MGT 3614 Econ Quiz Practice Questions - Custom Scholars
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MGT 3614 Econ Quiz Practice Questions

question
Which of the following will not change the demand for watermelon?

A. an increase in the price of a close substitute
B. consumers prefer less watermelon
C. a change in the incomes of consumers
D. the price of watermelons
E. research showing health benefits of eating watermelon
answer
D. the price of watermelons
question
An economist for a taco restaurant predicts that a rise in consumer incomes will decrease the demand for tacos. This prediction assumes that:

A. there are many substitutes for tacos
B. tacos have inelastic demand
C. tacos have a downward sloping demand curve
D. tacos are normal good
E. tacos are an inferior good
answer
E. tacos are an inferior good
question
A leftward shift in the supply curve for pianos could be caused by

A. decrease in the price of piano parts
B. improvements in the productivity of piano makers
C. an increase in the wages of workers that make pianos
D. decrease in consumer income
E. an increase in the price of pianos
answer
C. an increase in the wages of workers that make pianos
question
A decrease in the price of a substitute product will change the equilibrium price and quantity in a market in the which of the following ways?

A. Price increases and quantity decreases
B. Price increases and quantity increases
C. Price decreases and quantity decreases
D. Price decreases and quantity increases
E. Price does not change and quantity decreases
answer
C. Price decreases and quantity decreases
question
Assume that people like ranch dressing on their pizza. If the supply of pizza decreases, the demand for ranch dressing will most likely

A. remain unchanged because pizza and ranch dressing are normal goods
B. increase because pizza and ranch dressing are complements
C. decrease because pizza and ranch dressing are complements
D. increase because pizza and ranch dressing are substitutes
E. decrease because pizza and ranch dressing are substitutes
answer
C. decrease because pizza and ranch dressing are complements
question
If the demand for a product increased at the same time that technological improvements lowered production costs, what would happen to the price and quantity?

A. both price and quantity would increase
B. both price and quantity would decrease
C. price would increase and quantity would decrease
D. price would increase and quantity would be indeterminate
E. price would be indeterminate and quantity would increase
answer
E. price would be indeterminate and quantity would increase
question
Which of the following is true for the market (on the screen)?

A. All consumers are willing to pay $50 for this product
B. At a price of $30 there will be a shortage
C. A price floor of $30 would decrease the quantity produced
D. A decrease in demand would cause the supply to decrease
E. At $70 the quantity demanded is greater than the quantity supplied
answer
B. At a price of $30 there will be a shortage
question
Assume the equilibrium price in a competitive market is $20. What will happen to the equilibrium price and quantity if the government establishes a price floor of $10?

A. Price increases and quantity decreases
B. Price increases and quantity increases
C. Price decreases and quantity decreases
D. Price decreases and quantity increases
E. Price would not change and quantity would not change
answer
E. Price would not change and quantity would not change
question
Which of the following would most likely occur if the government imposed a biding price ceiling?

A. quantity sold will increase
B. there will be a surplus
C. quantity demanded will increase
D. demand will increase
E. supply will shift to the right
answer
C. quantity demanded will increase
question
The combination of which two concepts below explains why additional inputs will eventually generate less and less additional output?

A. Fixed resources and the law of diminishing marginal utility
B. Fixed resources and the law of diminishing marginal returns
C. Fixed resources and the law of comparative advantage
D. Variable resources and the law of supply
E. Variable resources and the law of demand
answer
B. Fixed resources and the law of diminishing marginal returns
question
The chart shows the number of inputs and outputs for a specific firm. With which worker does diminishing marginal returns first occur?

# of Workers
(Input) Total Product
(Output)
0 0
1 10
2 25
3 30
4 32
5 30

A. 1st worker
B. 2nd worker
C. 3rd worker
D. 4th worker
E. Not enough information
answer
C. 3rd worker
question
Which of the following is the best definition of marginal cost?

