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Managerial Economics
Managerial Economics MCQs
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The primary goal of a business firm is to
increase its production.
promote workforce job satisfaction.
promote fairness.
maximise profit.
?
When an economist uses the term 'cost' referring to a firm, the economist refers to the
opportunity cost of producing a good or service, which includes both implicit and explicit cost.
price of the good to the consumer.
implicit cost of producing a good or service, but not the explicit cost of producing a good or service.
explicit cost of producing a good or service, but not the implicit cost of producing a good or service.
?
A normal profit is defined as
the same thing as accounting profit.
the economic profit minus the implicit costs.
the return to entrepreneurship.
total revenue minus implicit costs.
?
Which of the following is correct?
The long run does not exist for some firms.
The short run is the same for all firms.
The long run is the time frame in which the quantities of all resources can be varied.
The short run for a firm can be longer than the long run for the same firm.
?
In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of capital is a
fixed cost.
short-run cost.
variable cost.
marginal cost.
?
The total product curve shows the relationship between total product (output) and____________; and the total cost curve shows the relationship between...
the quantity of labour; the quantity of labour
the quantity of output; the quantity of labour
the quantity of all inputs; the level of output
the quantity of labour; the level of output
?
The marginal product of labour is the change in_______;__________and the marginal cost is the change in.
average product from employing one more worker; average cost from employing one more worker
total revenue from employing one more worker; total cost from employing one more worker
total output from employing one more unit of capital; total cost from employing one more unit of capital
total cost from employing one more worker; total cost from producing one more unit of output
?
The law of decreasing returns states that as a firm uses more of a
variable input, output will begin to fall immediately.
variable input, with a given quantity of fixed inputs, the revenues eventually decrease.
variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases.
fixed input and a variable input, the marginal product of the fixed input and the marginal product of the variable input both decrease.
?
Average product is equal to__________; and average cost is equal to____________.
total product ÷ quantity of labour; total cost ÷ quantity of labour
output ÷ quantity of labour; total cost ÷ output
marginal product × quantity of labour; total cost × quantity of labour
marginal product + total product; marginal cost + total cost
?
When a firm's long-run average total cost falls as its output increases, the firm is experiencing
constant returns to scale.
decreasing cost of marginal returns.
decreasing marginal returns.
economies of scale.
?
A market with a large number of sellers
can only be a monopolistically competitive market.
might be a monopolistically competitive or a perfectly competitive market.
can only be a perfectly competitive market.
might be a perfectly competitive, monopolistically competitive, oligopoly or monopoly market.
?
Perfect competition is characterised by all of the following EXCEPT
a large number of buyers and sellers.
firms can set their own prices.
no restrictions on entry into or exit from the industry.
buyers and sellers are well informed about prices.
?
The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________....
horizontal; downward sloping
downward sloping; upward sloping
downward sloping; horizontal
downward sloping; downward sloping
?
A firm's marginal revenue is
the change in total revenue that results from employing one more worker.
the change in total revenue that results from an increase in the demand for the good or service.
the change in total revenue minus the change in total cost.
the change in total revenue that results from a one-unit increase in the quantity sold.
?
For a perfectly competitive firm, the market price of a good is
a given which the firm cannot change.
determined by the firm in order to maximise its profit.
equal to the firm's marginal revenue.
Answers A and C are correct
?
A perfectly competitive firm will maximise profit when the quantity produced is such that the
price exceeds the firm's marginal cost by as much as possible.
firm's marginal revenue is equal to the price.
firm’s marginal revenue is equal to its marginal cost.
firm's marginal revenue exceeds its marginal cost by the maximum amount possible.
?
A perfectly competitive firm should shut down in the short run if price falls below the minimum of
average variable costs.
marginal revenue.
average total cost.
fixed costs.
?
A perfectly competitive firm's decision on shut-down _______; whereas its decision on exit _______.
occurs in long run; occurs in short run
determines the level of price; determines the level of output
determines the level of output; determines the level of price
occurs in short run; occurs in long run
?
