zero economic profits.

 

In a monopoly, the firm’s marginal revenue curve:

A) Is identical to the demand curve.
B) Lies above the demand curve.
C) Lies below the demand curve.
D) Is horizontal at the market price.

 

A firm is producing in the short run, and its total fixed cost is $500. If its total cost at a level of output is $1,200, the total variable cost must be:

A) $500.
B) $700.
C) $1,200.
D) $1,700.

 

A firm’s long-run average cost curve is derived from:

A) The total cost curve in the short run.
B) The total variable cost curve.
C) The minimum points of all possible short-run average cost curves.
D) The firm’s production function.

 

A firm with market power:

A) Can sell at the same price as all other firms in the market.
B) Can set the price above marginal cost without losing all customers.
C) Has a perfectly elastic demand curve.
D) Faces a horizontal demand curve.

 

A monopolistically competitive firm maximizes its profit by producing at the level of output where:

A) Marginal revenue equals marginal cost.
B) Price equals average total cost.
C) Marginal revenue equals price.
D) Marginal cost equals average total cost.

 

The price elasticity of demand for a product is elastic when:

A) A small change in price causes a large change in quantity demanded.
B) A large change in price causes a small change in quantity demanded.
C) Price and total revenue move in the same direction.
D) The demand curve is vertical.

 

The main difference between a perfectly competitive firm and a monopolist is that:

A) A monopolist produces a homogeneous product, while a perfectly competitive firm does not.
B) A monopolist is a price maker, while a perfectly competitive firm is a price taker.
C) A monopolist faces a perfectly elastic demand curve, while a perfectly competitive firm faces a downward sloping demand curve.
D) A monopolist’s profit is always higher than a perfectly competitive firm’s profit.

 

In the short run, a firm will shut down if:

A) Its price is less than average total cost.
B) Its price is greater than average variable cost but less than average total cost.
C) Its price is less than average variable cost.
D) Its total revenue is greater than total cost.

 

The optimal consumption rule states that consumers will maximize their total utility when:

A) The price of a good equals the marginal utility of that good.
B) The marginal utility per dollar spent on each good is equal across all goods.
C) Total utility is maximized.
D) The total expenditure on each good is equal.

 

Which of the following is a feature of an oligopoly market structure?

A) Many firms, homogeneous products, and no barriers to entry.
B) A single firm that controls the entire market.
C) A few large firms, significant barriers to entry, and potential for strategic behavior.
D) Firms set the price equal to marginal cost.

 

A firm’s long-run supply curve in a perfectly competitive market is upward sloping when:

A) There are constant returns to scale.
B) The firm faces increasing marginal costs.
C) The firm faces decreasing average total costs.
D) All firms in the market have the same cost structure.

 

The deadweight loss in monopoly pricing arises because:

A) Firms set prices equal to marginal cost.
B) The monopolist produces less and charges more than a perfectly competitive firm.
C) Monopolists always earn positive economic profits.
D) The monopolist faces a perfectly elastic demand curve.

 

The term “marginal cost” refers to:

A) The total cost of producing the last unit of output.
B) The additional cost incurred when producing one more unit of output.
C) The fixed cost of production.
D) The average cost of producing a given level of output.

 

In the context of consumer theory, the substitution effect occurs when:

A) The consumer changes their purchasing behavior due to a change in income.
B) The consumer switches to a less expensive alternative as the price of a good increases.
C) The consumer increases their consumption of a good when their income increases.
D) The price of a complementary good decreases, leading to more consumption of both goods.

 

 

A production function exhibits diminishing marginal returns when:

A) The total product curve increases at an increasing rate.
B) The marginal product of labor decreases as more labor is employed.
C) The average product increases as more labor is added.
D) The firm experiences economies of scale.

 

If the marginal cost curve lies below the average total cost curve, then:

A) The average total cost is falling.
B) The firm is operating at a loss.
C) The firm is experiencing economies of scale.
D) The average total cost curve is upward sloping.

 

A monopolist’s total revenue is maximized when:

A) Marginal revenue is greater than marginal cost.
B) Marginal revenue equals marginal cost.
C) Marginal revenue is less than marginal cost.
D) Average revenue equals marginal cost.

 

Which of the following best characterizes a perfectly competitive market?

A) Many firms, identical products, and no barriers to entry.
B) A single firm controls the market and sets prices.
C) A few firms dominate the market, with high barriers to entry.
D) Firms charge a price above marginal cost.

 

The profit-maximizing output for a perfectly competitive firm occurs where:

A) Marginal revenue equals average total cost.
B) Marginal revenue equals marginal cost.
C) Price equals marginal cost.
D) Average variable cost is minimized.

 

In the long run, if firms in a perfectly competitive market are earning positive economic profits, what will happen?

A) Firms will exit the market, reducing supply and raising prices.
B) New firms will enter the market, increasing supply and driving down prices.
C) Existing firms will increase their fixed costs.
D) The demand curve for the product will become perfectly inelastic.

 

Which of the following is true about a monopolist’s pricing decision?

A) The monopolist sets price equal to marginal cost.
B) The monopolist’s price is determined by the market’s supply curve.
C) The monopolist produces at the point where marginal revenue equals marginal cost.
D) The monopolist charges the same price as firms in a perfectly competitive market.

 

Which of the following is an example of a variable input in the short run?

A) Rent paid for office space.
B) The salary of a permanent employee.
C) The number of workers hired by a firm.
D) The cost of a machine purchased for the factory.

 

If a monopolist faces a linear demand curve and sets price above marginal cost, the firm:

A) Will always be efficient.
B) Will maximize its total revenue.
C) Can earn economic profits in the long run.
D) Will charge a price equal to average total cost.

 

The average total cost curve for a firm is U-shaped because:

A) Fixed costs increase with output.
B) Variable costs decrease with output.
C) Initially, average total cost decreases as output increases, but eventually it increases due to diminishing returns.
D) Marginal cost decreases as output increases.

 

The market structure where firms sell differentiated products and have some degree of market power is:

A) Perfect competition.
B) Monopoly.
C) Oligopoly.
D) Monopolistic competition.

 

A firm’s supply curve in the short run is:

A) The portion of its marginal cost curve above the average total cost curve.
B) The portion of its marginal cost curve above the average variable cost curve.
C) The portion of its marginal cost curve below the average variable cost curve.
D) The same as the demand curve.

 

If the income elasticity of demand for a good is negative, the good is:

A) A luxury good.
B) A substitute good.
C) A normal good.
D) An inferior good.

