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INTRODUCTION TO MICRO-ECONOMICS

ASSIGNMENT 2

1) Which of the following does the marginal cost curve NOT intersect at its minimum?

A. Average variable cost

B. Average total cost

C. Average fixed cost

D. Average fixed cost plus average variable cost

2) Which of the following is not a potential cause of economies of scale?

A. Ability to use by-products

B. Specialization of labour

C. Efficient use of capital

D. All of the above are potential causes of economies of scale

3) A purely competitive firms short-run supply curve it its marginal cost curve, for all:

A. Quantities of output

B. Output where marginal cost exceeds minimum average total cost

C. Output where marginal cost exceeds minimum average fixed cost

D. Output where marginal cost exceeds minimum average total cost

4) If all of the firms producing a commodity in a purely competitive market are required to

adopt antipollution devices that increase their costs of production (even though it cleans

up the air), one would expect:

A. The demand for the product to decrease

B. The market supply curve to shift to the left

C. The long-run economic profits of the individual firms to decrease

D. The short-run economic profits of the individual firms to decrease

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True - False

5) When marginal cost is below average variable cost, average variable cost must be rising.

6) Long Range Average Total Cost reaches its minimum where short run marginal cost is equal

to LRATC.

7) Economic costs include implicit costs, whereas accounting costs do not.

8) Marginal costs are the change in costs associated with the addition of one more unit of

output.

9) If all industries within an economy were pure competitors, the economy would be

economically efficient.

10) Oligopoly is an industry with a large number of suppliers, but few buyers.

11) Society would be unambiguously better-off without monopolists.

12) A monopolist can maintain an economic profits in the long-run, because there are

substantial barriers to entry into its markets.

13) Monopsony is one buyer of a commodity in the market.

14) The MRP slopes downward in an imperfectly competitive (resource) market serving an

imperfectly competitive product market because the MP diminishes and the price of the

output must be lowered to sell more.

15) An unregulated monopolist when compared with a purely competitive industry will:

A. Produce more, and charge more

B. Produce more, and charge less

C. Produce less, and charge more

D. Produce less, and charge less

16) Which of the following statements is true of an unregulated monopolist?

A. Price is less than marginal cost

B. Price is more than average revenue

C. Price is more than marginal revenue

D. Price is set where the monopolist chooses regardless of cost

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17) Which of the following is the decision rule to determine the optimal combination of

Productive factors?

A. MRPlabor = MRPcapital = ... = MRPland = 0

B. MRPlabor= MRPcapital = ... = MRPland = 1

C. MRPlabor/MRClabor= MRPcapital/MRCcapital = ... = MRPland/MRCland = 0

D. MRPlabor/MRClabor = MRPcapital/MRCcapital = ... = MRPland/MRCland = 1

18) An increase in the productivity of a factor of production will typically increase the

demand for that factor. Which of the following is associated with an increase in the

demand for a factor of production? A. A person's acquisition of human capital

B. An increase in the price of a complementary factor

C. A decrease in the price of a factor of production that is a substitute for the factor

under consideration

D. All of the above will cause an increase in the demand for a factor of production

19) A monopolist in an otherwise competitive labour market will cause (as compared with the

competitive labour market):

A. Employment to increase, wages to decrease

B. Employment to decrease, wages to decrease

C. Employment to increase, wages to increase

D. Employment to decrease, wages to increase

20) Which of the following best describes a union that organizes only a specific skill group,

relies on apprentice programs to influence the supply of labour and is often called an

Exclusive union?

A. An industrial union

B. A CIO affiliate

C. A craft union

D. None of the above.

TRUE/FALSE

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21). A price ceiling imposed above the competitive equilibrium will result in ashortage.

22) The demand curve slopes downward because of the income and substitution effects.

23) The United States is the example of a laissez faire, capitalist economy.

24) Microeconomics is concerned with decision-making within the firm, household or on the

individual level, but macroeconomics is concerned with the behaviour of the entire economic

system.

25) Economic goals are complementary with one another, but may be conflicting with other

social goals.

26) The quantity supplied of a commodity will increase if we increase an ad valorem tax on

the commodity.

27) A price floor established above a competitive equilibrium will cause a surplus.

28) The income effect results from consumers having more resources available to purchase

everything, if the price of one good decreases.

29) The maximum point (where it is goes flat or from increasing to decreasing) in the total

revenue curve is associated with the unitary range in the demand curve.

30) The price elasticity of demand is the slope of the demand curve.