C13 Microeconomics Final Exam SCORE 95 PERCENT

Question 1

2.5 / 2.5 points

Game theory is concerned with

Question options:

A) 

predicting the results of bets placed on games like roulette.

B) 

the choice of an optimal strategy in conflict situations.

C) 

utility maximization by firms in perfectly competitive markets.

D) 

the migration patterns of caribou in Alaska.

Question 2

2.5 / 2.5 points

A major threat to longer-term profits exists when barriers to entry into an industry are high.

Question options:

True

False

Question 3

2.5 / 2.5 points

Which of the following is an example of a game theory strategy?

Question options:

A) 

You scratch my back and I'll scratch yours.

B) 

If the shoe fits, wear it.

C) 

Monkey see, monkey do.

D) 

None of the above.

Question 4

2.5 / 2.5 points

Which of the following is correct concerning opportunity cost?

Question options:

A) 

Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have  
purchased anyway.

B) 

To compute opportunity costs, you should subtract benefits from costs.

C) 

Opportunity costs and the idea of trade-offs are not closely related.

D) 

Rational people should compare various options without considering opportunity costs.

Question 5

2.5 / 2.5 points

To achieve more market power, firms can:

Question options:

A) 

Raise their profit margin on prices

B) 

Differentiate their products from the products of their rivals

C) 

Lobby the government to eliminate barriers to entry

D) 

Reduce their costs of production

E) 

Advertise that they charge low prices

Question 6

2.5 / 2.5 points

Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

Question options:

A) 

decrease output to increase profit.

B) 

maintain the current level of output to maximize profit.

C) 

increase output to increase profit.

D) 

Not enough information is given to determine if Carol should increase, decrease, or not change her level of output.

Question 7

2.5 / 2.5 points

Game theory refers to

Question options:

A) 

a plan for the actions that a player in a game will take under every conceivable circumstance that the player might face.

B) 

a situation in which each player chooses the strategy that yields the highest payoff, given the strategy chosen by the other players.

C) 

optimal decision making by microeconomic agents.

D) 

the branch of microeconomics concerned with the analysis of optimal decision making in competitive situations

Question 8

2.5 / 2.5 points

In perfect competition, a firm's marginal revenue equals its:

Question options:

A) 

Price

B) 

Supply curve

C) 

Total revenue

D) 

Average revenue

Question 9

2.5 / 2.5 points

A dominant strategy

Question options:

A) 

is a strong strategy.

B) 

guarantees a Nash equilibrium.

C) 

is a strategy that is better for a player than any other the player might choose, regardless of the other player's strategy.

D) 

depends on the other player's strategy

Question 10

0 / 2.5 points

Which one of the following would Adam Smith agree is an example of market failure requiring government interference?

Question options:

A) 

Many dot.com internet based companies go bankrupt in 2000.

B) 

Alex Rodriguez is offered $252 million to play baseball for 10 years.

C) 

Stock values of many high tech companies fall by more than 50% in 2000.

D) 

The production of steel pollutes the air and endangers the environment.

E) 

The price of heating oil continues to increase making it difficult, if not impossible, for the poor to be able to afford to heat their homes this winter.

Question 11

2.5 / 2.5 points

In the long run, the monopolist can remain in the industry at a price that is just below long-run average costs.

Question options:

True

False

Question 12

2.5 / 2.5 points

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

Question options:

A) 

an amusement park like Disney World

B) 

a civic center owned and operated by the government

C) 

a state university

D) 

a regional flood control project

Question 13

2.5 / 2.5 points

In game theory, a choice that is optimal for a firm no matter what its competitors do is referred to as the dominant strategy.

Question options:

True

False

Question 14

2.5 / 2.5 points

The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CD's sold by Dizzy Discs

Question options:

A) 

has positive slope.

B) 

has negative slope.

C) 

is horizontal.

D) 

is vertical.

Question 15

2.5 / 2.5 points

In the long run, firms under monopoly or oligopoly must earn normal profits.

Question options:

True

False

Question 16

2.5 / 2.5 points

Which one of the following does not occur in perfect competition?

Question options:

A) 

Firms and buyers are completely informed about the prices of the products of each firm in the industry

B) 

There are significant restrictions on entry into the industry

C) 

Firms already in the industry have no advantage over potential new entrants

D) 

There are many buyers

E) 

No single firm can exert a significant influence on the market price of the good

Question 17

2.5 / 2.5 points

Which of the following will increase the likelihood a person will experience periods of poverty?

Question options:

A) 

completing high school rather than dropping out

B) 

getting married before having a child

C) 

having a child as a teenage single parent

D) 

maintaining full-time employment

Question 18

2.5 / 2.5 points

As a firm loses its monopoly status, becoming more competitive as new firms enter the market, the ex-monopoly firm's demand curve:

Question options:

A) 

remains the same but is now only part of market demand

B) 

shifts to the left and becomes more elastic

C) 

shifts to the left and becomes more inelastic

D) 

shifts to the right and becomes more elastic

E) 

shifts to the right and becomes more inelastic

Question 19

2.5 / 2.5 points

According to Adam Smith's theory of the "invisible hand," businesses will produce the products consumers most desire because

Question options:

A) 

this will maximize consumer satisfaction.

B) 

the government requires them to do so.

C) 

this will maximize business profits.

D) 

this will maximize society's welfare.

E) 

this will generate consumer "good will."

Question 20

2.5 / 2.5 points

Which one of the following characteristics does not apply to oligopoly?

Question options:

A) 

The industry is often characterized by extensive non-price competition

B) 

A few large firms account for a high percentage of industry output

C) 

Each firm faces a downward sloping demand curve

D) 

Many small firms account for a high percentage of industry output

Question 21

2.5 / 2.5 points

Externalities can be positive because

Question options:

A) 

there is no concept for marginal benefit.

