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General Micro-Economics: 14 Multiple Choice

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1. Price discrimination is _____.
illegal in most economically developed nations
very rare in a market economy
common, and evidence of monopoly
all of the above

2. Market power is the ability _____.
to set prices and quantities sold
of capitalists to exploit the working classes
to set prices
all of the above

3. Which of the items below are examples of monopolistic competition, also known as imperfect competition?
patent, copyright, and trademark
professional licensing and labor unions
local shops and restaurants
all of the above
none of the above

4. In what kind of market is a firm unable to influence the price of its output? (Points: 4)
price maker
imperfect monopoly
perfectly competitive

5. When the quantity sold of a good changes significantly in response to changes in price, its demand is _____.
identical to his supply curve
identical to marginal cost
highly elastic
highly inelastic

6. Different individuals can earn different incomes because _____.
they are discriminated against, based on ethnicity, gender, race, or other traits
they have different levels of education and experience
they live in different geographic areas with different employment opportunities
any or all of the above could be reasons

7. When a firm's revenues rise more quickly than its costs, _____.
it is operating below its optimal capacity
it is operating above its optimal capacity
it is operating at its optimal capacity
all of the above

8. The primary goal of a firm is to _____.
minimize cost
maximize revenue
maximize profit
all of the above

9. Which of the following most nearly approximates a perfectly competitive market?
products with brand names that are sold in many different stores
commodities, like wheat, rice, and gold
products that are very close substitutes for each other, like Coke and Pepsi
all of the above

10. Profit equals _____.
total revenue minus total cost
total revenue minus marginal cost
marginal revenue minus marginal cost
gross revenue minus depreciation

11. Marginal cost is _____.
a small cost that does not affect a firm's profit significantly
the cost of increasing the margin between cost and price
the cost of producing the next unit of output
all of the above

12. A good that can be reproduced and distributed at a zero marginal cost is an example of _____.
public good
oligopoly good
monopoly good

13. The "Prisoner's Dilemma" illustrates:
The lack of cooperation among firms in a competitive market
The lack of cooperation among firms in a monopolistic market
The lack of cooperation between a monopoly and its customers
why, in an oligopoly market, cooperation is difficult to achieve even when it is mutually beneficial

14. A very large advertising budget is typically a sign of _____.
public good
perfect competition

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Solution Summary

The answers to the multiple choice questions are highlighted in the attached document.