econ-208-practice-exam-3

6) The main argument of Joseph Schumpeter's idea of "creative destruction" is that A) monopoly profits lead to innovation in an effort to sustain those profits. B) perfectly competitive industries are characterized by more productive innovation and productivity growth than monopolistic industries, which Schumpeter regarded as destructive. C) monopolies create profits for themselves at the expense of the destruction of consumer surplus. D) the existence of monopolies leads to destruction of the environment. E) short - run profits created by the existence of monopolies will lead to antitrust legislation, which will force the fragmentation of monopolies into competitive industries. 6) 7) It is common for a cartel to collapse when one or more firms in the cartel A) is much larger than other cartel members. B) produce more efficiently than other member firms. C) exit the industry. D) exceed its output quota. E) increase its price above the monopoly price. 7) 8) The cartelization of an industry with a homogeneous product usually means that A) the demand curve facing the industry must be linear. B) member firms have agreed to reduce investment. C) member firms have agreed to reduce their joint output. D) member firms have agreed to cooperate in reducing costs. E) the demand curve facing the industry must be elastic. 8) 9) Suppose you go to a retailer's website and print a coupon that gives you a discount on your next purchase at their store. But your friend, who also plans to purchase there, can't be bothered. You are revealing to the store that A) elasticity of demand changes according to the size of the discount offered. B) you have a lower income than your friend. C) you understand price discrimination and your friend does not. D) you have a lower elasticity of demand than your friend. E) you have a higher elasticity of demand than your friend. 9) 10) By calculating a concentration ratio, economists measure the A) degree to which firms in the industry use similar technologies. B) concentration of firms in one geographic location. C) degree to which a monopolist's output is lower than in perfect competition. D) fraction of total industry sales accounted for by the largest firms. E) control of a monopolist over its input prices. 10) 11) Consider the following characteristics of a particular industry: - there is freedom of entry and exit - in long - run equilibrium, each firm is producing a level of output where there are increasing returns to scale This industry is likely to be A) perfectly competitive. B) highly concentrated. C) monopolistically competitive. D) an oligopoly. E) a cartel. 11) 2 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

18) "Brand proliferation" in an oligopolistic industry A) can shift the average total cost curve down and raise the overall minimum scale of operation. B) allows new entrants to the industry to gain significant market share. C) allows easier entry to a new entrant with small sales. D) will generally reduce the expected market share of new entrants to the industry. E) allows firms to cooperate to maximize their joint profits. 18) 19) A condition for the profit - maximizing use of any factor of production is (where MP = marginal product, w = the price of a factor of production, p = price of one unit of the firm's output, MR = marginal revenue, MC = marginal cost, MRP = marginal revenue product): A) MR = MRP P B) MC = MR × w C) MRP = MR × MC D) w = MP × p E) MRP = MP × p 19) Consider the following table for a firm. The first column shows the number of units of a variable factor of production employed by the firm. Total Number of Units of the Factor Total Number of Units of Output 2 100 3 110 4 128 5 148 6 162 7 170 8 166 TABLE 13 - 2 20) Refer to Table 13 - 2. Suppose this firm is a perfect competitor and faces a given price of the product equal to $10 per unit. The marginal revenue product of the 3rd unit of the factor is A) $1000. B) $1100. C) $100. D) $110. E) $30. 20) 5 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

28) Suppose a piece of capital equipment offers its last MRP of $40 000 in one year, after which it is valueless. At an annual interest rate of 8%, a profit - maximizing firm would be willing to buy this unit of capital if its purchase price is A) below $37 037. B) above $37 037. C) below $40 000. D) above $40 000. E) above $40 000, but only at a higher interest rate. 28) 29) In any given period, which of the following is most likely to determine a firm's flow of investment demand? A) the rate of change of the capital stock in the entire economy B) a change in the firm's optimal capital stock C) the rate of change of the firm's investment demand D) a change in the firm's optimal flow of investment E) Any of the above, as they are all the same 29) 30) Choose the best reason for a rightward shift in the economy's investment demand curve. A) diminishing marginal returns to capital B) changes in technology that improve the productivity of capital C) an increase in the interest rate D) a decrease in the interest rate E) none of the above would shift the investment demand curve 30) 31) A firm's demand for physical capital leads to its ________ and a household's supply of saving leads to its ________. A) demand for bonds; supply of bonds B) demand for stocks; supply of stocks C) demand for financial capital; supply of financial capital D) lending behaviour; borrowing behaviour E) negative effect on the interest rate; positive effect on the interest rate 31) 8 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