 

In the case of perfect competition, firms will enter the market if:

A) The price is greater than average total cost.
B) The price is less than average total cost.
C) The marginal cost curve is downward sloping.
D) The firm is earning zero economic profits.

 

A firm operates in a perfectly competitive market, and the price of the good is $10. If the firm’s marginal cost is $8, the firm should:

A) Increase production to maximize profits.
B) Decrease production to maximize profits.
C) Continue producing at the same level to maximize profits.
D) Shut down immediately.

 

In a monopoly, price discrimination occurs when:

A) The firm charges the same price to all customers.
B) The firm charges different prices to different consumers based on their willingness to pay.
C) The firm sets a price equal to marginal cost.
D) The firm does not produce at the point where marginal cost equals marginal revenue.

 

The marginal rate of substitution (MRS) between two goods is defined as:

A) The amount of one good a consumer is willing to give up to obtain an additional unit of another good, keeping utility constant.
B) The price ratio of the two goods.
C) The change in the quantity demanded of one good when the price of another good changes.
D) The point where the budget line intersects the indifference curve.

 

If the price of a good increases and its supply becomes more elastic, the price elasticity of supply:

A) Increases.
B) Decreases.
C) Remains unchanged.
D) Becomes negative.

 

Which of the following describes the relationship between the marginal cost and the marginal product of labor?

A) Marginal cost increases when the marginal product of labor increases.
B) Marginal cost decreases when the marginal product of labor increases.
C) Marginal cost and marginal product of labor are unrelated.
D) Marginal cost and marginal product of labor always move in the same direction.

 

A firm in perfect competition produces where:

A) Price equals average total cost.
B) Marginal cost equals average variable cost.
C) Marginal cost equals marginal revenue.
D) Price equals marginal revenue.

 

 

If the income elasticity of demand for a good is greater than 1, the good is considered:

A) A luxury good.
B) A necessity good.
C) An inferior good.
D) A substitute good.

 

In a perfectly competitive market, firms produce where:

A) Marginal cost equals average total cost.
B) Marginal cost equals marginal revenue.
C) Average total cost is minimized.
D) Average total cost equals average variable cost.

 

A firm’s long-run supply curve in a perfectly competitive market is:

A) The portion of the marginal cost curve that lies above the average total cost curve.
B) The same as its marginal cost curve.
C) The same as its average total cost curve.
D) The portion of the marginal cost curve above the average variable cost curve.

 

A monopolist maximizes profit by producing the quantity of output where:

A) Marginal cost equals average total cost.
B) Marginal revenue equals marginal cost.
C) Marginal cost equals average variable cost.
D) Price equals marginal cost.

 

A firm experiencing economies of scale will see:

A) Marginal cost increase as output increases.
B) Average total cost decrease as output increases.
C) Marginal revenue increase as output increases.
D) Diminishing returns to labor.

 

Which of the following is a characteristic of a monopolistically competitive market?

A) Many firms, differentiated products, and no barriers to entry.
B) One firm, a unique product, and significant barriers to entry.
C) Few firms, homogeneous products, and barriers to entry.
D) Many firms, identical products, and no barriers to entry.

 

In the short run, a firm should continue to operate if:

A) Price is greater than average variable cost.
B) Price is greater than average total cost.
C) Price is equal to marginal cost.
D) Marginal revenue is greater than average total cost.

 

The total cost curve becomes steeper as:

A) The firm experiences increasing returns to scale.
B) The firm experiences diminishing marginal returns.
C) The firm’s production function becomes more efficient.
D) The firm moves to a higher level of output.

 

The price elasticity of demand is calculated by:

A) Dividing the change in quantity by the change in price.
B) Dividing the change in price by the change in quantity.
C) Dividing the percentage change in quantity by the percentage change in price.
D) Multiplying the percentage change in quantity by the percentage change in price.

 

If a firm in a perfectly competitive market is earning zero economic profit in the long run, it must be:

A) Charging a price greater than average total cost.
B) Producing where price equals marginal cost.
C) Facing barriers to entry.
D) Experiencing a downward-sloping demand curve.

 

A perfectly competitive firm’s marginal revenue is:

A) Equal to the price of the good.
B) Less than the price of the good.
C) Greater than the price of the good.
D) Equal to the average total cost.

 

In the short run, when a firm faces diminishing marginal returns, its marginal cost curve:

A) Shifts downward.
B) Slopes upward.
C) Slopes downward.
D) Becomes horizontal.

 

If a firm is experiencing a constant marginal cost and a downward-sloping demand curve, it will:

A) Set a price equal to marginal cost.
B) Maximize its profit by equating marginal revenue and marginal cost.
C) Produce at the output level where marginal cost equals average total cost.
D) Set the price at the minimum of average total cost.

 

A firm’s long-run equilibrium under monopolistic competition occurs when:

A) Price equals marginal cost.
B) Price equals average total cost, and the firm earns zero economic profit.
C) Price is above average total cost.
D) Marginal cost equals marginal revenue.

 

Which of the following is a feature of a natural monopoly?

A) A firm has constant marginal cost.
B) The market has many small firms.
C) One firm can supply the entire market at a lower cost than multiple firms.
D) Firms in the industry produce identical products.

 

A firm in monopolistic competition maximizes its profit by producing the quantity at which:

A) Marginal revenue equals marginal cost.
B) Average total cost equals price.
C) Marginal cost equals average total cost.
D) Average variable cost is minimized.

 

If the demand for a good is perfectly inelastic, then:

A) The price elasticity of demand is equal to zero.
B) The price elasticity of demand is equal to infinity.
C) The quantity demanded remains unchanged when price changes.
D) The demand curve is upward sloping.

 

If a monopolist sets a price equal to its marginal cost, then:

A) The monopolist will maximize its profit.
B) The monopolist will break even.
C) The monopolist will experience a loss.
D) The monopolist will produce an efficient output level.

 

A firm is said to be in the long run when:

A) All inputs are fixed.
B) The firm has achieved maximum efficiency.
C) The firm has the ability to change all of its inputs.
D) The firm cannot adjust its production levels.

 

The marginal product of labor (MPL) is the additional output produced when:

A) One more unit of capital is added to the production process.
B) One more unit of labor is added to the production process.
C) One more unit of fixed input is added.
D) The firm increases its fixed costs.

 

 

The law of diminishing marginal utility states that:

A) The total utility of a good always increases as consumption increases.
B) The marginal utility of a good decreases as consumption increases.
C) The marginal utility of a good increases as consumption increases.
D) Total utility decreases as the price of a good increases.

