QUIZ 2 (QUESTIONS 31- 61) - Custom Scholars
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QUIZ 2 (QUESTIONS 31- 61)

question
31) ABC Corp. cuts usage of all inputs by 50%. Production falls by more than 50 %. This firm is experiencing
a. External economies of scale
b. External diseconomies of scale
c. increasing returns to scale
d. Decreasing returns to scale
answer
C - Increasing returns to scale
question
32) In the short run, a perfectly competitive firm incurring losses should still produce if it can cover its
a. Average costs
b. Variable costs
c. Fixed costs
d. Economic costs
answer
b. Variable costs
question
33) An industry has external economies of scale. In the long run, an increase in demand will
a. A decrease price
b. Increase price
c. Not change price
d. Cause an indeterminate change in price
answer
a. A decrease price
question
34) Suddenly there is an increase in the demand for Frisbees. The most likely result would be

a. Higher prices in the short run, followed by an increase in production in the long run that would cause prices to decline somewhat
b. Higher prices in the short run, followed by larger long-run price increases as the stock of Frisbees is depleted
c. Higher prices in the short run because of greater sales volume, and even higher prices later on as plant sizes are increased.
d. Lower prices in the short run because of higher sales, but higher prices in the long run as the stock of Frisbees is depleted
answer
a. Higher prices in the short run, followed by an increase in production in the long run that would cause prices to decline somewhat
question
35) In the short- run perfectly competitive equilibrium, each of the following conditions will hold, except
a. P= MR
b. P= SRMC
c. LRAC is minimized
d. SRMC is minimized
answer
d. SRMC is minimized
question
36) An increasing-cost industry experiences external----- of scale and had an------ long-run industry supply curve
a. Economies; upward sloping
b. Economies; downward sloping
c. Diseconomies; upward sloping
d. Diseconomies; downward sloping
answer
c. Diseconomies; upward sloping
question
37) A perfectly competitive decreasing-cost industry in long-run equilibrium experiences a permanent decrease in market demand. When the industry reaches its new long-run equilibrium, the equilibrium price of its good will be--- than before and the equilibrium industry will be--- than before
a. Higher; higher
b. Higher; lower
c. Lower; higher
d. Lower; lower
answer
b. Higher; lower
question
38) A firm will not produce where MR=MC when
a. It is earning positive economic profit
b. It is making an operating loss
c. t is earning negative economic profits
d. It is making an operating profit
answer
b. It is making an operating loss
question
39) Jenny's Gemstones is making an operating loss. It should---- in the long run and ---- in the long run
a. Shut down; leave the industry
b. Leave the industry; shut down
c. Increase its price; leave the industry
d. Increase its price; reduce production
answer
a. Shut down; leave the industry
question
40) Jenny's Gemstones is making an operating loss. The industry supply curve will shift --- in the ---
a. A right; short run
b. Right; long run
c. Left; short run
d. Left; long run
answer
d. Left; long run
question
41) Economic profits are calculated by subtracting
a. explicit costs from total revenue.
b. implicit costs from total revenue.
c. implicit costs from normal profits.
d. explicit and implicit costs from total revenue.
answer
d. explicit and implicit costs from total revenue.
question
42) The long run is characterized by
a. the relevance of the law of diminishing returns.
b. at least one fixed input.
c. insufficient time for firms to enter or leave the industry.
d. the ability of the firm to change its plant size.
answer
d. the ability of the firm to change its plant size.
question
43) Economists would describe the U.S. automobile industry as a. purely competitive.
b. an oligopoly.
c. monopolistically competitive.
d. a pure monopoly.
answer
b. an oligopoly.
question
44) Which of the following statements applies to a purely competitive producer?
a. It will not advertise its product.
b. In long-run equilibrium it will earn an economic profit.
c. Its product will have a brand name.
d. Its product is slightly different from those of its competitors.
answer
a. It will not advertise its product.