In the long run, a firm in a perfectly competitive market will
remove all competitors and become a monopolistically competitive firm.
make zero normal profit but its owners will make an economic profit.
remove all competitors and become a monopoly.
make zero economic profit, so that its owners earn a normal profit.
?
A monopoly produces a product ________ and there ________ barriers to entry into the market.
identical to its many competitors; are no
with no close substitutes; are no
with no close substitutes; are
identical to its many competitors; are
?
A monopolist is
able to ignore the demand for its product when setting its price.
a firm with no marginal revenue curve.
a price taker.
able to earn only a normal profit in the long run.
?
A barrier to entry is
a factor that increases competition because firms must continue to operate in the market in which they were founded.
the same as rent seeking.
anything that protects a firm from the arrival of new competitors.
illegal in most markets.
?
The demand curve for a monopoly is
vertical because the demand is perfectly inelastic.
horizontal because the demand is perfectly elastic.
undefined because it is the only supplier in the market.
downward sloping
?
A single-price monopoly
must practice price discrimination.
can lower its price for only a few select consumers if it wants to increase its sales.
must lower the price for all customers if it wants to increase its sales.
is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly.
?
For a monopoly, marginal revenue
is equal to the change in total revenue brought about by a one-unit increase in quantity sold.
is equal to the price taken from the competitive market.
increases as the output level increases.
is equal to the amount people buy at a given price.
?
For a monopoly, the marginal revenue curve is
horizontal and the same as the demand curve.
horizontal and below the demand curve.
down-sloping and the same as the demand curve.
down-sloping and below the demand curve.
?
For a single-price monopoly, price is
equal to marginal revenue.
greater than marginal revenue.
less than marginal revenue because the firm cannot increase its total revenue when the demand curve is downward sloping.
equal to zero because the firm is not a price taker.
?
A monopolist maximises its profit when
the total revenue is maximized.
the price is the highest.
the total cost is minimized.
the marginal revenue is equal to the marginal cost.
?
A monopolist can make an economic profit in the long run because of
the fact that the firm produces where MR = MC.
the relatively elastic demand for its product.
the relatively inelastic demand for its product.
barriers to entry.
?
What does monopolistic competition have in common with perfect competition?
A standardized product.
Barriers to exit but no barriers to entry.
A large number of firms and freedom of entry and exit.
Product differentiation.
?
A differentiated product has
many different complements.
many perfect substitutes.
close but not perfect substitutes.
no close substitutes.
?
Firms in monopolistic competition have demand curves that are
U-shaped.
downward sloping.
upward sloping.
horizontal
?
In monopolistic competition, profit is maximized by producing so that marginal revenue
equals price.
equals average total cost but not marginal cost.
equals marginal cost and which are less than price.
is negative.
?
The major difference between monopolistic competition and monopoly is
how the quantity of output is determined.
only a monopoly can make an economic profit in the long run.
only a firm in monopolistic competition can make an economic profit in the short run.
monopoly is a price setter, and a firm in monopolistic competition is a price taker.
?
Which of the following is found ONLY in oligopoly?
One firm’s actions affect another firm’s profit.
Sellers face a downward-sloping demand curve for their product.
The firm's demand curve is horizontal.
Entry into the industry is blocked.
?
A cartel is
a market structure with a small number of large firms.
a market with only two firms.
a market structure with a large number of small firms.
a group of firms acting together to raise prices, decrease output, and increase economic profit.
?
A two-firm oligopoly is called a
duopoly
cartel
monopolistic oligopoly.
double monopoly.
?
The tool that economists use to analyse the mutual interdependence of oligopolies is
the efficient scale.
game theory.
the HHI.
economies of scale.
?
A Nash equilibrium i. is named after the Nobel prize-winning economist, John Nash. ii. occurs when each player chooses the best strategy given the s...
i only
ii only
iii only
i and ii