37) For a production process that involves a positive externality, it is true that A) a subsidy to producers could increase production to the socially optimal level. B) marginal social cost is more than marginal private cost. C) without government intervention the market will produce too much of this good. D) a per unit tax could be imposed on the producer to achieve the socially optimal level of production. E) marginal social benefit is less than marginal private benefit. 37) 38) Consider a remote village with a limited, freely available water supply and no government intervention in the allocation of water. In this case, each individual has an incentive to use water until their A) private marginal benefit is zero. B) social marginal cost is minimized. C) private and social marginal costs are equal. D) private marginal cost is zero. E) social marginal benefit is maximized. 38) 39) One reason that national defence is a classic example of a public good is that A) the benefits that accrue to one person do not diminish the benefits available to others. B) it would be immoral for private firms to provide this essential commodity. C) society deems it to be too important to be provided by the private sector. D) all citizens want national defence. E) military technology is too expensive for private firms to provide. 39) 40) Moral hazard is said to exist when one party to a transaction A) purchases insurance because they know they are involved in risky activities. B) has the incentive to, and is able to, shift costs to another party in the transaction. C) has no morals. D) is subject to a hostile corporate takeover. E) is not able to take advantage of the other party. 40) 41) The government prohibits individuals from paying someone else to replace them when they are selected to perform jury duty. What broader social goal is being met in this case? A) social responsibility B) protecting individuals from others or themselves C) income distribution D) regulation of an imperfectly competitive economic activity E) preference for public provision 41) 42) The main point about public choice theory is that A) there is adverse selection in the selection of elected officials. B) most civil servants act solely in the public interest. C) the choices of public officials may be governed more by their own self - interest than the public interest. D) most politicians are corrupt. E) elected officials never compromise the public interest in order to gain votes. 42) 11 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

50) Which of the following best describes the relationship between positive and normative statements in economics? A) Positive and normative statements are alternate ways of describing the desirability of certain economic policies. B) Normative statements are those with which all economists agree; positive statements may give rise to some disagreement. C) Economists generally agree with each other regardless of whether a question is positive or normative. D) Neither positive nor normative statements are concerned with the desirability of certain economic changes. E) Normative statements evaluate the desirability of certain economic changes; positive statements do not. 50) 51) Choose the statement that best characterizes an economic theory. A valid theory A) allows one to deduce a normative statement. B) generates a hypothesis that can predict future events. C) appeals to the law of large numbers. D) extrapolates from the past behaviour of a variable to predict its future course. E) allows one to prove irrefutably one's hypothesis. 51) 52) When using statistics in economics, the possibility of error A) cannot be controlled. B) cannot be evaluated. C) can be eliminated with more sophisticated statistical techniques. D) cannot be eliminated. E) is not considered to be important. 52) The table below shows hypothetical data for the volume of gold and nickel output across several years. Gold (troy ounces) Index Nickel (lbs) Index Year 1 1 230 000 4500 Year 2 1 416 000 4551 Year 3 1 349 000 100 4623 100 Year 4 947 000 4791 Year 5 1 012 000 4802 Year 6 1 321 000 4867 Year 7 1 450 000 5002 Year 8 1 510 000 5117 TABLE 2 - 5 53) Refer to Table 2 - 5. What is the index number for gold output in Year 1? A) 109.7 B) 0.91 C) 1.097 D) 99.7 E) 91.2 53) 54) Data collected of several variables but for the same time period are called A) time - analysis data. B) logarithmic data. C) cross - sectional data. D) topographic data. E) time - series data. 54) 14 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 3 - 6 61) Refer to Figure 3 - 6. If the initial demand and supply curves are D 1 and S 1 , equilibrium price and quantity are represented by point A) A. B) B. C) C. D) D. E) Not shown in the figure. 61) 62) Suppose the world price of oil rises by 25% over a 12 - month period; over the same period the average price level in Canada rises by 1.6%. What is the change in the price of oil relative to the change in the average price level? A) a decrease of 23.4 % B) a decrease of 26.6% C) an increase of 23.4% D) an increase of 25% E) an increase of 26.6% 62) 17 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland. FIGURE 32 - 5 69) Refer to Figure 32 - 5. If Paperland engages in international trade and the world price is P C , the amount of newsprint produced by Paperland will be A) Q 1 . B) Q 2 . C) Q 3 . D) Q 4 . E) Q 5 . 69) 20 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

