Multiple Choice Econ
1. A monopolistically competitive firm maintains its market share through
artificial product differentiation
relying on brand loyalty
all of the above
2. A price discriminating firm will charge the lowest price when price elasticity of demand is
equal to 1
3. An example of a cost externality occurs when a mining company:
dumps waste in river upstream from a popular fishing spot
produces coal that is not in demanded in a recession
underpays its employees
overwork its employees
4. X and Y are substitute goods. X is put on sale “buy one get one free”. This will lead to
an increase in demand for Y
a decrease in demand for Y
an increase in demand for X and Y
a decrease in demand for X and Y
5. In the short run, a monopolist may
attract other firms into the industry
none of the above
6. During recessionary periods, the sale of ground beef goes up. This indicates that
people have more time to make their own hamburgers during recessionary times
people have more time to be outdoor and cook hamburgers during recessionary times
ground beef is an inferior good
ground beef is a normal good
7. In the short run, a monopolistically competitive firm
always earns profit
earns profit higher than an oligopolistic firm
earns profit higher than a perfectly competitive firm
may or may not earn profit
8. Cost-effectiveness analysis compares the value of an innovation with its cost.
9. The main difference between perfect competition and monopolistic competition is:
the number of sellers in the market.
the ease of exit from the market.
the difference in the firm’s profits in the long run.
the degree of product differentiation.
10. In the Kinked Demand curve model, price tends to settle at the kink because
MR=MC rule does not apply
there is no unique MR curve
the demand curve is inelastic throughout the range
none of the above
11. In both monopolistic competition and oligopoly market structures
there is easy entry and exit
consumers perceive differences among the products of various competitors
economic profits may be earned in the long run
there are many sellers
12. Successful price discrimination requires
the ability to prevent transfers among customers in different submarkets
inelastic demand in each submarket
constant marginal costs
identical price elasticities among submarkets
13. Which function of management is most concerned with risk minimization?
human resource management
complying with government regulations
14. Cost cutting cannot increase profits.
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