20 Economic Quiz Multiple Choice Questions

| November 9, 2018

20.Factors that affect the ability of oligopolistic firms
to successfully engage in cooperation include_________________. (Points :
1.25)

a) number and size distribution of sellers

b) size and frequency of orders

c) product heterogeneity

d) a and b only

e) a, b, and c

Question 21. 21.Joint
products are: (Points : 1.25)

a) products which are technically independent in the production process

b) exemplified by beef and hide from cattle

c) products whose production processes are interdependent

d) a and b

e) b and c

Question 22. 22.In
_________ price discrimination, the monopolist charges each consumer the
highest price that purchaser is willing to pay for each unit purchased
(provided that this price exceeds the marginal cost of production). (Points
: 1.25)

a) first-degree

b) second-degree

Question 23. 23.___________
is a new product pricing strategy which results in a high initial product
price. This price is reduced over time as demand at the higher price is
satisfied. (Points : 1.25)

a) Prestige pricing

b) Price lining

c) Skimming

d) Incremental pricing

e) None of the above

Question 24. 24.____________
is the price at which an intermediate good or service is transferred from
the selling to the buying division within the same firm. (Points : 1.25)

a) Incremental price

b) Marginal price

c) Full-cost price

d) Transfer price

e) none of the above

Question 25. 25.For a
monopolist that engages in price discrimination, when the price elasticity
in market 1 is less (in absolute value) than in market 2, the optimal price
in market 1 will exceed the optimal price in market 2. (Points : 1.25)

a) Ture

b) False

Question 26. 26.To
maximize profits, a monopolist that engages in price discrimination must
allocate output in such a way as to make identical the_________in all
markets. (Points : 1.25)

a) ratio of price to marginal cost

b) ratio of marginal cost to marginal utility

c) ratio of price to elasticity

d) marginal revenue

e) none of the above

Question 27. 27.The
segmenting of customers into several small groups such as household,
institutional, commercial, and industrial users, and establishing a
different rate schedule for each group is known as: (Points : 1.25)

a) first-degree price discrimination

b) market penetration

c) third-degree price discrimination

d) second-degree price discrimination

e) none of the above

Question 28. 28.Transfer
pricing: (Points : 1.25)

a) is typical of a centralized firm

b) assumes no external sources available

c) should maximize a division’s profits, rather than the firm’s

d) can exist with or without an external competitive market

e) none of the above

Question 29. 29.A
company sells 20,000 pairs of jeans a year at an average price of $10.
Fixed costs are $60,000 and total variable costs are $120,000. They
estimate that a 10% increase in output would not affect fixed cost but
would reduce average variable costs by 40 cents. Someone suggests reducing
price by 5% to increase sales and project. The price elasticity of demand (ARC)
is -2.
The impact on total revenue would be: (Points : 1.25)

a) a decrease of $10,000

b) an increase of $10,000

c) an increase of $180,000

d) None above

Question 30. 30.Given
the information in (29) above. The change in total costs would be: (Points
: 1.25)

a) a decrease of $3,500

b) an increase of $ 3,800

c) an increase of $180,000

d) None above

Question 31. 31.Given
the information in (29) above. The effect on profit would be: (Points :
1.25)

a) an increase of $42,000

b) a decrease of $6,200

c) an increase of 50,000

d) an increase of $6,200

e) None above

Question 32. 32.An
effective ceiling price would cause: (Points : 1.25)

a) a surplus in the market

b) a shortage in the market

c) would not affect the market

d) None above

Question 33. 33.In the
electric power industry, residential customers have relatively________
demands for electricity compared to industrial users and are generally
charged _________ rate. (Points : 1.25)

a) similar: similar

b) elastic: lower

c) elastic; higher

d) inelastic; lower

e) inelastic; higher

Question 34. 34.To
maximize profit, a monopolist that engages in price discrimination must
allocate output in a way that makes _____ identical in all markets.
(Points : 1.25)

a) ratio of price to marginal cost

b) ratio of marginal cost to price

c) ratio of price to elasticity

d) marginal revenue

e) None above

Question 35. 35.In the
short-run a company (pure competitor) will stop production when: (Points :
1.25)

a) total revenue is less than total costs

b) price is less than average variable cost

c) operating at a loss

d) None above

Question 36. 36.Which of
the following is an example of an oligopolistic market structure? (Points :
1.25)

a) Public utilities

b) Airlines

c) liquor retailers

d) wheat farmers

e) None above

Question 37. 37.If a
cartel wishes to maximize profits, the market share of
each participant should be set at a level such that the _____ of
all participants is identical. (Points : 1.25)

a) average total cost

b) average profit

c) marginal cost

d) marginal profit

e) None above

Question 38. 38.Effective
collusion generally is more difficult as the number of oligopolistic firms
involved increases (Points : 1.25)

True

False

Question 39. 39.Capital
budgeting does not provide for depreciation (Points : 1.25)

a) True

b) False

Question 40. 40.To
determine the benefit from a capital investment. The stream of future
revenues must be discounted to their present value. (Points : 1.25)

a) True

b) False

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