Ireland and Japan are assumed to produce only wool and steel, to have full employment and complete mobility of resources between industries. Their production possibilities boundaries before trade are drawn in solid lines. It is assumed that the two countries have the same amount of resources. Their consumption possibilities after trade are shown by the dotted lines. The outputs of wool and steel are given in physical units. FIGURE 32 - 1 70) Refer to Figure 32 - 1. At the "terms of trade" shown by the dotted lines, A) both countries can experience gains from trade. B) consumers will press for tariffs. C) resources will be permanently unemployed in Japan. D) resources will be permanently unemployed in Ireland. E) only Japan can benefit from trade. 70) 71) Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food? A) Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand. B) Because cornflakes is food, cornflakes would have the same price elasticity of demand as food. C) Compared with food, cornflakes have a lower price elasticity of demand because it is specifically defined. D) Food has a lower price elasticity of demand than cornflakes because it is more broadly defined. E) Food has a higher price elasticity of demand because it is a necessity. 71) 72) A vertical demand curve shows that the price elasticity of demand is A) unity. B) less than one. C) zero. D) infinity. E) not defined. 72) 21 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

73) If total expenditure on a product rises and falls directly with a product's price, then demand for this product has an elasticity of A) zero. B) direct proportions. C) less than one. D) greater than one. E) one. 73) 74) Suppose a decrease in world demand for potash (used in the production of fertilizer) decreases the price by 5 percent. Annual Canadian production decreases by 2 percent. What is the elasticity of supply of Canadian potash? A) 0.2 B) 0.5 C) 0.4 D) 2.5 E) 1.0 74) FIGURE 4 - 3 75) Refer to Figure 4 - 3, which shows a demand shift and the short - run and long - run supply curves for some good. The diagram illustrates the general principle that A) both demand and supply are less elastic in the long run. B) demand is less elastic in the long run. C) demand is more elastic in the long run. D) supply is more elastic in the long run. E) supply is less elastic in the long run. 75) 22 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

There have been proposals that a tax be imposed on sugar - laden soft drinks in an attempt to reduce their consumption. Assume for simplicity that all bottled soft drinks are the same size. Suppose the initial market equilibrium is P = $2.00 and Q = 1000. FIGURE 4 - 4 76) Refer to Figure 4 - 4. Suppose the government imposes a tax of $0.60 per soft drink purchased. The change in total expenditure on soft drinks is A) a decrease of $160. B) an increase of $320. C) a decrease of $80. D) an increase of $480. E) No change in total expenditure. 76) 77) Consider an excise tax imposed on daily parking charges in the downtown of a small city. Before the imposition of the tax, equilibrium price and quantity are $15 and 100 cars parked per day. (P = $15, Q = 100). The city government then imposes a tax of $3 per car parked per day. Market equilibrium adjusts to P = $16 and Q = 95. Which of the following statements about the burden of the tax is correct? A) Supply is more elastic relative to demand and therefore more of the burden falls on the consumer. B) Supply is less elastic relative to demand and therefore more of the burden falls on the consumer. C) Supply is less elastic relative to demand and therefore more of the burden falls on the seller. D) Supply is more elastic relative to demand and therefore more of the burden falls on the seller. 77) 23 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