 

In the context of production, the short-run is defined as:

A) A period where all inputs are variable.
B) A period where at least one input is fixed.
C) A period where both inputs and outputs are fixed.
D) A period where the firm experiences diminishing returns.

 

The concept of a budget constraint refers to:

A) The limitation on the amount of money a consumer can spend.
B) The combination of goods a consumer can afford to buy at different prices.
C) The income a consumer has to spend.
D) The opportunity cost of consuming one good over another.

 

In a perfectly competitive market, firms are price:

A) Makers.
B) Takers.
C) Seekers.
D) Movers.

 

The marginal cost curve intersects the average total cost curve at:

A) The point of minimum average variable cost.
B) The point of minimum total cost.
C) The point of minimum average total cost.
D) The point of maximum marginal cost.

 

Which of the following is true for a monopolist in the long run?

A) It will always produce where marginal cost equals marginal revenue.
B) It will set a price equal to the marginal cost of production.
C) It will earn zero economic profit.
D) It will earn positive economic profit.

 

In the theory of consumer choice, the substitution effect refers to:

A) The change in consumption due to a change in income.
B) The change in consumption due to a change in the price of the good.
C) The effect of changing tastes and preferences on consumption choices.
D) The change in the total utility from consuming a good.

 

In the long run, the average total cost curve of a firm under perfect competition:

A) Is horizontal.
B) Is U-shaped and reflects economies of scale.
C) Lies above the marginal cost curve.
D) Is upward sloping due to diminishing returns.

 

A firm that is a price maker operates in a:

A) Perfectly competitive market.
B) Monopoly.
C) Oligopoly.
D) Monopolistic competition.

 

In a monopoly, the marginal revenue curve:

A) Is identical to the demand curve.
B) Lies below the demand curve and slopes downward.
C) Lies above the demand curve.
D) Is horizontal at the level of price.

 

The production function represents:

A) The relationship between inputs and output.
B) The level of output when only capital is changed.
C) The cost of production at different levels of output.
D) The number of workers employed at different output levels.

 

If the price of a good increases and the demand for the good decreases, the good is said to have:

A) Elastic demand.
B) Inelastic demand.
C) Perfectly elastic demand.
D) Unitary elastic demand.

 

Which of the following is true about a perfectly competitive market?

A) Firms have pricing power.
B) There are barriers to entry.
C) Firms produce differentiated products.
D) Firms produce a homogeneous product.

 

In the case of diminishing returns to labor, the marginal product of labor:

A) Continues to increase as more labor is employed.
B) Initially increases and then starts to decrease.
C) Always decreases as more labor is employed.
D) Remains constant regardless of the amount of labor.

 

Which of the following is a feature of a perfectly competitive market in the long run?

A) Firms earn positive economic profits.
B) The price is above the minimum average total cost.
C) Firms enter and exit freely.
D) There are significant barriers to entry.

 

If the price elasticity of demand is greater than 1, the demand for the good is:

A) Inelastic.
B) Elastic.
C) Unitary elastic.
D) Perfectly inelastic.

 

A monopolistic competitor maximizes its profit by producing at the quantity where:

A) Marginal cost equals average total cost.
B) Marginal revenue equals marginal cost.
C) Average total cost equals average variable cost.
D) Marginal revenue equals average total cost.

 

If a firm’s marginal revenue is greater than its marginal cost, the firm:

A) Should increase its output to maximize profit.
B) Should decrease its output to maximize profit.
C) Is earning negative profit.
D) Is in long-run equilibrium.

 

The opportunity cost of producing a good is:

A) The total cost of production.
B) The value of the next best alternative forgone.
C) The fixed costs incurred in production.
D) The variable costs incurred in production.

 

A firm’s supply curve in the short run is given by the portion of the marginal cost curve that:

A) Lies below the average variable cost curve.
B) Lies above the average variable cost curve.
C) Lies below the average total cost curve.
D) Lies above the average total cost curve.

 

 

The income effect is:

A) The change in consumption that results from a change in the price of a good.
B) The change in consumption that results from a change in the consumer’s income.
C) The substitution of one good for another as a result of a price change.
D) The change in price that causes consumers to switch between different income groups.

 

If the marginal cost of production is constant and the price in the market is greater than the marginal cost, a perfectly competitive firm will:

A) Shut down its operations.
B) Produce more output to maximize profits.
C) Increase its prices to improve profitability.
D) Reduce output to decrease losses.

 

In a competitive market, firms are able to enter or exit the market freely. In the long run, this ensures that firms:

A) Earn positive economic profits.
B) Face a perfectly elastic demand curve.
C) Earn zero economic profits.
D) Will experience increasing costs.

 

The concept of economies of scale refers to:

A) A reduction in total costs as the scale of production increases.
B) An increase in marginal costs as output increases.
C) A constant relationship between input and output.
D) A situation where increasing output increases the average cost.

 

A firm’s marginal revenue product of labor (MRP) is:

A) The additional output produced by an additional unit of labor.
B) The total revenue generated by all workers employed.
C) The price of the good multiplied by the marginal cost of labor.
D) The extra revenue a firm receives from hiring an additional worker.

 

A monopolist maximizes profit by producing at the point where:

A) Marginal cost equals average total cost.
B) Marginal revenue equals average variable cost.
C) Marginal revenue equals marginal cost.
D) Average total cost is minimized.

 

The concept of marginal utility refers to:

A) The total satisfaction gained from all units of a good consumed.
B) The additional satisfaction gained from consuming one more unit of a good.
C) The difference between total utility and total expenditure.
D) The total expenditure on a good divided by the price.

 

A firm’s cost structure is influenced by:

A) The price of its product.
B) The level of output.
C) The price of its inputs.
D) Both B and C.

 

In the long run, firms in a perfectly competitive market:

A) Will produce at the point where price equals marginal cost.
B) Will experience decreasing costs as the market grows.
C) Will earn positive economic profits.
D) Will produce at the point where price equals average total cost.

 

Which of the following is true for monopolistic competition?

A) Firms produce homogeneous products.
B) Firms are price takers.
C) There are significant barriers to entry.
D) Firms produce differentiated products.

 

If a firm is experiencing diseconomies of scale, this means:

A) The firm’s average costs are decreasing as output increases.
B) The firm is experiencing increasing returns to scale.
C) The firm’s average costs are increasing as output increases.
D) The firm is at the point of maximum efficiency.

 

If the cross-price elasticity of demand between two goods is negative, then the two goods are:

A) Complements.
B) Substitutes.
C) Unrelated.
D) Normal goods.