question
45) Which of the following is a characteristic of pure monopoly?
a. Close substitute products
b. Barriers to entry
c. The absence of market power
d. "Price taking"
answer
b. Barriers to entry
question
46) Confronted with the same unit cost data, a monopolistic producer will charge
a. the same price and produce the same output as a competitive firm.
b. a higher price and produce a larger output than a competitive firm.
c. a higher price and produce a smaller output than a competitive firm.
d. a lower price and produce a smaller output than a competitive firm.
answer
c. a higher price and produce a smaller output than a competitive firm.
question
47) The restaurant, legal assistance, and clothing industries are each illustrations of
a. countervailing power.
b. homogeneous oligopoly.
c. monopolistic competition.
d. pure monopoly.
answer
c. monopolistic competition.
question
48) The term oligopoly indicates
a. a one-firm industry.
b. many producers of a differentiated product.
c. a few firms producing either a differentiated or a homogeneous product.
d. an industry whose four-firm concentration ratio is low.
answer
c. a few firms producing either a differentiated or a homogeneous product.
question
49) Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?
a. Subway Sandwiches
b. Pittsburgh Plate Glass
c. Ford Motor Company
d. Kaiser Aluminum
answer
c. Ford Motor Compan
question
50) An industry having a four-firm concentration ratio of 85%
a. approximates pure competition.
b. is monopolistically competitive.
c. is a pure monopoly.
d. is an oligopoly.
answer
d. is an oligopoly.
question
51) Which of the following is not a criterion for judging the result of an economic policy
a. Stability
b. Employment
c. Efficiency
d. Equity
answer
b. Employment
question
52) Economics is the study of how
a. Scarce resources are used to satisfy unlimited wants
b. Human choose to use unlimited resources
c. Limitless resources are used to satisfy scarce wants
d. Society has no choices
answer
a. Scarce resources are used to satisfy unlimited wants
question
53) The opportunity cost of choice X can be defined as
a. The cheapest alternative to choice X
b. The most highly valued alternative to choice X
c. The price paid to obtain X
d. The most highly price alternative to choice X
answer
b. The most highly valued alternative to choice X
question
54) Carlo discovers when he studies for his macroeconomics tests at the bar, he earns better grades. He advises all students to study at the bar for similar results. Carlo is guilty of committing
a. The fallacy of composition
b. Fallacy of post hoc, ergo propter hoc
c. Fallacy of correlation and causation
d. Ceteris paribus
answer
a. The fallacy of composition
question
55) Households are
a. Suppliers in the input market
b. Demanders in the labor market
c. Suppliers in the product markets
d. Demanders in the input market
answer
a. Suppliers in the input market
question
56) The price of Good C increases and as a result, the demand for good D increases. The two goods are
a. Complement
b. Substitutes
c. Normal
d. inferior
answer
b. Substitutes
question
57) Because the nation N is operating at a point inside its PPF, it
a. Has full employment
b. Has unemployed or inefficiently employed resources
c. Must cut output of one good to increase the production of another
d. Will be unable to experience economic growth
answer
b. Has unemployed or inefficiently employed resources
question
58) A production possibility frontier diagram illustrates all of the following concepts except
a. Scarcity
b. Unlimited wants
c. Constrained choice
d. the marginal rate of transformation
answer
b. Unlimited wants
question
59) Which of the following is not one of the basic economic questions?