78) An increase in income will A) increase the demand for SUVs if SUVs are normal goods. B) increase the demand for SUVs if SUVs are inferior goods. C) decrease the demand for SUVs if SUVs have a very low price. D) always increase the demand for SUVs. E) increase the supply of SUVs. 78) 79) If two goods, X and Y, have a positive cross elasticity of demand, then we know that they A) are complements. B) are both inferior goods. C) are substitutes. D) are both normal goods. E) each have a price elasticity greater than one. 79) 80) In a market where we observe a disequilibrium, quantity exchanged is determined A) by the quantity demanded. B) by neither quantity demanded nor quantity supplied. C) by the lesser of quantity demanded and quantity supplied. D) by the greater of quantity demanded and quantity supplied. E) by the quantity supplied. 80) 81) A predictable result of the imposition of binding price floors or price ceilings is A) a more equitable distribution of commodities. B) shortages. C) production control by the government. D) a reduction in quantities exchanged. E) surpluses. 81) 82) Assuming that the long - run supply of housing is more ________ than the short - run supply, the imposition of binding rent controls will generally ________. A) elastic; lead to a worsening of the housing shortage over time B) inelastic; lead to a reduction in the housing shortage over time C) inelastic; lead to no significant change in the housing shortage D) elastic; lead the price of rental housing to revert back to its equilibrium level E) elastic; lead to only a temporary housing shortage 82) 83) Suppose a downward - sloping demand curve intersects the horizontal axis at a point where quantity demanded equals 1250 units. What is the "value" that consumers place on the 1250th unit of this good? A) $0 B) a negative value C) $1250 D) it depends on the position of the supply curve E) a positive value 83) 24 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 5 - 6 84) Refer to Figure 5 - 6. The market for good X is in equilibrium at P 0 and Q 0 . Economic surplus is represented by A) areas 2, 3, 4, 6, 7, 8. B) areas 1 and 5. C) areas 2, 3, 4, 6, 7, 8, 9. D) areas 1, 2, 3, 4, 5, 6, 7, 8. E) areas 1, 2, 3, 5, 6. 84) 85) Consider Canada's east coast lobster fishery. Suppose the government sets a production quota which is below the equilibrium quantity. Relative to the free - market equilibrium, we can expect the result to be A) the free - market equilibrium price and quantity because the quota is not binding. B) an increase in price and a decrease in deadweight loss. C) a decreased price. D) an increase in price and the introduction of a deadweight loss. E) a decrease in price and a decrease in deadweight loss. 85) 86) The "law" of diminishing marginal utility implies that the A) marginal utility of a good diminishes over time. B) first unit of a good consumed will contribute most to the consumer's satisfaction. C) total utility is constant as more units are consumed. D) total utility is negative. E) last unit of a good consumed will contribute most to the consumer's satisfaction. 86) 25 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 6 - 1 87) Refer to Figure 6 - 1. Total utility is at its maximum when marginal utility is A) positive. B) equal to zero. C) at the maximum. D) negative. E) equal to total utility. 87) 26 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 6 - 2 88) Refer to Figure 6 - 2. If the price of X is $2 and the price of Y is $1 and the consumer is buying 4 units of X and 2 units of Y, the consumer's total utility is A) 52. B) 69. C) 8. D) 56. E) 10. 88) 89) The Smith family is allocating its monthly household expenditure between only two goods, food and clothing. Suppose that the price of food is $5 per unit, and the price of clothing is $10 per unit and that the marginal utility that the family is receiving from its consumption of food is currently 25. What is the family's marginal utility from its consumption of clothing if it is maximizing its utility? A) 10 B) 50 C) 5 D) 12.5 E) 25 89) 27 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

Diagrams A, B, and C show 3 individual consumers' demand curves for cement. Consumers A, B, and C constitute the entire monthly cement market in this region. FIGURE 6 - 3 90) Refer to Figure 6 - 3. What is the market demand (in cubic metres per month) for cement at a price of $60 per cubic metre? A) 4000 B) 2000 C) 1000 D) 0 E) 3000 90) 91) If the income effect of a price change is negative and larger in absolute terms than the substitution effect, then the demand curve will be A) of indeterminate slope. B) upward sloping. C) vertical. D) horizontal. E) downward sloping. 91) 92) The substitution effect is A) the change in quantity demanded that occurs as a result of a change in absolute prices, with real income held constant. B) the change in quantity demanded that occurs as a result of a change in relative prices with money income held constant. C) the change in the relative prices of two or more goods. D) the change in quantity demanded that occurs when one good is substituted for another. E) the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant. 92) 28 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 6 - 6 93) Refer to Figure 6 - 6. Suppose the market price is p*. In this case, the total value consumers place on consuming Q* units is outlined by the area A) ACDE. B) ADE. C) ABD. D) BCD. E) ABDF. 93) 94) When a corporation issues a bond A) it is making a promise to pay interest each year but not repay the principal. B) it is called financing through the stock market. C) the purchaser of the bond assumes ownership rights in the corporation. D) it is making a promise to pay interest each year and to repay the principal at a stated time in the future. E) it is called equity capital. 94) 95) The relationship between factors of production used in the production process and the resulting output is called a(n) A) economic function. B) production boundary. C) production function. D) cost function. E) consumption possibilities boundary. 95) 29 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

