Top 350+ Solved Micro economics 2 MCQ Questions Answer
Q. Profit maximization for a perfectly competitive firm is at the quantity where
a. price equals marginal revenue
b. the difference between price and marginal cost is the greatest
c. price equals marginal cost
d. marginal cost is at a minimum
Q. A firm may decide to shut down in the short run
a. if profit maximization occurs at an output level where price is less than average variable cost
b. if profit maximization occurs at an output level where price is less than average total cost
c. profit maximization occurs at an output level where price is less than average total cost but greater than average variable cost
d. if profit maximization occurs at an output level where price is equal to average total cost and the firm does not foresee changes to the market price in the future
Q. If a perfectly competitive firm finds that the profit maximizing output level occurs whereprice is equal to marginal cost but is less than average variable cost
a. the firm will continue to operate in the short run since total revenue exceeds total variable cost but will exit the industry in the long run
b. the firm will continue to operate in the short run since it has to pay the total fixed cost whether or not it continues to operate
c. the firm will increase its selling price to raise revenue in order to be able to continue to operate profitably in the short run
d. the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing
Q. In the long run, a perfectly competitive firm earning zero economic profits
a. will exit the market in search of more profitable use of its resources
b. is earning a normal rate of return on its investments
c. signifies that the firm is performing poorly and so should exit the market
d. will break even
Q. In the long run, a constant cost industry
a. has an upward sloping supply curve as the quantity supplied increases with increases in demand
b. expands in response to an increase in demand despite rising input costs, and so the long run supply curve is horizontal
c. can expand in response to an increase in demand without input costs changing, and so the long run supply curve is horizontal
d. does not expand in response to an increase in demand and so the long run supply curve is horizontal
Q. Market power is defined as
a. the ability of a firm to charge any price it wants
b. produce and sell as large a quantity as possible at high prices
c. the ability of a seller or buyer to affect the market price of a good or service
d. sell large a quantity at high prices
Q. Marginal revenue for a monopolist is equal to
a. the increased revenue from the sale of an additional unit less the loss of revenue from selling previous units at a lower price
b. the change in revenue resulting from a one unit change in output
c. the change in revenue divided by the change in output
d. all of the above are applicable
Q. For a monopolist, marginal revenue is always less than price because
a. as output increases, the price of all units must fall to sell the additional unit
b. because at lower prices, profit margins fall
c. in order to sell additional quantities, the additional units much be sold at a lower price
d. because monopolist is a price maker
Q. The supply curve for the monopolist
a. does not exist
b. is represented by the marginal cost curve above the average total cost curve
c. is represented by the marginal cost curve above the average variable cost curve
d. is represented by the marginal cost curve above the average cost curve
Q. The Lerner Index is a measure of __________
a. perfect competition
b. monopoly power
c. competition
d. market
Q. For the monopolist, at the profit maximizing level of output
a. price is greater than marginal cost (p > mc)
b. price is equal to marginal cost (p=mc)
c. price may be greater than or equal to marginal cost,
d. price is less than marginal cost (p <mc)
Q. A major source of monopoly power in a market is
a. a low market elasticity of demand
b. a high market price elasticity of demand
c. aggressive rivalry between firms in a market
d. the presence of many firms in a market
Q. According to economic pricing theory, the basic objective of every pricing strategy
a. is to reduce prices in order to increase consumer surplus and the quantity sold
b. to raise prices in order to reduce consumer surplus
c. sell at a price and quantity where total revenue is maximized
d. to capture consumer surplus and convert it to additional profit for the firm
Q. The practice of charging different prices to different consumers for the same goods or services is known as _____
a. product differentiation
b. marketing
c. aggressive selling
d. price discrimination
Q. Which of the following statements about industries that are oligopolies is false
a. firms in these industries may attempt to cooperate
b. firms in these industries are interdependent
c. the fact that there is more than one firm in an oligopoly means that there are no barriers to entry
d. an oligopoly with two firms is called a duopoly