A. The difference between the average total cost and the average variable cost
B. The change in total product from hiring an additional worker
C. The change in total cost from hiring an additional worker
D. The change in fixed cost as you produce additional units
E. The change in total cost from producing an additional output
answer
E. The change in total cost from producing an additional output
question
If the average total cost (ATC) of producing a specific unit is decreasing then

A. the firm should produce less but not shut down
B. the marginal cost must be decreasing
C. the marginal cost must be less than the ATC
D. the marginal cost must be greater than the ATC
E. the average fixed cost is constant
answer
C. the marginal cost must be less than the ATC
question
Which of the following best explains why average total cost (ATC) falls and then rises in the short term?

A. the law of diminishing marginal utility
B. diminishing marginal returns and the substitute effect
C. falling average fixed costs and diminishing marginal returns
D. economies of scale and diseconomies of scale
E. the fact that all resources are variable
answer
C. falling average fixed costs and diminishing marginal returns
question
If the firm's output increased 60% as a result of increasing their inputs by 20%, this firm

A. is experiencing returns to scale
B. is experiencing diseconomies of scale
C. has an upward sloping long-run average total cost curve
D. is experiencing increasing returns to scale
E. has no variable costs as a result of the increase in productivity
answer
D. is experiencing increasing returns to scale
question
A firm is producing 10 units of output where the ATC is $20, the AVC is $15, and the MC is $10. Which of the following is true?

A. The firm is producing too much output
B. the firm's total cost is $100
C. The firm's average fixed costs is $10
D. The firm's total fixed cost is $50
E. The marginal cost must be decreasing
answer
D. The firm's total fixed cost is $50
question
According to the chart, what is the fixed cost and average total cost of the 4th unit?

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. Fixed cost: $30; ATC: $30
B. Fixed cost: $30; ATC: $15
C. Fixed cost: $30; ATC: $20
D. Fixed cost: $120; ATC: $20
E. Fixed cost: Unknown; ATC: $20
answer
C. Fixed cost: $30; ATC: $20
question
The chart shows the costs for a perfectly competitive firm that sells a product with a price of $25. Identify the profit maximizing quantity and the amount of profit or loss.

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. 0 Units for a loss of $30
B. 4 Units for a profit of $20
C. 4 Units for a profit of $10
D. 4 Units for a profit of $5
E. 5 Units for a profit of $10
answer
B. 4 Units for a profit of $20
question
If the price were to fall to $10, which of the following is true?

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. This firm should shut down in the short run
B. This firm should shut down in the long run
C. This firm would make a profit
D. This firm would produce 4 units
E. The firm would produce 1 unit
answer
B. This firm should shut down in the long run
question
All of the following are characteristics of perfect competition in general EXCEPT:

A. zero accounting profit in the long run
B. low barriers to entry
C. downward sloping market demand
D. perfectly elastic demand for firms
E. identical or homogeneous products
answer
A. zero accounting profit in the long run
question
Which of the following statements best describes the graph shown?

A. Economic profits are earned and firms will leave in the long run
B. Economic profits are earned and firms will enter in the long run
C. Economic losses are earned and firms will leave in the long run
D. The firm depicted is currently in long run equilibrium
E. Economic profits are earned but this firm will keep other firms from entering
answer
B. Economic profits are earned and firms will enter in the long run
question
In long run equilibrium, a perfectly competitive firm

A. earns positive economic profits
B. must shut down if the market price fails
C. maximizes total revenue
D. produces where the MR is equal to the AVC
E. is allocatively efficient
answer
E. is allocatively efficient
question
Assume a perfectly competitive firm is producing where the marginal revenue is less than the marginal cost. The firm should

A. decrease the quantity they are producing
B. decrease their price
C. shut down
D. increase their marginal cost
E. decrease their fixed costs
answer
A. decrease the quantity they are producing
question
For a perfectly competitive firm, the short run supply curve is

A. less than the AVC curve
B. the marginal cost curve
C. the marginal cost curve above the AVC curve
D. the upward sloping portion of the MC curve
E. greater than the ATC
answer
C. the marginal cost curve above the AVC curve
1 of 24
question
Which of the following will not change the demand for watermelon?

