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Economics Multiple Choice Questions

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1. Which of the following is a relevant cost?
A. Replacement cost
B. Sunk Cost
C. Historical Cost
D. Fixed Cost
E. All of the above are relevant costs

2. Which of the following cost relationships is not true?
A. AFC = AC - MC
B. TVC = TC - TFC
C. the change in TVC divided by the change in Q = MC
D. The change in TC divided by the change in Q = MC

3. When a firm produces at the point where MR = MC, and the price of its product is higher than the cost per unit, the profit that it is earning is considered to be:
A. normal
B. above normal
C. below normal

4. Suppose a firm is currently maximizing its profits (i.e. following the MR - MC rule). Assuimg that it wants to continue maximizing its profits, if its fixed costs increase, it should:
A. raise its price
B. maintain the same price
C. lower its price
D. not enough information to answer this question

5. Which of the following is true about a monopoly?
A. It will always earn economic profit
B. It will charge the highest price possible
C. Its demand curve is generally less elastic than in more competitive markets
D. It will always be subject to government regulations.

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Solution Preview

1. Which of the following is a relevant cost?
A. Replacement cost
B. Sunk Cost
C. Historical Cost
D. Fixed Cost
E. All of the above are relevant costs

CORRECT ANSWER IS "A"

2. Which of the following cost relationships is not true?
A. AFC = AC - MC
B. TVC = TC - TFC
C. the change in TVC divided by the ...

Solution Summary

This solution deals with a set of multiple choice questions in Economics dealing with various aspects such as cost and monopoly.

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See Also This Related BrainMass Solution

Economics multiple choice questions

1.The opportunity cost of receiving 100 dollars in the future as opposed to getting that 100 dollars today
is:
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?
a.Entry
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.
d.Monopoly.

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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