a. what will be produced
b. how will it be produced
c. where would it be produced
d. for whom will it be produced
answer
c. where would it be produced
question
60) Jean &co has an increasing cost production possibility frontier. Its slope must be
a. Positive and increasing
b. Positive and decreasing
c. Negative and increasing
d. Negative and decreasing
answer
c. Negative and increasing
question
61) Each of the following is a basic concern of any economic system except
a. The allocation of scarce resources among producers
b. The mix of different types of output
c. The distribution of output among customers
d. The quality of resources allocated among customers
answer
d. The quality of resources allocated among customers
1 of 31
question
31) ABC Corp. cuts usage of all inputs by 50%. Production falls by more than 50 %. This firm is experiencing
a. External economies of scale
b. External diseconomies of scale
c. increasing returns to scale
d. Decreasing returns to scale
answer
C - Increasing returns to scale
question
32) In the short run, a perfectly competitive firm incurring losses should still produce if it can cover its
a. Average costs
b. Variable costs
c. Fixed costs
d. Economic costs
answer
b. Variable costs
question
33) An industry has external economies of scale. In the long run, an increase in demand will
a. A decrease price
b. Increase price
c. Not change price
d. Cause an indeterminate change in price
answer
a. A decrease price
question
34) Suddenly there is an increase in the demand for Frisbees. The most likely result would be

a. Higher prices in the short run, followed by an increase in production in the long run that would cause prices to decline somewhat
b. Higher prices in the short run, followed by larger long-run price increases as the stock of Frisbees is depleted
c. Higher prices in the short run because of greater sales volume, and even higher prices later on as plant sizes are increased.
d. Lower prices in the short run because of higher sales, but higher prices in the long run as the stock of Frisbees is depleted
answer
a. Higher prices in the short run, followed by an increase in production in the long run that would cause prices to decline somewhat
question
35) In the short- run perfectly competitive equilibrium, each of the following conditions will hold, except
a. P= MR
b. P= SRMC
c. LRAC is minimized
d. SRMC is minimized
answer
d. SRMC is minimized
question
36) An increasing-cost industry experiences external----- of scale and had an------ long-run industry supply curve
a. Economies; upward sloping
b. Economies; downward sloping
c. Diseconomies; upward sloping
d. Diseconomies; downward sloping
answer
c. Diseconomies; upward sloping
question
37) A perfectly competitive decreasing-cost industry in long-run equilibrium experiences a permanent decrease in market demand. When the industry reaches its new long-run equilibrium, the equilibrium price of its good will be--- than before and the equilibrium industry will be--- than before
a. Higher; higher
b. Higher; lower
c. Lower; higher
d. Lower; lower
answer
b. Higher; lower
question
38) A firm will not produce where MR=MC when
a. It is earning positive economic profit
b. It is making an operating loss
c. t is earning negative economic profits
d. It is making an operating profit
answer
b. It is making an operating loss
question
39) Jenny's Gemstones is making an operating loss. It should---- in the long run and ---- in the long run
a. Shut down; leave the industry
b. Leave the industry; shut down
c. Increase its price; leave the industry
d. Increase its price; reduce production
answer
a. Shut down; leave the industry
question
40) Jenny's Gemstones is making an operating loss. The industry supply curve will shift --- in the ---
a. A right; short run
b. Right; long run
c. Left; short run
d. Left; long run
answer
d. Left; long run
question
41) Economic profits are calculated by subtracting
a. explicit costs from total revenue.
b. implicit costs from total revenue.
c. implicit costs from normal profits.
d. explicit and implicit costs from total revenue.
answer
d. explicit and implicit costs from total revenue.
question
42) The long run is characterized by
a. the relevance of the law of diminishing returns.
b. at least one fixed input.
c. insufficient time for firms to enter or leave the industry.
d. the ability of the firm to change its plant size.
answer
d. the ability of the firm to change its plant size.
question
43) Economists would describe the U.S. automobile industry as a. purely competitive.
b. an oligopoly.
c. monopolistically competitive.
d. a pure monopoly.
answer
b. an oligopoly.
question
44) Which of the following statements applies to a purely competitive producer?
a. It will not advertise its product.
b. In long-run equilibrium it will earn an economic profit.
c. Its product will have a brand name.
d. Its product is slightly different from those of its competitors.
answer
a. It will not advertise its product.
question
45) Which of the following is a characteristic of pure monopoly?