A. an increase in the price of a close substitute
B. consumers prefer less watermelon
C. a change in the incomes of consumers
D. the price of watermelons
E. research showing health benefits of eating watermelon
answer
D. the price of watermelons
question
An economist for a taco restaurant predicts that a rise in consumer incomes will decrease the demand for tacos. This prediction assumes that:

A. there are many substitutes for tacos
B. tacos have inelastic demand
C. tacos have a downward sloping demand curve
D. tacos are normal good
E. tacos are an inferior good
answer
E. tacos are an inferior good
question
A leftward shift in the supply curve for pianos could be caused by

A. decrease in the price of piano parts
B. improvements in the productivity of piano makers
C. an increase in the wages of workers that make pianos
D. decrease in consumer income
E. an increase in the price of pianos
answer
C. an increase in the wages of workers that make pianos
question
A decrease in the price of a substitute product will change the equilibrium price and quantity in a market in the which of the following ways?

A. Price increases and quantity decreases
B. Price increases and quantity increases
C. Price decreases and quantity decreases
D. Price decreases and quantity increases
E. Price does not change and quantity decreases
answer
C. Price decreases and quantity decreases
question
Assume that people like ranch dressing on their pizza. If the supply of pizza decreases, the demand for ranch dressing will most likely

A. remain unchanged because pizza and ranch dressing are normal goods
B. increase because pizza and ranch dressing are complements
C. decrease because pizza and ranch dressing are complements
D. increase because pizza and ranch dressing are substitutes
E. decrease because pizza and ranch dressing are substitutes
answer
C. decrease because pizza and ranch dressing are complements
question
If the demand for a product increased at the same time that technological improvements lowered production costs, what would happen to the price and quantity?

A. both price and quantity would increase
B. both price and quantity would decrease
C. price would increase and quantity would decrease
D. price would increase and quantity would be indeterminate
E. price would be indeterminate and quantity would increase
answer
E. price would be indeterminate and quantity would increase
question
Which of the following is true for the market (on the screen)?

A. All consumers are willing to pay $50 for this product
B. At a price of $30 there will be a shortage
C. A price floor of $30 would decrease the quantity produced
D. A decrease in demand would cause the supply to decrease
E. At $70 the quantity demanded is greater than the quantity supplied
answer
B. At a price of $30 there will be a shortage
question
Assume the equilibrium price in a competitive market is $20. What will happen to the equilibrium price and quantity if the government establishes a price floor of $10?

A. Price increases and quantity decreases
B. Price increases and quantity increases
C. Price decreases and quantity decreases
D. Price decreases and quantity increases
E. Price would not change and quantity would not change
answer
E. Price would not change and quantity would not change
question
Which of the following would most likely occur if the government imposed a biding price ceiling?

A. quantity sold will increase
B. there will be a surplus
C. quantity demanded will increase
D. demand will increase
E. supply will shift to the right
answer
C. quantity demanded will increase
question
The combination of which two concepts below explains why additional inputs will eventually generate less and less additional output?

A. Fixed resources and the law of diminishing marginal utility
B. Fixed resources and the law of diminishing marginal returns
C. Fixed resources and the law of comparative advantage
D. Variable resources and the law of supply
E. Variable resources and the law of demand
answer
B. Fixed resources and the law of diminishing marginal returns
question
The chart shows the number of inputs and outputs for a specific firm. With which worker does diminishing marginal returns first occur?

# of Workers
(Input) Total Product
(Output)
0 0
1 10
2 25
3 30
4 32
5 30

A. 1st worker
B. 2nd worker
C. 3rd worker
D. 4th worker
E. Not enough information
answer
C. 3rd worker
question
Which of the following is the best definition of marginal cost?