The table below provides the annual revenues and costs for a family - owned firm producing catered meals. Total Revenues ($) 500 000 Total Costs ($) - wages and salaries 200 000 - risk - free return of 6% on owners' capital of 250 000 15 000 - rent 105 000 - depreciation of capital equipment 25 000 - risk premium of 8% on owners' capital of 250 000 20 000 - intermediate inputs 150 000 - forgone wages of owners in alternative employment 80 000 - interest on bank loan 10 000 TABLE 7 - 1 96) Refer to Table 7 - 1. The implicit costs for this family - owned firm are A) $100 000. B) $80 000. C) $490 000. D) $35 000. E) $115 000. 96) 97) With regard to economic decision making for firms, the long run is a period in which A) technology may be variable, but some factors of production are fixed. B) technology is variable. C) only capital is variable. D) all factors of production are variable but technology is fixed. E) only some of the factors of production are variable. 97) 98) Consider a basket - producing firm with fixed capital. If the firm can produce 36 baskets per day with 3 workers and then increases production to 44 baskets per day with 4 workers, then which of the following statements is true? A) With 4 workers, the firm's average product of labour is 8. B) The firm has not yet reached the point of diminishing marginal productivity. C) With 4 workers, the marginal product is above the average product. D) The marginal product of the fourth worker is 11. E) The firm has passed the point of diminishing marginal productivity. 98) 30 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

FIGURE 7 - 1 99) Refer to Figure 7 - 1. The marginal product of labour curve intersects the average product of labour curve when A) the firm is at its capacity. B) total product is at its maximum. C) the firm achieves increasing returns. D) average product is at its maximum. E) diminishing returns sets in. 99) 31 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

100) Diminishing marginal product of labour is said to exist when there is A) an increase in the amount of capital available for each unit of labour. B) a successively smaller increase in output with each successive unit increase in labour input. C) a reduction in the level of labour input that causes output to increase. D) an increase in the division and specialization of labour. E) technological advancement. 100) 101) When a firm's marginal cost is rising, we know that A) marginal product must be zero. B) average fixed cost must be rising. C) average variable cost must be rising. D) marginal product must be falling. E) average total cost must be rising. 101) 102) When a plant is operating at the level of output where its short - run average total cost is at its minimum, A) more of the variable factor of production should be employed. B) marginal cost is at a minimum. C) average variable cost is at a minimum. D) the plant is operating at its capacity. E) average fixed cost is at a minimum. 102) 103) Suppose that capital costs $8 per unit and labour costs $4 per unit. For a profit - maximizing firm operating at its optimal factor mix, if the marginal product of capital is 60, the marginal product of labour must be A) 20. B) 10. C) 90. D) 30. E) 120. 103) 104) Suppose that capital costs $50 per unit and labour costs $20 per unit. If the marginal product of capital is 100 and the marginal product of labour is 30, a cost - minimizing firm should A) employ more of both capital and labour. B) employ less of both capital and labour. C) employ more capital and less labour. D) employ less capital and more labour. E) not change its current factor use. 104) 105) A short - run average total cost curve will touch the long - run average cost curve at a level of output only A) where the short - run cost curve is upward sloping. B) when the quantity of the fixed factor being employed is at the optimal level for that level of output. C) where the short - run cost curve is downward - sloping and the quantity of the fixed factor is optimal. D) by coincidence. E) where the short - run cost curve is downward sloping. 105) 106) Which of the following paired concepts are equivalent to each other? A) increasing returns; decreasing costs B) increasing costs; economies of scale C) increasing returns; increasing costs D) increasing returns; diseconomies of scale E) constant costs; economies of scale 106) 32 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

107) Suppose RioTintoAlcan is considering the construction of a new aluminum smelter in Northern Quebec, the operation of which requires a great deal of electricity. Suppose also that the price of electricity is predicted to rise significantly in the near future. As a result, the firm decides to embark on new research and development which leads to the development of a new production technique that uses less electricity per tonne of aluminum produced. This is an example of A) short - run cost minimization. B) long - run economies of scale. C) the marginal rate of substitution between factors. D) short - run profit maximization. E) innovation away from increases in factor prices. 107) 108) With respect to innovation, which of the following statements is true? A) The principal incentive for innovation does not appear to be related to profits. B) The utilization rate of existing plant and equipment and its durability are independent of the pace of innovation. C) Innovation is exogenous to the economic system. D) Innovation is often endogenous to the economic system. E) Government policy cannot influence the rate of innovation. 108) 109) Which of the following is NOT a determinant of market structure? A) The capital - labour ratio of the firm. B) The market share of the sellers. C) The number of sellers. D) The nature of the product. E) The ease of entering the industry. 109) 110) A firm is said to have "market power" only when A) its demand curve is the market demand curve. B) it has the ability to choose its own profit - maximizing level of output. C) it has the ability to influence the price of its product. D) it is one of 25 or fewer firms in the industry. E) it is one of 10 or fewer firms in the industry. 110) 111) A firm in a perfectly competitive market A) has no power to influence the market price. B) is limited in the amount of product it can sell without affecting the price. C) is dependant upon the behaviour of its competitors. D) competes actively with other sellers in the industry. E) is aware of its competitors' costs. 111) 112) When economists say that a firm is a "price taker" they mean that A) at the price prevailing in the market, the firm will be willing to sell an infinite quantity. B) the demand curve that the firm faces is perfectly inelastic. C) the firm initially takes price as given and tries to influence it through advertising. D) the firm can alter its rate of production and sales without affecting the market price of the product. E) the firm can alter the market price as it changes its rate of production. 112) 113) The price elasticity of demand faced by an individual wheat farmer would come closest to which following value? A) 0.00007 B) 0.7 C) 1.0 D) 71.0 E) 71 000 113) 33 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

