Microeconomics Part-2

Question-1

Limit pricing occurs when a firm sets price:

A) equal to marginal cost.

B) equal to average cost.

C) at different amounts for different groups of consumers.

D) so low that other firms are prevented from entering the market.

Question-2

A relatively high base income in a cash assistance program __________.

a.   reduces the incentive to work

b. increases the incentive to work

c. does not affect the incentive to work

d. will reduce the incentive to work through the substitution effect, but will increase the incentive to work through the income effect

Question-3

Which of the following statements about featherbedding is correct?

A. It could increase production costs, resulting in higher prices for products

B. The quantity of labor demanded by firms could actually decrease

C. It could lead to a lower wage and smaller employment in the long run

D. All of the above

Question-4

Suppose the nation of Alphonia was charge with dumping lawnmowers in the nation of Omegalon. The charge of dumping lawnmowers in the Omegalon market means that Alphonia was accused of:

 a. selling faulty lawnmowers in Omegalon

 b. selling lawnmowers below cost or below domestic prices. 

c. selling counterfeit-branded lawnmowers in Omegalon 

d. discarding lawnmower that would not sell in their home country

Question-5

In 1995, the United States threatened to impose 100% tariffs on ___from ___if it didn't loosen its protectionist policies. 

a. luxury cars: Japan 

b. auto parts; Japan 

c. brandies; France 

d. light trucks; Germany

Question-6

Tradeoff is

A) allowing the government and other organizations to choose for us.

B) sacrificing one thing for another.

C) deciding who consumes the products produced in an economy.

D) holding other variables fixed

Question-7

Which of the following is a question answered with positive economic analysis?

A) Should the college reduce tuition for out-of-state residents?

B) Should the college charge higher tuition for part-time students?

C) If the college increased its eligibility requirements for enrollment, will class sizes decline?

D) Should the college eliminate its athletic program to cut its costs?

Question-8

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. Which of the following statements is most correct?

A) Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a parking spot.

B) The opportunity cost of using the spot is zero, because Steven owns the house.

C)The opportunity cost of using the parking spot is the price he could charge someone else for using the spot.

D)The opportunity cost depends on how much Steven's mortgage payment is 

Question-9

The quantity demanded of a product increases as ___?

A. Consumer income rises

B. The prices of other products fall

C. The price of the product rises

D. The price of the product falls

Question-10

The market demand curve _____

Shows relationship between the price of a good and quantity that all consumers together are willing to buy

Is drawn assuming that variables such as income tastes are variable

Is drawn assuming that the number of consumer is variable

Is drawn assuming that selling price is fixed

Question-11

Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to know what will happen to their revenue if they increase the price of each donut from $0.80 to $1.  What concept do they need to apply to find out their expected revenue?

A. price elasticity of supply       

  B. price elasticity of demand    

  C. cross elasticity of demand    

  D. income elasticity of demand

Question-12

Which of the following would result from a quota imposed on the quantity of cars that can be imported into the United States?;

A. an increase in the total surplus;

B. an increase in producer surplus;

C. an increase in prices for consumers;

D. an increase in consumer surplus

Question-13

Assume that Crystal's demand for handbags remains constant, but the price of handbags increases. Crystal's consumer surplus __________.;

A. decreases;

B. increases;

C. remains constant;

D. may increase or decrease depending on the amount of the price decrease

Question-14

Assume that production costs rise and demand remains constant. The equilibrium price will __________ and the producer surplus will __________.;

A. increase, increase;

B. increase, decrease;

C. decrease, decrease;

D. decrease, increase

Question-15

Sirens located around a town to warn citizens of the approach of a tornado are an example of

An external cost

A private good

A common resource

A public good

Question-16

Once a firm is forced to consider an external cost, the price of its product will;

a. increase and output will decrease

b. increase and output will increase

c. decrease and output will decrease

d.decrease and output will increase

Question-17

Jamal and Lauren live in the countryside 30 minutes from a city in Virginia. They moved there because they wanted to enjoy the fresh air. After a year of living in their house, the 200 acres that surround their neighborhood were zoned for an industrial property. A paper mill was built on the land and now

emits strong gases that can be smelled from miles away. The paper mill's emission of gases is an example of a (n

a. public good

b. good that imposes an external cost

c. good that provides an external benefit

d. efficient good

Question-18

Utility can be thought of as the same as

a. opportunity cost

b. satisfaction

c. choice

d. none of the above

Question-19

Suppose that Erin spends all of her income on two goods, pizza and fiction novels. If the price of pizza rises then: 

A. the current marginal utility per dollar spent on pizza will rise 

B. the current marginal utility per dollar spent on pizza will fall 

C. the current marginal utility per dollar spent on fiction novels will rise 

D. the current marginal utility per dollar spent on fiction novels will fall

Question-20

When a second firm enters a monopolist's market: 

A) market price will drop. 

B) Sales for the first firm will rise

c) the first firm's profits will increase. 

D) All of the above will occur.

Question-21

Oligopoly differs from monopoly and perfect competition in that ___.

A.     Firms consider other firms actions when choosing price and quantity

B.     There are a few firms in the industry

C.     Firms act strategically 

D.     All of the above

Question-22

A minimum wage that is less than the prevailing market wage will ___.

A.     Have no effect on the market

B.     Increase unemployment

C.     Increase wages

D.     Reduce wages

Question-23

In order to practice price discrimination,  a firm must be in a market such that the consumers in its market ___.

A.     Have identical tastes

B.     Have identical elasticity of demand

C.     Have different elasticity of demand

D.     Have the same demand for its product

Question-24

Which of the following statements is true?

A.     Free trade will benefit all workers in a nation equally

B.     As a result of specialization some workers will be displaced and harmed in the short run by free trade. 

C.     Free trade leads to lower wages for all workers in both nations

D.     Specialization will result in a decline in an industry, and none of those workers will be able to find other jobs. 

Question-25

Import bans, import quotas, voluntary export restraints, and tariffs on goods all:

A. increase imports and raise prices for consumers.

 B. reduce imports and prices for consumers.

C. reduce imports and raise prices for consumers.

D. increase imports and reduce prices for consumers