QuestionMICROECONOMICS

MICROECONOMICS

1. The three major economic factors of production are natural, human, and capital. Which of the following groups best illustrates these factors?

A. farmers, teachers, and investors.

B. rent, wages, and interest.

C. gold, bankers, and corporate stocks.

D. iron ore, bricklayers, and money.

E. water, secretaries, and desks.

2. The Toscano Pizza Company faces a demand for its pizzas which obeys the “law of demand.” Thus, if the owner lowers the priceshe charges per pizza, the number of pizzas sold would:

A. rise as would her total revenues.

B. rise, but her total revenues would fall.

C. rise, while her total revenues could rise, fall, or even stay the same.

D. fall as would her total revenues.

E. fall, while her total revenues could rise, fall, or even  stay the same.

3. Suppose some good was available in unlimited quantities to everybody. Which of the following would be true?

A. The price of the good would be equal to zero.

B. The value of the good would be equal to zero.

C. The opportunity cost of using a unit of the good would be

equal to zero.

D. Both A and C are true.

E. A, B, and C are all true.

4. Instead of doing yardwork for $1.00 an hourfor her neighbor, Mindy sets up a lemonade stand. In three hoursshe is able to sell 100cups of lemonade at five centseach. If the ingredients (the lemonade mix, sugar, water, and cups) cost her a total of $3.00and she obtained all her capital inputs (a table, pitcher, spoon, and sign) for free from a company called “M.O.M.”, then her economic profits were:

A. $5.00.

B. $2.00.

C. $1.00.

D. $0 (that is, she “broke even”).

E. -$1.00 (that is, she suffered economic losses).

5. What provides the bestassurance that firms in an industry will produce efficiently and earn no economic profits in the long run?

A. Having many firms in the industry.

B. Government regulation of the industry.

C. The existence of large economies to scale.

D. An absence of major barriers to entry in the industry.

E. Economic rivalry among existing firms in the industry.

6. What effect would a decrease in the price of silicon chips (used to produce computers) and a decrease in the price of user-friendly software have on the price and production of personal computers?

Price Production

A. increase increase

B. indeterminable increase

C. decrease indeterminable

D. decrease decrease

E. increase decrease

7. Which of the following could cause supply to decreasein the short run?

A. A labor union representing the workers who produce this good is able to negotiate higher wages for its members.

B. More producers enter this industry.

C. The price of a close substitute for this good falls.

D. A large group of consumers decide to boycott this good due to the political beliefs of some of the producers.

E. A technological breakthrough in the production of this good lowers the cost of producing it.

8. Which of the following represents a long-run adjustment?

A. A supermarket hires two additional checkout people.

B. A steel manufacturer cuts back on its purchases of taconite pellets.

C. A food processor sells the real assets of one of its branch plants.

D. The demand for tea falls in response to a fall in the price of coffee.

E. A farmer uses an extra dose of fertilizer on his crop.

9. A newspaper reports, “Coffee growers in Brazil and Columbia organizedto consider world coffee supply levels.” If this group should decide to act in a concertedeffort for the benefit of the group as a whole, the likely result is:

A. Increased coffee production and prices.

B. Decreased coffee production and increased prices.

C. Increased prices with no change in coffee production.

D. Increased coffee production and decreased prices.

E. Coffee production and prices at competitive levels.

10. Forming and maintaining collusiveagreements among firms is easier given all other things equal when:

A. The number of firms involved is large.

B. The firms involved produce differentiated products.

C. The demand for the product produced is stable.

D. The firms face different cost situations.

E. There are ample opportunities to make secret price concessions to selected buyers.

11. Duff Firewood Supply, a competitive private logging firm, is currently maximizing its profits. Its total costs are $1100 of which $100 are fixed costs(insurance on its equipment). It is currently producing and selling 20 cordsof wood at the going market price of $60.Suppose, due to its filing of a claim, its insurance premiums are raised to $300. Then the firm should in the short run:

A. increase its production of cords.

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