A. The difference between the average total cost and the average variable cost
B. The change in total product from hiring an additional worker
C. The change in total cost from hiring an additional worker
D. The change in fixed cost as you produce additional units
E. The change in total cost from producing an additional output
answer
E. The change in total cost from producing an additional output
question
If the average total cost (ATC) of producing a specific unit is decreasing then

A. the firm should produce less but not shut down
B. the marginal cost must be decreasing
C. the marginal cost must be less than the ATC
D. the marginal cost must be greater than the ATC
E. the average fixed cost is constant
answer
C. the marginal cost must be less than the ATC
question
Which of the following best explains why average total cost (ATC) falls and then rises in the short term?

A. the law of diminishing marginal utility
B. diminishing marginal returns and the substitute effect
C. falling average fixed costs and diminishing marginal returns
D. economies of scale and diseconomies of scale
E. the fact that all resources are variable
answer
C. falling average fixed costs and diminishing marginal returns
question
If the firm's output increased 60% as a result of increasing their inputs by 20%, this firm

A. is experiencing returns to scale
B. is experiencing diseconomies of scale
C. has an upward sloping long-run average total cost curve
D. is experiencing increasing returns to scale
E. has no variable costs as a result of the increase in productivity
answer
D. is experiencing increasing returns to scale
question
A firm is producing 10 units of output where the ATC is $20, the AVC is $15, and the MC is $10. Which of the following is true?

A. The firm is producing too much output
B. the firm's total cost is $100
C. The firm's average fixed costs is $10
D. The firm's total fixed cost is $50
E. The marginal cost must be decreasing
answer
D. The firm's total fixed cost is $50
question
According to the chart, what is the fixed cost and average total cost of the 4th unit?

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. Fixed cost: $30; ATC: $30
B. Fixed cost: $30; ATC: $15
C. Fixed cost: $30; ATC: $20
D. Fixed cost: $120; ATC: $20
E. Fixed cost: Unknown; ATC: $20
answer
C. Fixed cost: $30; ATC: $20
question
The chart shows the costs for a perfectly competitive firm that sells a product with a price of $25. Identify the profit maximizing quantity and the amount of profit or loss.

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. 0 Units for a loss of $30
B. 4 Units for a profit of $20
C. 4 Units for a profit of $10
D. 4 Units for a profit of $5
E. 5 Units for a profit of $10
answer
B. 4 Units for a profit of $20
question
If the price were to fall to $10, which of the following is true?

Output Total
Cost
0 $30
1 $40
2 $45
3 $60
4 $80
5 $110

A. This firm should shut down in the short run
B. This firm should shut down in the long run
C. This firm would make a profit
D. This firm would produce 4 units
E. The firm would produce 1 unit
answer
B. This firm should shut down in the long run
question
All of the following are characteristics of perfect competition in general EXCEPT:

A. zero accounting profit in the long run
B. low barriers to entry
C. downward sloping market demand
D. perfectly elastic demand for firms
E. identical or homogeneous products
answer
A. zero accounting profit in the long run
question
Which of the following statements best describes the graph shown?

A. Economic profits are earned and firms will leave in the long run
B. Economic profits are earned and firms will enter in the long run
C. Economic losses are earned and firms will leave in the long run
D. The firm depicted is currently in long run equilibrium
E. Economic profits are earned but this firm will keep other firms from entering
answer
B. Economic profits are earned and firms will enter in the long run
question
In long run equilibrium, a perfectly competitive firm

A. earns positive economic profits
B. must shut down if the market price fails
C. maximizes total revenue
D. produces where the MR is equal to the AVC
E. is allocatively efficient
answer
E. is allocatively efficient
question
Assume a perfectly competitive firm is producing where the marginal revenue is less than the marginal cost. The firm should

A. decrease the quantity they are producing
B. decrease their price
C. shut down
D. increase their marginal cost
E. decrease their fixed costs
answer
A. decrease the quantity they are producing
question
For a perfectly competitive firm, the short run supply curve is

A. less than the AVC curve
B. the marginal cost curve
C. the marginal cost curve above the AVC curve
D. the upward sloping portion of the MC curve
E. greater than the ATC
answer
C. the marginal cost curve above the AVC curve

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