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Question 2
Suppose you are eating hamburgers. The first hamburger gives you 16 units of satisfaction, the second hamburger 8 additional units, and the third brings the total utility to 30. What was the marginal utility of the third hamburger?
A. 6
B. 22
C. 10
D. 8
Question 4
For a natural monopolist, fixed costs are very ___ ____, while marginal costs are relatively ____ __.
A. low, low
B. high, high
C. high, low
D. low, high
Question 9
The assumption of free entry implies that
A. firms will always earn a profit since new firms can enter the industry at any time they like.
B. a firm in monopolistic competitive can never earn a profit.
C. the government regulates the number of firms that are allowed in an industry.
D. if firms in an industry are making excessively high profits, new firms are likely to enter the industry.
Question 10
For a price making firm, when marginal revenue is above zero the demand curve is
A. unit elastic.
B. perfectly inelastic.
C. elastic.
D. inelastic.
Question 11
In a perfectly competitive industry (where firms are price takers), the market demand curve is _______, and the firms demand curve is ________.
A. upward sloping, perfectly inelastic.
B. upward sloping, perfectly elastic.
C. downward sloping, perfectly elastic.
D. downward sloping, perfectly inelastic.
Question 14
The price taking competitive equilibrium of a large number of identical firms implies thatAnswer
A. the net revenue of each firm is zero.
B. no firm can earn more from its assets by investing them elsewhere.
C. no firm earns economic profits in the long run.
D. B and C
Question 18
Which of the following is a correct statement about the relationship between average product (AP) and marginal product (MP)?Answer
A. If AP is at a maximum, then MP is also.
B. If TP is declining then AP is negative.
C. If AP exceeds MP, then AP is falling.
D. If AP = MP, then total product is at a maximum.
Question 22
Imagine that a demand function for lamb in the UK has been constructed. The income elasticity has been estimated as -0.2. This means that, in the UK, lamb is a/an ________ good.Answer
A. superior
B. giffen
C. inferior
D. normal
Question 23
When creating a demand function, we would NOT use data onAnswer
A. customers income.
B. our prices.
C. advertising.
D. our production costs.
Question 25
The law of diminishing marginal utilityAnswer
A. refers to the decrease in total satisfaction as more units of the good are consumed.
B. refers to the idea that total utility can be negative.
C. refers to the fall in additional satisfaction created by consumption of additional units of a good.
D. all of the above
Question 26
Insurance companies can lower their risks by
A. using the law of large numbers to make the number of claims more predictable.
B. granting large numbers of independent risk policies.
C. diversifying across insurance products.
D. all of the above
Question 27
What are the three attitudes towards risk?
A. Accepting, rejecting, avoider.
B. Averse, neutral, loving.
C. For, neutral, against.
D. Avoiding, indifferent, loving.
Question 30
If marginal utility has become negative, we can infer thatAnswer
A. total utility is increasing by smaller and smaller amounts.
B. the product is an inferior good.
C. total utility is also negative.
D. total utility is falling with additional consumption.
Question 32
An increase in supply, not caused by a change in market price, is represented byAnswer
A. a rightward shift of the supply curve.
B. a move down the given supply curve.
C. a move up the given supply curve.
D. A and C
Question 33
Which of the following will cause a shift in a supply curve?Answer
A. An increase in the ability/productivity of the firms workforce.
B. A change in the profitability of alternative products.
C. A change in hourly wage costs.
D. all of the above
Question 34
If the market price is below equilibrium then
A. the demand curve will shift to the right.
B. the supply curve will shift to the right.
C. there is excess supply.
D. there is excess demand.
Question 38
When a decrease in the price of good A causes an increase in demand for good B. This tells us that the goods areAnswer
A. normal.
B. complements.
C. inferior.
D. substitutes.
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