Question MICROECONOMICS

07 Jun Question MICROECONOMICS

Question
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 hour for her neighbor,

Mindy sets up a lemonade stand. In three hours she is able

to sell 100 cups of lemonade at five cents each. If the

ingredients (the lemonade mix, sugar, water, and cups) cost

her a total of $3.00 and 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 best assurance 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 decrease in 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 concerted effort 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 collusive agreements 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 cords of 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.

B. decrease its production of cords.

C. continue producing 20 cords.

D. increase its price.

E. shut down its operations.

12. Property (or unearned )income (that is, profits, interest,

and rents) account for approximately what percent of total

national income?

A. 90% B. 70% C. 50% D. 20% E. 10%

13. Assume labor is the only variable input and that an additional

input of labor increases total output per day from

20 to 28 units. If the product produced sells for $6 per

unit, the additional worker should be hired as long as the

prevailing daily wage rate is less than:

A. $6 C. $48 E. $144

B. $24 D. $120

14. Which type of merger creates the greatest threat of

increasedmonopoly power?

A. Conglomerate.

B. Horizontal.

C. Vertical.

D. Diagonal.

E. Multi-national.

15. Assuming that the market for a good is in equilibrium, the

initial effect of an increase in demand is:

A. the generation of a surplus of the good.

B. the generation of a shortage of the good.

C. a shift in the supply of the good.

D. an increase in the price of the good.

E. a decrease in the price of the good.

16. Which of the following would most likely be considered a

free goodby an economist?

A. Your high-school education.

B. Network television programs received in your home.

C. Whales.

D. The “prize” in a Cracker-Jack box or in a box of cereal.

E. None of these.

17. Which of the following would be considered a productive

economic resource?

A. IBM stocks. C. Gold bullion. E. AT&T bonds.

B. $100 in cash. D. A savings account.

18. When two or more individuals join together to form a

business where their liability is not limited to the

business’ assets, their business is called a:

A. Corporation.

B. Co-op.

C. Partnership.

D. Merger.

E. Cartel.

19. Which of the following is necessary for perfectly-competitive