Microeconomics Answers

Suppose a firm faces the production function Q=4L+12L^2-2L^3

find the maximum points of AP and MP curves

ich one of the following statements about a monopoly is true?

A.The monopolist has a flat demand curve because of high barriers to entry.

B.For a monopolistic firm, profit will be maximised where P = MR.

C.Price in the long run is not usually equal to minimum average total cost.

D.In the long run, a monopolist can earn only normal profits.

The maximum loss a firm should experience in the short run is equal to:

A.total variable costs

B.zero

C.total fixed costs

D.average total costs

The demand for labour curve slopes downwards because of __________________

A.

diminishing returns to labour

B.

falling demand for the output that labour produces

C.

falling wages, causing more people to demand employment

D.

the supply of output

The market structure that involves the most competition:

A.monopolistic competition

B.perfect competition

C.oligopoly

D.pure monopoly

Which one of the following is not a requirement for perfect competition to exist?

A.No individual seller must be able to influence the price.

B.No individual buyer must be able to influence the price.

C.The product must be standardised (homogeneous).

D.All sellers must have similar costs of production.

7 The following are the assumptions of the price leadership model except

A there are two firms, A and B

B The costs of the firms are different.

The number of buyers is large

D They produce a homogenous product

E none of the above.

8 Which one of the following is not a major determinant of the supply of labor?

The size of the population and age composition

B migrations of people from one area to another

C the proportion of the working population willing to work

 D the price of labor (wage rate)

E none.

9 Markets will not allocate resources efficiently if we have

A monopoly on power

B oligopoly power

C externalities

D private commodities/goods

E interdependent between firms.

10 One of the following is a characteristic of an efficient property rights structure.

A Universality

B exclusivity

C enforceability

D transferability

E all.

4 Which of the following is not true about Bertrand’s duopoly model?

Each seller assumes his rival’s output to remain constant.

B it differs from Cournot’s model by its behavioral assumption.

Each seller assumes that their rival’s price to remain constant.

D a & c

E none of the above.

5 According to a kinked demand model, each seller will respond to its rival’s change by

A cut in the price of this commodity

B not follow the change in price.

C reacts to price cut but not price hikes.

D all a to c

6 One of the following is not a reason that brings oligopoly firms into collusion.

A to form an entry barrier for new firms.

B to reduce an oligopolistic risk

C to reduce competition between firms

D to reduce the price of their output.

E none.

Multiple choice

1 The short run equilibrium analysis under monopolistic competition is based on the following assumptions except

A There is no entry of new firms.

B the short run cost curves of each firm are similar

The products of each seller are differentiated

D The demand curve is elastic.

The factor of service is perfectly elastic in supply.

2 Which of the following doesn’t belong to the characteristics of an oligopoly market?

A interdependence of firms in decision making

 B products are homogenous of differentiated.

C There is a barrier to entry

D a and b

E none of the above.

3 One of the following is an assumption of the Cournot model:

A There are two firms each with a mineral well.

B Each firm operates at zero marginal cost

Each firm faces a downward sloping demand curve

D Each seller acts on the assumption that his competitors will react to his decision.

E a and b

Workers are likely to have more bargaining power to negotiate higher wages with employers if

A.they belong to a trade union

B.there is a limited substitution of capital for labour

C.there is an excess demand for labour

D.all of the above are correct