a. Close substitute products
b. Barriers to entry
c. The absence of market power
d. "Price taking"
answer
b. Barriers to entry
question
46) Confronted with the same unit cost data, a monopolistic producer will charge
a. the same price and produce the same output as a competitive firm.
b. a higher price and produce a larger output than a competitive firm.
c. a higher price and produce a smaller output than a competitive firm.
d. a lower price and produce a smaller output than a competitive firm.
answer
c. a higher price and produce a smaller output than a competitive firm.
question
47) The restaurant, legal assistance, and clothing industries are each illustrations of
a. countervailing power.
b. homogeneous oligopoly.
c. monopolistic competition.
d. pure monopoly.
answer
c. monopolistic competition.
question
48) The term oligopoly indicates
a. a one-firm industry.
b. many producers of a differentiated product.
c. a few firms producing either a differentiated or a homogeneous product.
d. an industry whose four-firm concentration ratio is low.
answer
c. a few firms producing either a differentiated or a homogeneous product.
question
49) Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?
a. Subway Sandwiches
b. Pittsburgh Plate Glass
c. Ford Motor Company
d. Kaiser Aluminum
answer
c. Ford Motor Compan
question
50) An industry having a four-firm concentration ratio of 85%
a. approximates pure competition.
b. is monopolistically competitive.
c. is a pure monopoly.
d. is an oligopoly.
answer
d. is an oligopoly.
question
51) Which of the following is not a criterion for judging the result of an economic policy
a. Stability
b. Employment
c. Efficiency
d. Equity
answer
b. Employment
question
52) Economics is the study of how
a. Scarce resources are used to satisfy unlimited wants
b. Human choose to use unlimited resources
c. Limitless resources are used to satisfy scarce wants
d. Society has no choices
answer
a. Scarce resources are used to satisfy unlimited wants
question
53) The opportunity cost of choice X can be defined as
a. The cheapest alternative to choice X
b. The most highly valued alternative to choice X
c. The price paid to obtain X
d. The most highly price alternative to choice X
answer
b. The most highly valued alternative to choice X
question
54) Carlo discovers when he studies for his macroeconomics tests at the bar, he earns better grades. He advises all students to study at the bar for similar results. Carlo is guilty of committing
a. The fallacy of composition
b. Fallacy of post hoc, ergo propter hoc
c. Fallacy of correlation and causation
d. Ceteris paribus
answer
a. The fallacy of composition
question
55) Households are
a. Suppliers in the input market
b. Demanders in the labor market
c. Suppliers in the product markets
d. Demanders in the input market
answer
a. Suppliers in the input market
question
56) The price of Good C increases and as a result, the demand for good D increases. The two goods are
a. Complement
b. Substitutes
c. Normal
d. inferior
answer
b. Substitutes
question
57) Because the nation N is operating at a point inside its PPF, it
a. Has full employment
b. Has unemployed or inefficiently employed resources
c. Must cut output of one good to increase the production of another
d. Will be unable to experience economic growth
answer
b. Has unemployed or inefficiently employed resources
question
58) A production possibility frontier diagram illustrates all of the following concepts except
a. Scarcity
b. Unlimited wants
c. Constrained choice
d. the marginal rate of transformation
answer
b. Unlimited wants
question
59) Which of the following is not one of the basic economic questions?
a. what will be produced
b. how will it be produced
c. where would it be produced
d. for whom will it be produced
answer
c. where would it be produced
question
60) Jean &co has an increasing cost production possibility frontier. Its slope must be
a. Positive and increasing
b. Positive and decreasing
c. Negative and increasing
d. Negative and decreasing
answer
c. Negative and increasing
question
61) Each of the following is a basic concern of any economic system except
a. The allocation of scarce resources among producers
b. The mix of different types of output
c. The distribution of output among customers
d. The quality of resources allocated among customers
answer
d. The quality of resources allocated among customers
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