ECONOMICS - 2

Question 1

Firms in perfect competition face a:

a) Perfectly elastic demand curve

b) Perfectly inelastic demand curve

c) Perfectly elastic supply curve

d) Perfectly inelastic supply curve

Question 2

In perfect competition:

a) The price equals the marginal revenue

b) The price equals the average variable cost

c) The fixed cost equals the variable costs

d) The price equals the total costs

Question 3

A profit maximizing firm in perfect competition produces where:

a) Total revenue is maximized

b) Marginal revenue equals zero

c) Marginal revenue equals marginal cost

d) Marginal revenue equals average cost

Question 4

In perfect competition:

a) The products firms offer are very similar

b) Products are heavily differentiated

c) A few firms dominate the market

d) Consumers have limited information

Question 5

In the long run in perfect competition:

a) The price equals the total revenue

b) Firms are allocatively inefficient

c) Firms are productively efficient

d) The price equals total cost

Question 6

In perfect competition:

a) Short run abnormal profits are competed away by firms leaving the industry

b) Short run abnormal profits are competed away by firms entering the industry

c) Short run abnormal profits are competed away by the government

d) Short run abnormal profits are competed away by greater advertising

Question 7

In perfect competition:

a) A few firms dominate the industry

b) Firms are price makers

c) There are many buyers but few sellers

d) There are many buyers and sellers

Question 8

In the short run firms in perfect competition will still produce provided:

a) The price covers average variable cost

b) The price covers variable cost

c) The price covers average fixed cost

d) The price covers fixed costs

Question 9

In the long run equilibrium in perfect competition:

a) Price = average cost = marginal cost

b) Price = average cost = total cost

c) Price = marginal revenue = total cost

d) Total revenue = total variable cost

Question 10

For a perfectly competitive firm:

a) Total revenue is a straight line

b) Price is greater than marginal revenue

c) Price equals total revenue

d) Price equals total cost

Question 1

X inefficiency occurs when:

a) The price is greater than the marginal cost

b) The price is greater than the average cost

c) Costs are higher than they could be due to a lack of competitive pressure

d) There are external costs

Question 2

The marginal revenue curve in monopoly:

a) Equals the demand curve

b) Is parallel with the demand curve

c) Lies below and converges with the demand curve

d) Lies below and diverges from the demand curve

Question 3

In monopoly when abnormal profits are made:

a) The price set is greater than the average cost

b) The price is less than the marginalcost

c) The average revenue equals the marginal cost

d) Revenue equals total cost

Question 4

In monopoly in long run equilibrium:

a) The firm is productively efficient

b) The firm is allocatively inefficient

c) The firm produces where marginal cost is less than marginal revenue

d) The firm produces at the socially optimal level

Question 5

A monopolist faces

a) An upward sloping demand curve

b) A perfectly elastic demand curve

c) A downward sloping demand curve

d) A demand curve with a positive price elasticity of demand

Question 6

In a monopoly which of the following is not true?

a) Products are differentiated

b) There is freedom of entry and exit into the industry in the long run

c) The firm is a price maker

d) There is one main seller

Question 7

In monopoly which of the following is true?

a) There are many buyers and sellers

b) There is one main buyer

c) There is one main seller

d) The actions of one firm do not affect the market price and quantity

Question 8

According to Schumpeter:

a) Monopolies are inefficient

b) Monopoly profits act as an incentive for innovation

c) Monopolies are allocatively efficient

d) Monopolies are productively efficient

Question 9

A welfare loss occurs in monopoly where:

a) The price is greater than the marginal cost

b) The price is greater than the marginal benefit

c) The price is greater than the average revenue

d) The price is greater than the marginal revenue

Question 10

In the UK the Competition Commission

a) Bans monopolies

b) Fines all monopolies

c) Prevents firms acquiring more than 25% of the market

d) Has the right to investigate monopolies and will assess each one on its own merits

Question 1

If a few firms dominate an industry the market is known as:

a) Monopolistic competition

b) Competitively monopolistic

c) Duopoly

d) Oligopoly

Question 2

In a cartel member firms may be given a fixed amount to produce. This amount is called a:

a) Limit

b) Factor

c) Quota

d) Quotient

Question 3

In the Kinked Demand Curve theory it is assumed that:

a) An increase in price by the firm is not followed by others

b) An increase in price by the firm is followed by others

c) A decrease in price by the firm is not followed by others

d) Firms collude to fix the price

Question 4

The Kinked Demand Curve theory assumes:

a) Firms cooperate

b) Firms act as part of a cartel

c) Firms are competitive with each other

d) Firms are not profit maximizers

Question 5

In Game Theory:

a) Firms are always assumed to act independently

b) Firms are always assumed to cooperate with each other

c) Firms always collude as part of a cartel

d) Firms consider the actions of others before deciding what to do

Question 6

In the Kinked Demand Curve theory:

a) The marginal revenue curve is perfectly horizontal

b) Demand is always price inelastic

c) Demand is always price elastic

d) Non price competition is likely

Question 7

In oligopoly

a) The largest four firms are likely to have a small market share

b) The price is likely to equal marginal revenue

c) Firms will continue to produce in the long run if price is less than average cost

d) Firms may collude or compete depending on their assumptions about their competitors

