Set of flashcards Microeconomics Quiz (Page 1 of 1)

Flashcards	36
Language	English
Category	Macro-Economics
Level	University
Created / Updated	01.07.2021 / 02.07.2021
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Which-one of the following statements is correct?

The market equilibrium is an important concept in the market model. It is defined as the condition in which the quantity offered for sale at a given price equals the quantity demanded at that price.

In the market model, the own-price and quantity are called exogenous variables because they are determined inside the market model.

The analysis of one market only, taking exogenous variables a given, is referred to as a general equilibrium analysis.

Which-one of the following statements is correct?

A unit price below the market equilibrium leads to excess supply which, in turn, leads to an increase in the unit price, establishing market equilibrium.

A unit price above the market equilibrium leads to excess supply which, in turn, leads to an increase in the unit price, establishing market equilibrium.

A unit price below the market equilibrium leads to excess demand which, in turn, leads to an increase in the unit price, establishing market equilibrium

Which-one of the following statements is correct?

If the wage decreases by 2

the quantity supplied decreases by 20.

the supply curve shifts to the right.

the supply curve shifts to the left.

Which-one of the following statements is correct?

Jane and Robert both have identical bundles of good A and good B, however they are NOT on the same indifference curve. The marginal rate of substitution MRS_A for _B for Jane is 4, whereas the MRS_A for B for Robert is 0.4 . They both agree to exchange one unit of A for one unit of B.

Which of the following statements is correct?

If Jane gives to Robert one unit of A in exchange for one unit of B, they will, as a result, both end up on a higher-ranking indifference curve.

If Jane gives to Robert one unit of B in exchange for one unit of A, she will, as a result, end up on a higher-ranking indifference curve. Robert, however, will stay on the original indifference curve.

If Jane gives to Robert one unit of B in exchange for one unit of A, they will, as a result, both end up on a higher-ranking indifference curve.

Which-one of the following statements is correct?

A business operating under the conditions of perfect competition will maximize its profit where ...

the marginal cost curve intersects with the average variable cost curve.

where marginal cost, i.e. the increment in total cost due to the production of another unit, equals the market price, i.e. marginal revenue.

None of the above.

Which-one of the following statements is correct?

is a loss of surplus due to a market inference. The loss of surplus however is transferred from the seller to the buyer.

describes a transfer of surplus from the buyer to the seller due to price interference.

is a loss of surplus due to market interference. The surplus is altogether lost, and is transferred to neither the buyer nor the seller.

Which-one of the following statements is correct?

In the short run, a business operating under the conditions of monopolistic competition will maximize its profit where ...

the marginal cost curve intersects with the average variable cost curve.

where marginal cost, i.e. the increment in total cost due to the production of another unit, equals marginal revenue.

where marginal cost, i.e. the increment in total cost due to the production of another unit, equals the market price, i.e. marginal revenue.

Which-one of the following statements is correct?

In the short run, a business operating under the conditions of monopolistic competition will charge a unit price which is below the unit price consistent with perfect competition.

In the short run, a business operating under the conditions of monopolistic competition is highly likely to earn an economic profit.

None of the above.

Which-one of the following statements is correct?

In the long run, a business operating under the conditions of monopolistic competition will charge a unit price, which is below average total cost.

In the long run, a business operating under the conditions of monopolistic competition will neither earn an economic profit nor an accounting profit.

In the long run, a business operating under the conditions of monopolistic competition will not earn an economic profit.

For any particular good, an increase in the price of a complement would most likely result in?

A movement along the demand curve to the right

A shift in the demand curve to the left

A shift in the demand curve to the right

Consider the following statements:

Statement I: If close substitutes are easily available for a particular good, the price elasticity of demand for that good cannot be identified.
Statement II: If a relatively large proportion of a person’s income is spent on a particular good, the price elasticity of demand for that good is most likely relatively high.

Which of the following is true?

Both statements are incorrect.

Both statements are correct.

Only one statement II is correct

Consider the following statements:

Statement I: If the price elasticity of demand for a good equals -1.25, an increase in price will result in a decrease in total revenue.
Statement II: If a decrease in price leads to a decrease in total revenue, demand for the good is price elastic.

Which of the following is true?

Only Statement I is correct.

Only Statement II is correct.

Both Statements are incorrect.

When a rent ceiling (maximum price) is imposed below the equilibrium market price, which of the following is most likely?

