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Economics Multiple Choice Questions

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.

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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