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Various economic multiple choice questions

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1.The opportunity cost of receiving 100 dollars in the future as opposed to getting that 100 dollars today
a.The foregone interest that could be earned if you had the money today.
b.The taxes paid on any earnings.
c.The value of $100 relative to the total income of that person.
d.The value of $100 relative to the total income of all persons.
2. If firms in the pizza industry are earning negative economic profits, which of the following will most likely occur in the future?
a.Some firms will exit the market
b.The economic profits of the firms in the industry will rise
c.The market price for pizza will rise
d.All of the above
3.The economic principle that producers are willing to produce more output when price is high is depicted by the:
a.Upward slope of the supply curve
b.Extreme steepness of the supply curve.
c.Downward slope of the supply curve.
d.Interaction of the supply and demand curves.

4.Because of consumer-consumer rivalry, the price will tend to:
a.Be driven to a lower price.
b.Rise up to the maximum price the consumers are willing and able to pay.
c.Be the same as the competitive price.
d.Be the same as the monopoly price.

5.Opportunity cost differs from accounting costs because of
a.Implicit costs
b.Accounting profits
c.Economic profits
d.Explicit costs
6.If A and B are substitutes, an increase in the price of good A would:
a.Have no effect on the quantity demanded of B.
b.Lead to an increase in demand for B.
c.Lead to a decrease in demand for B.
d.None of the statements associated with this question are correct.

7.Which of the following increases the potential for sustainable long-run industry profits?
b.The availability of multiple substitute
c.Presence of complements
d.None of the above
8.Negotiations between the buyer and seller of a new car is an example of:
a.Consumer-consumer rivalry.
b.Consumer-producer rivalry
c.Producer-producer rivalry.

9.Property owners move scarce resources towards the production of goods most valued by society because
a.Government controls the allocation of resources.
b.Consumers demand inexpensive goods and services.
c.Managers are solely pursuing the interests of society.
d.Firms attempt to maximize profits.

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Solution Summary

The problem set deals with questions under finance: The solution would be useful to students of accounting and economics.

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Question 21 Save

The _____ elastic a firm's demand curve, the greater its _____.

a. less; monopoly power

b. less; output

c. more; monopoly power

d. more; costs

Question 22 Save

Which of the following is not a basic feature of a monopolistically competitive industry?

a. There are many buyers and sellers in the industry

b. Each firm in the industry produces a differentiated product

c. There is free entry and exit into the industry

d. Each firm owns a patent on its product

Question 23 Save

The variance of a probability distribution is used to measure risk because a higher variance is associated with

a. a wider spread of values around the mean.

b. a more compact distribution.

c. a lower expected value.

d. both a and b

Question 24 Save

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

a. government-created monopolies.

b. resource monopolies.

c. natural monopolies.

d. monopolistic competition.

Question 25 Save

The most important factor in determining the long-run profit potential in monopolistic competition is

a. free entry and exit.

b. the elasticity of the market demand curve.

c. the elasticity of the firm's demand curve.

d. that it is in the threatener's self interest to act on the threat.

Question 26 Save

In making decisions under risk

a. maximizing expected value is always the best rule.

b. mean variance analysis is always the best rule.

c. the coefficient of variation rule is always best.

d. maximizing expected value is most reliable for making repeated decisions with identical

Question 27 Save

When marginal revenue equals marginal cost, total revenue is equal to total cost, therefore, the firm just "breaks even"



Question 28 Save

The following payoff matrix shows the various profit outcomes for 3 projects, A, B, and C, under 2 possible states of nature: the product price is $10 or the product price is $20.
Project P = $10 P = $20
A 20 80
B 40 60
C -26 140
Using the minimax regret rule the decision maker would choose

a. A

b. B

c. C

d. impossible to tell from the information

Question 29 Save

An oligopolistic situation involving the possible creation of barriers to entry would probably best be modeled by

a. Cooperative game.

b. Prisoner's Dilemma game.

c. Battle of the Sexes game.

d. Sequential game.

Question 30 Save

The essential characteristic of a credible threat is

a. that the threatener has a reputation for carrying out threats.

b. that the threatener ignores the costs of carrying out the threat.

c. that the threatener and the threatenee know each other well.

d. that it is in the threatener's self interest to act on the threat.

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