B) 

utility can be impacted positively as well as negatively

C) 

marginal damages do not last over time

D) 

positive externalities are subsidies

Question 22

2.5 / 2.5 points

In oligopoly:

Question options:

A) 

firms compete with each other only by raising and lowering quantity because prices are fixed

B) 

the fewness of firms creates mutual interdependence in pricing among the firms

C) 

the firm is the industry

D) 

firms have no difficulty entering and leaving the market

E) 

the firm having a natural monopoly sets price for the others

Question 23

2.5 / 2.5 points

Perfect competition occurs in a market where there are many firms each selling:

Question options:

A) 

A similar product

B) 

A unique product

C) 

A capital intensive product

D) 

An identical product

E) 

A competitive product

Question 24

2.5 / 2.5 points

One difference between perfect competition and monopolistic competition is that:

Question options:

A) 

In perfect competition, the products are slightly differentiated between firms

B) 

There are a smaller number of firms in perfectly competitive industries

C) 

Monopolistic competition has barriers to entry, whereas perfect competition has none

D) 

Firms in monopolistic competition have some degree of market power

E) 

There are a larger number of firms in monopolistic competition

Question 25

2.5 / 2.5 points

Price discrimination refers to charging different products in different markets.

Question options:

True

False

Question 26

2.5 / 2.5 points

In game theory, the outcome or consequence of a strategy is referred to as the

Question options:

A) 

payoff.

B) 

penalty.

C) 

reward.

D) 

end-game strategy.

Question 27

2.5 / 2.5 points

A game that involves multiple moves in a series of identical situations is called a

Question options:

A) 

sequential game.

B) 

repeated game.

C) 

zero-sum game.

D) 

nonzero-sum game.

Question 28

2.5 / 2.5 points

Game theory refers to

Question options:

A) 

a plan for the actions that a player in a game will take under every conceivable circumstance  that the player might face.

B) 

a situation in which each player chooses the strategy that yields the highest payoff, given the strategy chosen by the other players.

C) 

optimal decision making by microeconomic agents.

D) 

the branch of microeconomics concerned with the analysis of optimal decision making in
competitive situations.

Question 29

2.5 / 2.5 points

Which of following is an example of a monopolistically competitive firm?

Question options:

A) 

Farmer Jones's wheat farm.

B) 

Post Breakfast Cereals.

C) 

TCI Cablevision, a supplier of cable T.V. services.

D) 

T.J.'s Clothes, a local retail clothing store.

E) 

None of the above.

Question 30

2.5 / 2.5 points

A game that involves interrelated decisions that are made over time is a

Question options:

A) 

sequential game.

B) 

repeated game.

C) 

zero-sum game.

D) 

nonzero-sum game.

Question 31

2.5 / 2.5 points

A firm that considers the potential reactions of its competitors when it makes a decision is engaged in strategic behavior.

Question options:

True

False

Question 32

2.5 / 2.5 points

Public goods can be

Question options:

A) 

provided privately

B) 

provided publicly

C) 

subject to free rider problems

D) 

all of the above

Question 33

2.5 / 2.5 points

To cure the problem of externalities, such as pollution, economists recommend that government:

Question options:

A) 

regulate polluters.

B) 

pursues a policy of laissez-faire, "hands off" businesses.

C) 

determine mandatory limits controlling the amount of pollution which businesses may generate.

D) 

use the market mechanism to control undesirable externalities.

Question 34

2.5 / 2.5 points

If a good is characterized by easy exclusion but many may concurrently use it without reducing the amount available for others, the good is a:

Question options:

A) 

private good

B) 

common property resource

C) 

toll goods

D) 

public good

Question 35

2.5 / 2.5 points

Extensive advertising can be a powerful barrier to entry into an industry:

Question options:

True

False

Question 36

2.5 / 2.5 points

_______, in his 1776 work _______, introduced the concept of the invisible hand.

Question options:

A) 

Eli Hecksher; The Wealth of Nations

B) 

Adam Smith; The Wealth of Nations

C) 

Paul Samuelson; Economics

D) 

Karl Marx; The Wealth of Nations

Question 37

0 / 2.5 points

Pure Strategy is:

Question options:

A) 

is a specific choice of a strategy from the player's possible strategies in the game, whereas a mixed strategy is a choice between quantity and price optimization.

B) 

is a specific choice of a strategy outside of the player's possible strategies in the game, whereas a mixed strategy is a choice among two or more pure strategies according to pre-specified probabilities.

C) 

is a specific choice of a strategy outside of the player's possible strategies in the game, whereas a mixed strategy is a choice between quantity and price optimization.

D) 

is a specific choice of a strategy from the player's possible strategies in the game, whereas a mixed strategy is a choice among two or more pure strategies according to pre-specified probabilities

Question 38

2.5 / 2.5 points

Suppose Kevin offers to match his competitors' price in an oligopoly market. This will have the effect of

Question options:

A) 

Eliminating his competitors' incentive to reduce price if his threat is credible.

B) 

Driving out his competition.

C) 

Increasing his competitors incentive to reduce price if his threat is credible.

D) 

Triggering an antitrust investigation.

E) 

None of the above.

Question 39

2.5 / 2.5 points

Under which type of market structure is price rigidity often predicted?

Question options:

A) 

Natural monopoly

B) 

Imperfect competition

C) 

Perfect competition

D) 

Pure monopoly

E) 

Oligopoly

Question 40

2.5 / 2.5 points

Industrial policy

Question options:

A) 

is strategic behavior that takes place at the national level.

B) 

may be accomplished by protecting and subsidizing selected industries.

C) 

is intended to provide competitive advantage to selected firms.

D) 

All of the above.

  

 

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