 

A firm’s total revenue is maximized when the price elasticity of demand is:

A) Zero.
B) One.
C) Infinite.
D) Greater than one.

 

The law of diminishing marginal returns occurs when:

A) The total product increases at a decreasing rate as more units of labor are added.
B) The marginal product of labor increases with additional labor.
C) The average total cost curve slopes upward.
D) The firm faces constant returns to scale.

 

The marginal revenue product of capital is defined as:

A) The additional revenue generated from employing one more unit of capital.
B) The total revenue divided by the number of capital units used.
C) The price of the good multiplied by the total quantity produced.
D) The change in output divided by the change in capital.

 

In a competitive market, a firm’s short-run supply curve is:

A) The portion of the marginal cost curve above average total cost.
B) The portion of the marginal cost curve above average variable cost.
C) The entire marginal cost curve.
D) The portion of the average total cost curve above average variable cost.

 

In the short run, a perfectly competitive firm will produce at the quantity where:

A) Price equals average variable cost.
B) Marginal revenue equals marginal cost.
C) Total revenue equals total cost.
D) Average total cost is minimized.

 

The term “monopoly” refers to:

A) A market structure in which many firms sell identical products.
B) A market structure where there is only one firm in the market.
C) A market structure with high levels of competition and low entry barriers.
D) A firm that produces multiple products.

 

If a firm in a perfectly competitive market is earning economic profits in the short run, in the long run, this will lead to:

A) Increased competition and lower profits.
B) Decreased competition and higher profits.
C) Firms exiting the market and higher prices.
D) No change in the market structure.

 

The supply curve for a perfectly competitive firm in the short run is the portion of the:

A) Average total cost curve above the minimum point.
B) Marginal cost curve above the average variable cost curve.
C) Marginal revenue curve above the average total cost curve.
D) Average fixed cost curve above the average variable cost curve.

 

 

A firm will continue to operate in the short run even if it is making a loss, as long as:

A) Its total revenue is greater than total cost.
B) Its total revenue is greater than or equal to total fixed costs.
C) The price is greater than or equal to average variable costs.
D) The price is greater than average total cost.

 

A Giffen good is a product for which:

A) An increase in price leads to an increase in demand.
B) An increase in price leads to a decrease in demand.
C) The price elasticity of demand is infinite.
D) The price and demand are perfectly inelastic.

 

The point where the supply and demand curves intersect is called the:

A) Equilibrium price.
B) Marginal cost price.
C) Average total cost.
D) Price floor.

 

In monopolistic competition, firms produce:

A) Identical products with no differentiation.
B) Highly differentiated products with unique features.
C) Products that are substitutes for each other but not identical.
D) Products that are the same but have different price points.

 

The marginal product of labor (MPL) is:

A) The change in output when an additional unit of labor is employed.
B) The amount of output produced by all units of labor.
C) The total cost of labor for producing output.
D) The additional cost of hiring one more worker.

 

The concept of “consumer surplus” refers to:

A) The difference between what consumers are willing to pay and what they actually pay.
B) The total amount of money consumers spend in the market.
C) The amount of goods that consumers are willing to buy at a certain price.
D) The difference between marginal utility and price.

 

A decrease in the price of a complementary good will:

A) Increase the demand for the good in question.
B) Decrease the demand for the good in question.
C) Have no effect on the demand for the good in question.
D) Shift the supply curve of the good in question to the left.

 

The marginal cost curve in the short run:

A) Is the same as the average variable cost curve.
B) Lies above the average variable cost curve.
C) Lies below the average total cost curve.
D) Is identical to the average total cost curve.

 

A firm experiencing economies of scale is:

A) Producing at the minimum point of its average total cost curve.
B) Experiencing rising average costs as output increases.
C) Able to reduce costs as its scale of production increases.
D) Facing a perfectly elastic demand curve.

 

In a perfectly competitive market, firms can:

A) Set their own prices above market equilibrium.
B) Earn economic profits in the long run.
C) Only earn zero economic profits in the long run.
D) Collude to set prices above market equilibrium.

 

The demand curve for a perfectly competitive firm is:

A) Downward sloping, reflecting a negative relationship between price and quantity demanded.
B) Horizontal at the market price.
C) Vertical, indicating that quantity demanded does not change with price.
D) Upward sloping, reflecting an increase in demand as price increases.

 

A price floor:

A) Is set below the equilibrium price and causes a shortage.
B) Is set above the equilibrium price and causes a surplus.
C) Is set at the equilibrium price and has no effect.
D) Is a government-imposed maximum price.

 

If a firm is operating where marginal cost equals marginal revenue and the price is greater than average variable cost, the firm will:

A) Shut down in the short run.
B) Continue to produce in the short run.
C) Increase its output to reduce costs.
D) Produce less output to minimize loss.

 

The average total cost (ATC) curve:

A) Always decreases as output increases.
B) Always increases as output increases.
C) Has a U-shape, first decreasing and then increasing.
D) Is upward sloping due to diminishing marginal returns.

 

A natural monopoly occurs when:

A) The firm’s production costs increase as the firm expands.
B) The firm’s average cost decreases as the firm expands.
C) A single firm can serve the entire market at a lower cost than multiple firms.
D) The market is so small that only one firm can survive.

 

The price elasticity of demand is highest when:

A) The good is a necessity with few substitutes.
B) The good is a luxury with many substitutes.
C) The good has a low income elasticity.
D) The good has a perfectly inelastic demand curve.

 

The law of supply states that:

A) The quantity supplied increases as price increases.
B) The quantity supplied decreases as price increases.
C) The quantity supplied is not related to price.
D) The quantity supplied is constant regardless of price.

 

If a firm is operating in a perfectly competitive market, the firm’s marginal revenue is:

A) Greater than the price of the good.
B) Equal to the price of the good.
C) Less than the price of the good.
D) Independent of the price.

 

The average product of labor is:

A) The total output produced divided by the number of workers.
B) The additional output produced by one more worker.
C) The total cost of labor in the production process.
D) The change in output produced by a given change in labor.

 

A monopolist’s marginal revenue curve:

A) Lies below the demand curve for the monopolist’s product.
B) Is identical to the demand curve.
C) Lies above the average total cost curve.
D) Is horizontal, reflecting perfect price elasticity.

 

 

In the long run, firms in a perfectly competitive market:

A) Can make positive economic profits.
B) Can only make zero economic profits.
C) Will exit the market if they are making losses.
D) Can earn positive accounting profits but zero economic profits.