Question 8

A model of Game Theory of oligopoly is known as the:

a) Prisoner's Dilemma

b) Monopoly Cell

c) Jailhouse Sentence

d) Jury Box

Question 9

In cartels:

a) Each individual firm profit maximizes

b) There may be an incentive to cheat

c) The industry as a whole is loss making

d) There is no need to police agreements

Question 10

In a cartel:

a) Firms compete against each other

b) Price wars are common

c) Firms use price to win market share from competitors

d) Firms collude

Question 1

In monopolistic competition:

a) Firms face a perfectly elastic demand curve

b) All products are homogeneous

c) Firms make normal profits in the long run

d) There are barriers to entry to prevent entry

Question 2

In monopolistic competition:

a) Demand is perfectly elastic

b) Products are homogeneous

c) Marginal revenue = price

d) The marginal revenue is below the demand curve and diverges

Question 3

In monopolistic competition firms profit maximize where:

a) Marginal revenue = Average revenue

b) Marginal revenue = Marginal cost

c) Marginal revenue = Average cost

d) Marginal revenue = Total cost

Question 4

Which of the following is not one of the four Ps in marketing?

a) Product

b) Price

c) Place

d) Presence

Question 5

Effective branding will tend to make:

a) Demand more price inelastic

b) Supply more price inelastic

c) Demand more income elastic

d) Supply more income elastic

Question 6

In monopolistic competition if firms are making abnormal profit other firms will enter and:

a) The marginal cost will shift outwards

b) The demand curve will shift inwards

c) The average cost will shift downwards

d) The average variable cost will increase

Question 7

In Porter's five forces model conditions are more favourable for firms within an industry if:

a) Buyer power is high

b) Supplier power is high

c) Entry threat is low

d) Substitute threat is high

Question 8

If a firm takes over a competitor then, according to Porter's 5 forces model:

a) Buyer power is higher

b) Supplier power is higher

c) Substitute threat is higher

d) Rivalry is lower

Question 9

In marketing "USP" stands for:

a) Unique Selling Proposition

b) Underlying Sales Pitch

c) Unit Sales Point

d) Under Sales Procedure

Question 10

In monopolistic competition:

a) There are few sellers

b) There are few buyers

c) There is one seller

d) There are many sellers

Question 1

Barriers to entry:

a) Do exist in monopoly

b) Cannot exist in oligopoly

c) Doexist in monopolistic competition

d) Do not exist in perfect competition

Question 2

Which best describes price discrimination?

a) Charging different prices for different products

b) Charging the same prices for different products

c) Charging the same prices for the same products

d) Charging different prices for the same products

Question 3

For a firm operating in two markets and price discriminating when profit maximizing

a) Marginal revenue in A = Price B

b) Marginal revenue in A = Price A

c) Marginal revenue in A = Marginal revenue B

d) Marginal revenue in A = Average cost in A

Question 4

If the price elasticity of demand for a product in market A is -0.2 and in market B is -3 a price discriminator will charge:

a) The higher price in market A

b) The higher price in market B

c) The same price in both markets

d) Cannot tell which price will be higher

Question 5

In perfect price discrimination:

a) Consumer surplus is maximized

b) Produce surplus is zero

c) Community surplus is maximized

d) Consumer surplus is zero

Question 6

A benefit to consumers of price discrimination is that:

a) Some products are produced that would not otherwise be produced

b) Producer surplus increases

c) Consumer surplus decreases

d) Firms' profits increase

Question 7

In perfect price discrimination:

a) The demand curve is the marginal cost curve

b) The average revenue equals the average cost

c) The marginal cost is the average cost curve

d) The demand curve is the marginal revenue

Question 8

When price discriminating abnormal profits are made if:

a) Average revenue is greater than average variable cost

b) Average revenue is greater than average cost

c) Average revenue is greater than marginal revenue

d) Average revenue is greater than average fixed cost

Question 9

Barriers to entry:

a) Enable abnormal profits to be made in the long run

b) Enable losses to be made in the long run

c) Enable abnormal profits to be made in the short run only

d) Occur in perfect competition

Question 10

Barriers to entry do not include

a) Patents held by established firms

b) Internal economies of scale experienced by established firms

c) High mobility of resources

d) High investment costs to enter an industry