The unit price falls while quantity supplied increases

The unit price rises while quantity demanded falls

The unit price falls and the quantity supplied also falls

Which of the following is least likely regarding indifference curves?

For a given consumer, the slope of one indifference curve changes along the indifference curve.

The indifference curves for two consumers can never intersect.

Indifference curves are convex when viewed from the origin.

Robert’s MRSxy is given by 2.5. If Good Y is on the y axis and Good X is on the x axis, the slope of the indifference curve is closest to?

2.5

-2.5

-0.4

This question addresses the budget constraint: The amount of Good A that a consumer would have to give up in order to consume 1 more unit of Good B is given by:

The ratio of the price of Good A to Good B

The marginal rate of substation of Good B for Good A

The ratio of the price of Good B to Good A

For any particular good, an decrease in the price of a complement would most likely result in?

A movement along the demand curve to the right

A shift in the demand curve to the left

A shift in the demand curve to the right

Consider the following statements:

Statement I: The availability of close substitutes for a particular good A has no effect on the price elasticity of demand for that good A.
Statement II: If a comparatively small proportion of a person’s income is spent on a particular good, the price elasticity of demand for that good is comparatively high (i.e. very elastic).

Which of the following is most likely true?

Both statements are incorrect.

Both statements are correct.

Only one statement is correct.

Consider the following statements:

Statement I: If the price elasticity of demand for a good equals -2.5, an increase in price will result in a decrease in total revenue.
Statement II: If a decrease in price leads to an increase in total revenue, the demand for that good is price elastic.

Which of the following is most likely true?

Only Statement I is incorrect.

Only Statement II is incorrect.

Both Statements are correct.

When a price floor is imposed above the equilibrium market price, which of the following is most likely true?

Price falls while quantity supplied increases

Price rises while quantity demanded falls

Price and quantity supplied both fall

Which of the following statements is most likely true?

The indifference curves for two different consumers cannot intersect.

For a given consumer, the slope of one indifference curve changes along the indifference curve.

Total utility enjoyed by a consumer changes along one given indifference curve.

Peter’s MRSxy is given by 1.5. If Good Y is on the y axis and Good X is on the x axis, the slope of the indifference curve is closest to?

1.5

-0.67

-1.5

This question addresses the budget constraint: The amount of Good A that a consumer would have to give up in order to consume one more unit of Good B is given by:

The ratio of the price of Good A to Good B

The marginal rate of substitution of Good B for Good A

The ratio of the price of Good B to Good A

Which one of the following statements is correct?

If a monopolist faces the inverse demand function P = 50 - 5Q, which of the following statements is true?

I. The equation of the average revenue curve is AR(Q) = 50 – 5Q.

II. The marginal revenue curve is twice as steep as the average revenue curve.

III. For outputs less than 5, marginal revenue is positive, for outputs more than 5, marginal revenue is negative.

Only the statements I and II are true.

Only the statements II and III are true.

All three statements, I, II, and III are true

Which-one(s) of the following statement(s) is/are correct?

Under the conditions of perfect competition, the supply function calculates the quantity a supplier is willing to produce in function of the selling price as well as the cost of the input factors needed for production.
Given everything else is held constant, an increase in the cost of labour leads to upward shift of the supply curve. Mathematically, this corresponds to a higher intercept.
An increase in the cost of the input factors has no effect on the supply curve because the market price decides, which quantity a firm is willing to supply.

Statements I and II are correct.

All three statements are correct.

Statements II and III are correct.

Which-one of the following statements is correct?

Given are the following denotations:

MP_L : marginal product of labour

MP_K : marginal product of capital

PL : price of labour

PK : price of capital

If a firm wants to maximise output per monetary unit of input cost, then, given a two-factor production function with labour and capital, the following condition must hold: MPL = MPK .

If a firm wants to maximise output per monetary unit of input cost, then, given a two-factor production function with labour and capital, the following condition must hold: MPL/PL = MPK/PK .

If a firm wants to maximise output per monetary unit of input cost, then, given a two-factor production function with labour and capital, the following condition must hold: MPL × PL = MPK × PK .

Which one of the following statements is correct?

Under the conditions of perfect competition, firms are price takers only if they must lower their price to sell more units.

Under the conditions of monopolistic competition, in the absence of price discrimination, marginal revenue is not constant. It increases if more units are produced and sold at the market price.

Under the conditions of perfect competition marginal revenue is equal to average revenue.