 

In a monopolistic competition market structure, firms:

A) Produce identical products and are price takers.
B) Have market power due to product differentiation.
C) Face perfectly elastic demand curves.
D) Produce homogeneous goods and are price makers.

 

If the price elasticity of demand for a good is greater than 1, the demand is:

A) Inelastic.
B) Unitary elastic.
C) Elastic.
D) Perfectly elastic.

 

The concept of diminishing marginal utility implies that:

A) The more of a good a consumer consumes, the greater the additional satisfaction derived from each additional unit.
B) The more of a good a consumer consumes, the less additional satisfaction is derived from each additional unit.
C) Consumers will stop consuming goods once total utility is maximized.
D) Consumers always consume goods in equal quantities to maximize satisfaction.

 

In the case of a natural monopoly, a firm:

A) Faces a downward-sloping demand curve and has increasing average costs.
B) Experiences constant returns to scale and high average costs.
C) Has decreasing average costs as output increases.
D) Can achieve productive efficiency but not allocative efficiency.

 

If a firm is operating in the short run and its total revenue is less than its total variable costs, it should:

A) Continue to produce in the short run to minimize losses.
B) Shut down immediately to minimize losses.
C) Increase its output to increase its revenue.
D) Raise its prices to increase revenue.

 

The price elasticity of supply is defined as the:

A) Percentage change in price divided by the percentage change in quantity supplied.
B) Percentage change in quantity supplied divided by the percentage change in price.
C) Change in quantity supplied divided by the change in price.
D) Change in price divided by the change in quantity supplied.

 

In a perfectly competitive market, a firm’s short-run supply curve is:

A) The portion of its marginal cost curve that lies above average total cost.
B) The portion of its marginal cost curve that lies above average variable cost.
C) The portion of its demand curve that lies above marginal cost.
D) The portion of its average total cost curve that lies above marginal cost.

 

The income elasticity of demand is positive for:

A) Inferior goods.
B) Normal goods.
C) Giffen goods.
D) Both normal and inferior goods.

 

If a firm is operating in a perfectly competitive market, its total revenue is equal to:

A) The market price times the quantity sold.
B) The marginal cost times the quantity sold.
C) The average total cost times the quantity sold.
D) The marginal revenue times the quantity produced.

 

If the demand curve for a good is perfectly elastic, then:

A) The quantity demanded does not change when the price changes.
B) The price does not change when the quantity demanded changes.
C) The price is fixed and consumers will buy any quantity at that price.
D) The firm is able to increase its price without losing customers.

 

Which of the following is true for a monopolist in the short run?

A) The firm faces a horizontal demand curve.
B) The firm maximizes profit where marginal cost equals average total cost.
C) The firm sets its price above the marginal cost to maximize profit.
D) The firm will always produce at the minimum point of its average total cost curve.

 

A perfectly competitive firm maximizes profit when:

A) Marginal revenue equals marginal cost.
B) Marginal cost equals average total cost.
C) Average total cost equals price.
D) Marginal revenue equals average total cost.

 

In the short run, a firm will shut down if:

A) Its price is greater than average variable cost.
B) Its price is less than average total cost.
C) Its price is less than average variable cost.
D) Its total revenue is less than its total fixed cost.

 

The law of diminishing returns suggests that:

A) As the quantity of a factor of production increases, total output will increase at a decreasing rate.
B) The marginal product of a factor of production will always increase.
C) Total output will eventually begin to decrease as more units of input are added.
D) Firms should always increase the amount of input to increase total output.

 

In the long run, a perfectly competitive firm earns:

A) Positive economic profits.
B) Zero economic profits.
C) Positive accounting profits but zero economic profits.
D) Economic losses.

 

A monopolist’s profit-maximizing level of output occurs where:

A) Marginal cost equals marginal revenue.
B) Average total cost equals average revenue.
C) Price equals average total cost.
D) Marginal cost equals average variable cost.

 

The average total cost curve is U-shaped because:

A) Initially, average total cost decreases as output increases, and then it increases.
B) Average total cost increases at all levels of output.
C) The firm experiences economies of scale at all levels of output.
D) The firm has increasing marginal costs at all levels of output.

 

If the market demand curve is elastic, a decrease in price will:

A) Increase total revenue.
B) Decrease total revenue.
C) Not affect total revenue.
D) Decrease the quantity demanded.

 

The Herfindahl-Hirschman Index (HHI) is used to measure:

A) The total output of a market.
B) The degree of market concentration.
C) The elasticity of demand for a good.
D) The consumer surplus in a market.

 

 

If a firm’s marginal cost curve is above the average variable cost curve, then the firm:

A) Is making losses.
B) Is making positive economic profits.
C) Is covering its variable costs.
D) Is minimizing its total cost.

 

In the short run, a perfectly competitive firm maximizes its profit where:

A) Marginal cost equals average total cost.
B) Marginal revenue equals marginal cost.
C) Price equals average total cost.
D) Price equals marginal cost.

 

Which of the following is characteristic of a monopolistic competition market structure?

A) Firms produce identical products.
B) Firms have no control over the price.
C) There are many sellers and low barriers to entry.
D) There are a few firms with significant market power.

 

In the long run, in a perfectly competitive market, firms:

A) Can produce at a level where marginal cost exceeds average total cost.
B) Earn positive economic profits.
C) Operate at a level where price equals marginal cost and average total cost.
D) Will always produce at the minimum point of their average total cost curve.

 

The demand curve for a firm in perfect competition is:

A) Upward sloping.
B) Horizontal at the market price.
C) Downward sloping.
D) Vertical at the market price.

 

If a firm is experiencing economies of scale, it means that:

A) The firm’s average total cost is increasing as output increases.
B) The firm is experiencing diminishing marginal returns.
C) The firm’s average total cost is decreasing as output increases.
D) The firm is minimizing its marginal cost.

 

The total cost curve typically has which of the following shapes?

A) It is always a straight line.
B) It is upward sloping and concave.
C) It is upward sloping and convex.
D) It is downward sloping and convex.

 

In the long run, a firm in a monopolistic competitive market will:

A) Continue to make profits.
B) Enter into a perfectly competitive market.
C) Earn zero economic profits.
D) Face a horizontal demand curve.

 

A firm that is a price maker:

A) Can set the price in a perfectly competitive market.
B) Has control over the price in a monopolistic competition market.
C) Can set the price in a monopoly but not in perfect competition.
D) Has no control over the price and is a price taker.

 

Which of the following best describes the effect of a price increase on a perfectly competitive firm in the short run?