114) When economists say that a perfectly competitive firm is a "quantity adjuster," they mean that A) it adjusts its output in response to changes in prices. B) its marginal - cost curve coincides with its own demand curve. C) changing the output level does not affect the costs of production. D) it is not concerned with cost factors. E) it can vary its output by an infinite amount. 114) Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. Price ($) Quantity 5 1000 5 1250 5 1500 5 1750 5 2000 TABLE 9 - 1 115) Refer to Table 9 - 1. Suppose this firm is currently selling 1750 mousetraps at the market price of $5. If the firm raises its price to $6, it's average revenue will be A) between $5 and $6. B) greater than $6. C) $5. D) $0. E) $6. 115) 116) If a perfectly competitive firm is faced with average revenue below average variable cost it will produce zero output so as to reduce its A) costs to zero. B) losses to the amount of its marginal costs. C) losses to the amount of its fixed costs. D) losses to the amount of its variable costs. E) costs to below its revenue. 116) 117) Consider a firm in a perfectly competitive industry. The shut - down point is the price at which the firm can just cover its A) unstated costs. B) non - economic costs. C) fixed costs. D) variable costs. E) marginal costs. 117) 118) The short - run supply curve for a perfectly competitive firm is A) its marginal - cost curve above the average - variable - cost curve. B) its average - revenue curve. C) its rising portion of the average - variable - cost curve. D) the industry supply curve. E) its entire marginal - cost curve. 118) 34 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

119) If a perfectly competitive market is in a short - run equilibrium and each firm has P > SRATC , then A) the market supply curve will become less elastic. B) price will fall in the short run as it is too high and firms are making economic profits. C) existing firms will continue to earn economic profits in the long run. D) individual firms in the industry will increase their output. E) new firms will enter the market because existing firms are earning economic profits. 119) 120) Long - run equilibrium in a perfectly competitive industry is characterized by A) falling costs. B) rising costs. C) each firm producing at the minimum point on its LRAC curve. D) internal economies of scale. E) an output level at which firms' SRATC curves are tangent to the downward sloping portion of their LRAC curves. 120) 35 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

Answer Key Testname: MOCK FINAL 2017 1) B 2) C 3) D 4) E 5) A 6) A 7) D 8) C 9) E 10) D 11) C 12) D 13) A 14) D 15) E 16) A 17) D 18) D 19) D 20) C 21) C 22) E 23) A 24) C 25) E 26) C 27) D 28) A 29) B 30) B 31) C 32) C 33) E 34) B 35) D 36) B 37) A 38) A 39) A 40) B 41) A 42) C 43) D 44) E 45) C 46) B 47) A 48) C 49) B 50) E 36 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

Answer Key Testname: MOCK FINAL 2017 51) B 52) D 53) E 54) C 55) D 56) D 57) E 58) B 59) B 60) B 61) A 62) C 63) C 64) A 65) D 66) C 67) E 68) A 69) B 70) A 71) D 72) C 73) C 74) C 75) D 76) C 77) C 78) A 79) C 80) C 81) D 82) A 83) A 84) E 85) D 86) B 87) B 88) B 89) B 90) E 91) B 92) E 93) A 94) D 95) C 96) E 97) D 98) E 99) D 100) B 37 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699

Answer Key Testname: MOCK FINAL 2017 101) D 102) D 103) D 104) C 105) B 106) A 107) E 108) D 109) A 110) C 111) A 112) D 113) E 114) A 115) D 116) C 117) D 118) A 119) E 120) C 38 Downloaded by Nicholas Sun (sun_nicholas@yahoo.com) lOMoARcPSD|16672699