Which-one(s) of the following statement(s) is/are correct?

Consumer choice theory can be defined as the branch of microeconomics that relates consumer demand curves to production and cost theory.
A consumption bundle, or consumption basket, is a specific combination of goods and services that a consumer would like to consume.
Under reasonable assumptions, it is possible to come up with a rule that translates the quantities of goods in different baskets into a number. That assignment is called the utility function of that consumer.

Statements I and II are correct.

All three statements are correct.

Statements II and III are correct.

Rowena and John both have identical bundles of good A and good B, however they are NOT on the same indifference curve.

The marginal rate of substitution MRSA for B for Rowena is 5, whereas the MRSA for B for John is 0.2 . They both agree to exchange one unit of A for one unit of B.

Which of the following statements is correct?

If Rowena gives to John one unit of B in exchange for one unit of A, they will, as a result, both end up on a higher-ranking indifference curve.

If Rowena gives to John one unit of B in exchange for one unit of A, she will, as a result, end up on a higher-ranking indifference curve. Al, however, will stay on the original indifference curve.

If Rowena gives to John one unit of A in exchange for one unit of B, they will, as a result, both end up on a higher-ranking indifference curve.

None of the above.

Which-one(s) of the following statement(s) is/are correct?

Price discrimination (charging different prices for different consumers)
offers a firm with market power an opportunity to capture more surplus.
Block pricing is an example of third-degree price discrimination. So is the splitting of the price charged to consumers into a subscription and a usage charge.
Price discrimination (charging different prices for different consumers) offers a firm, given certain conditions are met, an opportunity to capture more surplus. Yet, this is not true for firms that have no information about so-called reservation prices (i.e., a consumer’s maximum willingness to pay for that unit) or about how the price-elasticity of demand differs across consumers.

All statements are correct.

Only statement I is correct.

Statements I and III are correct.

None of the above.

Which one of the following statements is correct?

First-degree price discrimination describes the practice of charging different uniform prices to different consumer groups or segments in a market.

Third-degree price discrimination describes the practice of offering consumers a quantity discount.

Screening describes a process for sorting consumers based on a consumer characteristic that (1) the firm can see (such as age or status) and (2) is strongly related to a consumer characteristic that the firm cannot see but would like to observe (such as willingness to pay or elasticity of demand).

Which one of the following statements is correct?

The Cournot model pertains to a homogeneous products oligopoly. In that model, the only decision each firm needs to make is to determine the maximum level of marginal cost which is compatible with maximising profit.

The Herfindahl-Hirschman Index HHI is a useful measure to determine the share of industry sales revenue generated by the four firms with the largest sales revenue in the industry.

The Cournot and Bertrand models make different predictions about the quantities, prices, and profits that will arise under oligopolistic competition. This is partly due to the fact that they make different assumptions about how a firm expects its rival to react to its competitive moves.

Which one of the following statements is correct?

A reaction function shows a firm’s best response (i.e., profit-maximising output choice) to the output level of a rival firm.

In the Cournot model, each firm’s output choice depends on the market price, and the market price depends solely on the output of the dominant, leading firm.

In homogenous products oligopoly markets, a small number of firms sell products that are substitutes for each other but also differ from each other in significant ways.

Which one of the following statements is correct?

A Nash equilibrium describes a situation in which there exists at least one dominant strategy for one player.
In a Nash equilibrium the aggregate payoff of the players is maximised.
At the Nash equilibrium, expected behaviour and actual behaviour converge.

Only the statements I and III are true.

Only the statements II and III are true.

Only statement III is true.

None of the above.

In a repeated prisoner’s dilemma game, the likelihood of a cooperative outcome increases if:

Cheating is hard to detect.

Interactions between players are frequent.

Players can earn a comparatively large one-time game from cheating.

Which-one(s) of the following statement(s) is/are correct?

According to the theory of comparative advantage, free trade between two countries is mutually beneficial, if each country specialises in the production of those goods where the opportunity cost of producing another unit is only marginally higher than in the other country.
According to the theory of comparative advantage, free trade between two countries is mutually beneficial, if each country specialises in the production of those goods where the opportunity cost of producing another unit is lower than in the other country.
According to the theory of comparative advantage, free trade between two countries is mutually beneficial only, if at least one country has an absolute advantage in the production of one good.

None of the statements is correct.

Only statement II is correct.

Statements II and III are correct.

Microeconomics Quiz

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