A) The firm will earn higher profits, which may attract new firms.
B) The firm will reduce production because demand is elastic.
C) The firm will increase its production to take advantage of higher prices.
D) The firm will leave the market due to increased costs.

 

A firm in a perfectly competitive market will shut down in the short run if:

A) Its total revenue is less than total cost.
B) Its price is less than average variable cost.
C) Its price is greater than average total cost.
D) Its marginal cost is equal to average total cost.

 

Which of the following is an example of a public good?

A) A television broadcast.
B) A new smartphone.
C) A concert ticket.
D) A private park.

 

If a monopolist sets its price above marginal cost, it:

A) Maximizes its total revenue.
B) Operates at the point where marginal revenue equals marginal cost.
C) Will eventually face competition.
D) Earns a deadweight loss.

 

A perfectly competitive firm will continue to produce in the short run as long as:

A) Price is greater than average total cost.
B) Price is greater than average variable cost.
C) Marginal revenue equals marginal cost.
D) Price is equal to marginal cost.

 

If a firm in a perfectly competitive market is making losses in the short run, it will:

A) Continue producing to minimize losses as long as price covers average variable cost.
B) Shut down immediately.
C) Increase its output to reduce losses.
D) Raise its prices to eliminate losses.

 

A firm’s total cost is the sum of:

A) Fixed costs only.
B) Variable costs only.
C) Fixed and variable costs.
D) Marginal costs and variable costs.

 

The price elasticity of demand is equal to 1 when:

A) The demand curve is vertical.
B) The demand curve is horizontal.
C) The percentage change in quantity demanded equals the percentage change in price.
D) The total revenue curve is maximized.

 

In the case of perfect competition, economic profit is:

A) Always positive in the long run.
B) Zero in the long run due to entry of new firms.
C) Positive in the short run but negative in the long run.
D) Maximized when price exceeds marginal cost.

 

The marginal revenue curve for a perfectly competitive firm is:

A) The same as its demand curve.
B) Below the demand curve.
C) Equal to average total cost.
D) Above the price line.

 

A firm’s long-run supply curve in a perfectly competitive market is:

A) The part of its marginal cost curve above average total cost.
B) The part of its marginal cost curve below average variable cost.
C) The part of its average total cost curve above the marginal cost curve.
D) Horizontal at the level of minimum efficient scale.

 

 

If a firm’s marginal cost is greater than its average variable cost, it must be:

A) Operating in the short run.
B) Minimizing its average total cost.
C) Experiencing increasing returns to scale.
D) Experiencing diminishing marginal returns to labor.

 

In a perfectly competitive market, if firms are earning positive economic profits in the short run, in the long run:

A) New firms will enter the market, driving the price down to the level of average total cost.
B) The government will regulate prices to prevent entry of new firms.
C) Firms will continue to earn positive economic profits.
D) The market will become monopolized due to the higher profits.

 

A firm that is experiencing economies of scale can produce:

A) At a higher cost as output increases.
B) At a lower cost as output increases.
C) At the same cost no matter how much output increases.
D) At a higher cost in the long run.

 

In the short run, a firm should shut down if:

A) Total revenue is greater than total variable cost.
B) Marginal cost is greater than marginal revenue.
C) Price is greater than average total cost.
D) Price is less than average variable cost.

 

A monopolist will maximize its profit by:

A) Setting price equal to marginal cost.
B) Setting price equal to average total cost.
C) Setting marginal revenue equal to marginal cost.
D) Setting price at the minimum point of the average total cost curve.

 

The concept of diminishing marginal returns implies that:

A) The marginal product of labor increases as more labor is added.
B) The total product curve slopes upward as more inputs are used.
C) The marginal product of labor decreases as more labor is added.
D) The total cost of production increases as output increases.

 

In the long run, a perfectly competitive firm will produce at the point where:

A) Marginal cost equals average total cost.
B) Price equals average variable cost.
C) Marginal revenue equals marginal cost.
D) Average total cost is at its minimum.

 

In a monopolistic competition market structure, firms produce:

A) Homogeneous products.
B) Differentiated products.
C) Products with perfect substitutes.
D) Products with no substitutes.

 

A monopolist’s marginal revenue curve is:

A) The same as its demand curve.
B) Above the price line.
C) Below the demand curve and slopes downward.
D) Vertical.

 

The long-run equilibrium of a perfectly competitive firm occurs when:

A) Price is above marginal cost.
B) Firms are making zero economic profit.
C) Price is below average total cost.
D) The firm is earning a positive economic profit.

 

The income effect refers to:

A) The change in the quantity demanded of a good due to a change in the price of a related good.
B) The change in the quantity demanded of a good due to a change in income.
C) The change in the quantity demanded of a good due to a change in the price of the good itself.
D) The change in the quantity demanded of a good due to a change in tastes.

 

The elasticity of supply measures:

A) The responsiveness of quantity supplied to changes in price.
B) The responsiveness of quantity demanded to changes in income.
C) The responsiveness of price to changes in quantity.
D) The responsiveness of demand to changes in income.

 

The deadweight loss in a monopoly is the result of:

A) Efficient allocation of resources.
B) A price set equal to marginal cost.
C) A price set above marginal cost.
D) The absence of market power.

 

A price discriminating monopolist charges higher prices to:

A) Consumers with more elastic demand.
B) Consumers with less elastic demand.
C) All consumers equally.
D) Consumers who have no alternatives.

 

Which of the following best describes a firm in perfect competition?

A) A firm that faces an upward-sloping demand curve.
B) A firm that is a price taker.
C) A firm that can influence the market price.
D) A firm that produces differentiated products.

 

In a monopoly, marginal revenue is always:

A) Equal to the price.
B) Greater than the price.
C) Less than the price.
D) Equal to the quantity demanded.

 

In the long run, in monopolistic competition, firms:

A) Make zero economic profit.
B) Earn positive economic profit.
C) Have no entry barriers.
D) Experience economies of scale.

 

Which of the following is true for a perfectly competitive firm in the long run?

A) It operates at a loss in the long run.
B) It operates at the point where average total cost is minimized.
C) It has significant market power.
D) It can set its own price.

 

A firm’s total revenue is equal to:

A) The total number of units sold multiplied by the price per unit.
B) The price per unit minus the cost per unit.
C) The price per unit times the number of units produced.
D) The total cost of production.

 

If the marginal product of labor is increasing, this implies:

A) The firm is experiencing diminishing returns.
B) The firm is experiencing increasing returns to labor.
C) The firm is maximizing output.
D) The firm is operating at its minimum cost.

 

 

If a firm is producing at a point where its marginal cost is below its average total cost, the firm:

A) Is producing at its minimum efficient scale.
B) Will experience decreasing average total costs as output increases.
C) Should decrease output to minimize total cost.
D) Should increase its price to maximize profit.

 

A firm is in long-run equilibrium in perfect competition when:

A) The firm is earning a normal profit.
B) The firm is maximizing its total revenue.
C) The firm is minimizing its costs.
D) The firm is earning an economic profit.

 

The law of diminishing marginal utility states that:

A) As a consumer consumes more of a good, the marginal utility of each additional unit increases.
B) As a consumer consumes more of a good, the marginal utility of each additional unit decreases.
C) The total utility of a good decreases as more units are consumed.
D) Total utility is maximized when the marginal utility of the last unit consumed is zero.

 

In the short run, a firm’s average variable cost curve is:

A) U-shaped.
B) Horizontal.
C) Upward sloping.
D) Downward sloping.

 

In monopolistic competition, firms face:

A) A perfectly elastic demand curve.
B) A downward-sloping demand curve.
C) An upward-sloping demand curve.
D) A perfectly inelastic demand curve.

 

Which of the following is a characteristic of a natural monopoly?

A) Large economies of scale.
B) Many firms can enter the market easily.
C) The firm’s average total cost curve is upward sloping.
D) The firm’s marginal cost is greater than average total cost.

 

A firm’s total cost curve is steeper as output increases because:

A) It is experiencing economies of scale.
B) It is experiencing diseconomies of scale.
C) It is maximizing its production.
D) It is reducing its fixed costs.

 

Which of the following best describes the concept of opportunity cost?

A) The total cost of producing a good or service.
B) The cost of the next best alternative that must be forgone when a decision is made.
C) The sum of fixed and variable costs of production.
D) The financial cost of production minus any externalities.

 

The shutdown point for a perfectly competitive firm occurs when:

A) Price is equal to average total cost.
B) Price is greater than average total cost.
C) Price is equal to average variable cost.
D) Price is greater than average variable cost.

 

A monopolist’s ability to set prices above marginal cost depends on:

A) The number of firms in the market.
B) The elasticity of demand for the product.
C) The firm’s ability to produce at a lower cost than competitors.
D) The lack of substitutes for the product.

 

A firm in a perfectly competitive market faces a price of $20. If its marginal cost is $15 and its average variable cost is $10, the firm should:

A) Shut down in the short run.
B) Increase its output to maximize profit.
C) Decrease its output to minimize loss.
D) Continue producing in the short run.

 

The long-run supply curve for a perfectly competitive market is:

A) Upward sloping.
B) Vertical.
C) Downward sloping.
D) Horizontal.

 

A firm’s total revenue is maximized when:

A) Marginal cost equals marginal revenue.
B) Average total cost is minimized.
C) Marginal cost is greater than marginal revenue.
D) The price is equal to the average variable cost.

 

In a perfectly competitive market, in the long run, firms enter the market when:

A) Firms are earning economic profits.
B) Firms are earning zero economic profits.
C) Price is equal to marginal cost.
D) Firms are incurring losses.

 

The relationship between total cost and marginal cost is such that:

A) Marginal cost increases as total cost decreases.
B) Marginal cost increases as total cost increases.
C) Total cost increases as marginal cost decreases.
D) Marginal cost and total cost are unrelated.

 

If the cross-price elasticity of demand between two goods is negative, the goods are:

A) Substitutes.
B) Complements.
C) Normal goods.
D) Inferior goods.

 

A firm in monopolistic competition has the ability to:

A) Set its price equal to marginal cost.
B) Produce a homogeneous product.
C) Differentiate its product from others.
D) Produce at the lowest point of its average total cost curve.

 

A perfectly competitive firm’s marginal revenue equals:

A) Price.
B) Total revenue divided by output.
C) Average total cost.
D) Marginal cost.

 

If the price of a good increases, the quantity demanded of that good will decrease if the good is:

A) A normal good.
B) A Giffen good.
C) A substitute good.
D) A complement good.

 

In a competitive market, if firms are earning positive economic profits in the short run, the long-run adjustment will involve:

A) A shift in the demand curve.
B) A decrease in market supply.
C) An increase in market supply.
D) An increase in market price.

 

 

In the context of consumer choice theory, the budget constraint represents:

A) The quantity of goods a consumer can afford to buy at a given income level and prices.
B) The preferences of a consumer for different goods.
C) The relationship between income and utility.
D) The quantity of goods that a consumer chooses to purchase.

 

A firm operates in the short run and its total fixed costs are $100. If its average variable cost is $20 and it produces 10 units of output, what is the firm’s total cost?

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

 

If the price of a good rises and the demand for that good increases, it suggests that the good is:

A) A substitute good.
B) A Giffen good.
C) A complement good.
D) An inferior good.

 

Which of the following is a feature of monopolistic competition?

A) Many firms, each producing a differentiated product.
B) Barriers to entry are high.
C) The firm is a price taker.
D) Firms produce identical products.

 

The elasticity of demand for a good is the:

A) Percentage change in quantity demanded divided by the percentage change in income.
B) Percentage change in quantity demanded divided by the percentage change in price.
C) Total quantity demanded at a given price.
D) Total amount consumers are willing to pay for a good.

 

If a monopolist faces a linear downward-sloping demand curve, its marginal revenue curve:

A) Is identical to the demand curve.
B) Is above the demand curve.
C) Is below the demand curve.
D) Is vertical.

 

The marginal product of labor is the:

A) Additional output produced when one more unit of labor is added.
B) Total output produced by all workers.
C) The total revenue from labor.
D) Difference between total revenue and total cost.

 

In perfect competition, long-run equilibrium occurs when:

A) Price equals marginal cost.
B) Firms are earning positive economic profits.
C) Price equals average total cost.
D) The market is at maximum production.

 

A firm’s marginal cost curve is upward sloping due to:

A) Diminishing marginal returns to factors of production.
B) The law of demand.
C) The economies of scale.
D) Increasing average total cost.

 

A monopolist maximizes profit by producing the quantity at which:

A) Marginal cost equals marginal revenue.
B) Average total cost equals marginal revenue.
C) Price equals marginal cost.
D) Price equals average total cost.

 

If a firm is operating where marginal cost is greater than marginal revenue, the firm should:

A) Increase output.
B) Decrease output.
C) Keep output constant.
D) Increase price.

 

The price elasticity of demand for a good is determined by:

A) The size of the good’s market.
B) The availability of substitutes for the good.
C) The time of day the good is purchased.
D) The number of firms in the market.

 

A firm in perfect competition faces a market price of $15 and its marginal cost is $10. In this situation, the firm should:

A) Increase output to maximize profit.
B) Decrease output to reduce costs.
C) Continue producing as long as marginal cost equals marginal revenue.
D) Shut down production.

 

The “efficient scale” of a firm is the level of output at which:

A) Marginal revenue equals marginal cost.
B) The firm maximizes its total revenue.
C) The firm minimizes its average total cost.
D) Average total cost equals average variable cost.

 

In the case of a Giffen good, the income effect outweighs the substitution effect, leading to:

A) A positive relationship between price and quantity demanded.
B) A negative relationship between price and quantity demanded.
C) No change in quantity demanded.
D) A horizontal demand curve.

 

The substitution effect explains why:

A) A decrease in the price of a good leads to an increase in the quantity demanded of that good.
B) A decrease in the price of a good leads to a decrease in the quantity demanded of that good.
C) A consumer will always buy more of a good if its price decreases.
D) Consumers will buy less of a good if its price increases.

 

In the long run, if firms in a perfectly competitive market are earning economic profits, what will happen?

A) New firms will enter the market, increasing supply and driving the price down.
B) Existing firms will leave the market.
C) The supply curve will shift leftward.
D) Firms will stop producing.

 

The marginal revenue product of labor is:

A) The additional revenue generated by employing one more unit of labor.
B) The total revenue generated by labor.
C) The total cost of employing labor.
D) The total output produced by labor.

 

A firm in monopolistic competition maximizes its profit by setting the price where:

A) Marginal cost equals marginal revenue.
B) Price equals marginal cost.
C) Average total cost equals marginal revenue.
D) Average total cost equals price.

 

Which of the following is an assumption of the model of perfect competition?

A) Firms are able to set prices above marginal cost.
B) All firms produce a homogeneous product.
C) There are significant barriers to entry.
D) There is only one firm in the market.

 

 

The concept of “diminishing marginal utility” implies that:

A) As a person consumes more of a good, the total utility decreases.
B) The more of a good a person consumes, the less satisfaction they get from each additional unit.
C) A person will never consume too much of a good.
D) The more of a good a person consumes, the more satisfaction they get from each additional unit.

 

In a competitive market, firms will produce at the point where:

A) Marginal cost equals marginal revenue.
B) Average total cost equals average variable cost.
C) Marginal revenue equals average total cost.
D) Marginal cost equals average total cost.

 

If a firm’s marginal cost is less than its average total cost, then:

A) Average total cost is decreasing.
B) Average total cost is increasing.
C) The firm is making an economic profit.
D) The firm is in long-run equilibrium.

 

In monopolistic competition, the demand curve faced by a firm is:

A) Perfectly elastic.
B) Perfectly inelastic.
C) Downward sloping, but more elastic than a monopoly.
D) Downward sloping and less elastic than in perfect competition.

 

In a perfectly competitive market, if the price is greater than average total cost, firms:

A) Will enter the market in the long run.
B) Will leave the market in the long run.
C) Will reduce production.
D) Will maintain production at the same level.

 

The law of diminishing returns states that as more units of a variable input are added to a fixed input:

A) Marginal product increases at a decreasing rate.
B) Marginal product increases at an increasing rate.
C) Marginal product decreases.
D) Total product decreases.

 

A price ceiling is effective only if it is set:

A) Above the equilibrium price.
B) Below the equilibrium price.
C) At the equilibrium price.
D) It is always effective.

 

If the cross-price elasticity of demand between two goods is negative, the goods are:

A) Substitutes.
B) Complements.
C) Independent.
D) Necessities.

 

If a firm in a perfectly competitive market is producing where marginal cost equals marginal revenue and the price is equal to average total cost, the firm:

A) Is earning economic profit.
B) Is earning zero economic profit.
C) Should increase its production.
D) Should decrease its production.

 

The optimal consumption rule for a consumer states that:

A) The consumer should spend all of their income on the good with the highest marginal utility.
B) The consumer should equalize the marginal utility per dollar spent across all goods.
C) The consumer should allocate income in such a way that marginal utility is maximized.
D) The consumer should only purchase the good that gives the highest total utility.

 

A monopoly maximizes profit by:

A) Producing at the point where marginal cost equals marginal revenue.
B) Setting a price equal to marginal cost.
C) Producing at the point where average total cost equals marginal revenue.
D) Producing at the point where average variable cost equals marginal revenue.

 

In the long run, a perfectly competitive firm will produce at the level of output where:

A) Price equals average total cost.
B) Marginal revenue equals marginal cost.
C) Total revenue equals total cost.
D) All of the above.

 

The production function shows the relationship between:

A) The quantity of inputs used in production and the quantity of output produced.
B) The total cost and the level of output.
C) The total revenue and the price level.
D) The price of a good and the quantity demanded.

 

A perfectly competitive firm’s supply curve in the short run is:

A) The portion of the marginal cost curve above average total cost.
B) The portion of the marginal cost curve above average variable cost.
C) The average total cost curve.
D) The marginal revenue curve.

 

The total cost of production is:

A) The sum of fixed and variable costs.
B) The sum of the costs of capital and labor.
C) The total revenue minus total profit.
D) The cost of goods sold.

 

Which of the following describes an oligopoly market structure?

A) There is one firm that controls the entire market.
B) There are a large number of firms producing identical products.
C) A few large firms dominate the market, and they may produce differentiated or identical products.
D) All firms are price takers.

 

The shutdown point for a firm occurs when:

A) Price equals marginal cost.
B) Average total cost is minimized.
C) Price equals average variable cost.
D) Marginal cost is greater than marginal revenue.

 

The total revenue for a firm is:

A) Price times quantity.
B) Price minus cost.
C) The area under the marginal cost curve.
D) The sum of fixed and variable costs.

 

The income effect explains why, when the price of a good falls, a consumer:

A) Will buy more of that good and less of other goods.
B) Will buy more of that good and more of other goods.
C) Will buy less of that good and more of other goods.
D) Will buy more of other goods, but not more of that good.

 

If a firm in monopolistic competition is making economic profits, in the long run, new firms will:

A) Enter the market, shifting the demand curve for existing firms to the left.
B) Enter the market, shifting the demand curve for existing firms to the right.
C) Exit the market, reducing competition.
D) Remain in the market, maintaining the demand curve.

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