This document contains 40 multiple choice questions about microeconomics concepts related to firm behavior and decision-making under different market structures (perfect competition, monopoly, oligopoly), costs of production, profit maximization, and factor demand. The questions assess understanding of key topics like marginal analysis, short-run and long-run equilibrium, price discrimination, game theory, and labor demand.

1. Question 1
1. If a firm's marginal revenue from its 100th unit of output is
$50 and the marginal cost from its 100th unit of output is $45,
then in the short run this firm should:
a.
shut down.
b.
produce more than 99 units of output.
c.
change its technology.
d.
produce less than 100 units of output.
e.
increase its plant size.
3 points
Question 2
1. Which of the following is a key characteristic of the long-run
competitive equilibrium that distinguishes it from the short-run
competitive equilibrium?
a.
Free entry to reduce short-run profits, or free exit to reduce
short-run losses.
b.
Average revenue is less than average cost.
c.
Marginal revenue is greater than marginal cost.

2. d.
Economic profits are positive, but cannot be negative.
3 points
Question 3
1. The marginal approach to profit maximization means that a
firm should produce until:
a.
marginal revenue equals price.
b.
price equals average total cost.
c.
marginal cost becomes negatively sloped.
d.
marginal revenue equals marginal cost.
e.
marginal revenue equals zero.
3 points
Question 4
1. If the demand for a product increases in an increasing cost
industry, as the market adjusts in the long run:
a.
the firm's per-unit cost will fall.
b.
the market price will return to its initial position.
c.
price will rise.

3. d.
the firm's per-unit cost will increase.
3 points
Question 5
1. In the perfectly competitive market, individual firms exert no
effect on the market price. Therefore, the firm's marginal
revenue curve is:
a.
indeterminate.
b.
an upward-sloping curve.
c.
a downward-sloping curve.
d.
the same as the firm's demand curve.
3 points
Question 6
1. Exhibit 8-12 Marginal revenue and cost per unit curves
As shown in Exhibit 8-12, the firm will shut down in the short-
run at a price below:
a.
OB.
b.
OA.
c.
OD.

4. d.
OC.
3 points
Question 7
1. Exhibit 8-3 Cost per unit curves
As shown in Exhibit 8-3, the price at which the firm earns zero
economic profit in the short-run is:
a.
more than $2.00 per unit.
b.
$1.00 per unit.
c.
$2.00 per unit.
d.
$1.50 per unit.
e.
$4.00 per unit.
3 points
Question 8
1. In the short run, if a perfectly competitive firm is producing
at a price above average total cost, its economic profit must be:
a.
normal.
b.
negative.
c.

5. zero.
d.
positive.
3 points
Question 9
1. Which of the following correctly explains why sellers in a
perfectly competitive market are price takers?
a.
There are many sellers, and so the market process generates an
equilibrium price that cannot be influenced by any one seller.
Thus they have no choice but to take the price generated by the
market process.
b.
Individual buyers in a competitive market have the power to
influence price, and thus can impose prices and other conditions
on powerless sellers.
c.
There are few sellers, and so they have the power to take
whatever price they want.
d.
Sellers in a competitive market have the power to influence
price by colluding with one another and using quotas to limit
overall market output and thus raise price.
3 points
Question 10
1. Exhibit 8-3 Cost per unit curves
As shown in Exhibit 8-3, the firm will produce in the short run
if the price is at least equal to:

6. a.
$1.00 per unit (point A).
b.
$1.50 per unit (point B).
c.
$2.00 per unit (point C).
d.
$4.00 per unit (point D).
3 points
Question 11
1. Under both perfect competition and monopoly, a firm:
a.
always earns a pure economic profit.
b.
is a price maker.
c.
sets marginal cost equal to marginal revenue.
d.
will shut down in the short-run if price falls short of average
total cost.
e.
is a price taker.
4 points
Question 12
1. Compared to a perfectly competitive industry, a monopolist
with the same marginal cost and demand curve will charge:
a.

7. a higher price and produce a higher volume of output.
b.
a higher price and produce a lower volume of output.
c.
the same price and produce the same volume of output.
d.
a lower price and produce a lower volume of output.
e.
a lower price and produce a higher volume of output.
4 points
Question 13
1. Exhibit 9-8 Profit maximizing for a monopolist
As shown in Exhibit 9-8, the monopolist's total cost is which of
the following areas?
a.
P1AEP5.
b.
P2BDP4.
c.
P3CDP5.
d.
P4DEP5.
e.
None of these.

8. 4 points
Question 14
1. A monopoly sets a market price that is higher than the
marginal cost of production. This fact implies that a monopoly's
allocation of resources is:
a.
unfair.
b.
inefficient.
c.
excessive.
d.
discriminatory.
4 points
Question 15
1. The goal of any monopolist is to maximize:
a.
normal profits.
b.
output.
c.
price.
d.
economic profits.
e.
consumer welfare.
4 points

9. Question 16
1. Under monopoly, a firm:
a.
is a price taker.
b.
will shut down in the short-run if price falls short of average
total cost.
c.
maximizes profit by setting marginal cost equal to marginal
revenue.
d.
always earns a pure economic profit.
4 points
Question 17
1. Which of the following is true for the monopolist?
a.
Marginal revenue is less than the price charged.
b.
Economic profit is possible in the long-run.
c.
Profit maximizing or loss minimizing occurs when marginal
revenue equals marginal cost.
d.
All of the above.
e.
None of the above.
4 points

10. Question 18
1. Exhibit 9-2 Demand and cost information for a monopoly
Q
P
TC
0
40
10
1
30
15
2
20
25
3
10
40
4
0
60
2.
3. Refer to Exhibit 9-2. Using the rule that focuses on the
marginal approach to maximizing profits, the monopolist
maximizes profit by choosing price equal to:
a.
$10.
b.
$30.
c.
$40.
d.
$20.

11. e.
$0.
4 points
Question 19
1. If pizza used to be produced in a perfectly competitive
market, and now the pizza market has become a monopoly, we
can expect:
a.
less pizza to be sold at a lower price.
b.
the same amount of pizza to be sold at the same price.
c.
more pizza to be sold at a higher price.
d.
less pizza to be sold at a higher price.
e.
more pizza to be sold at a lower price.
4 points
Question 20
1. When marginal revenue is zero for a monopolist facing a
downward-sloping straight-line demand curve, the price
elasticity of demand is:
a.
equal to 0.
b.
less than 2.
c.

12. greater than 1.
d.
equal to 1.
4 points
Question 21
1. Game theory is an especially useful model for analysis in the
following types of markets:
a.
monopolistic competition.
b.
perfect competition.
c.
oligopoly.
d.
monopoly.
4 points
Question 22
1. Suppose an oligopoly has a dominant firm that sets the price
for the entire industry. In this situation, the oligopoly has:
a.
a cartel.
b.
a kinked demand curve.
c.
nonprice competition.
d.
price leadership.

13. 4 points
Question 23
1. Exhibit 10-5 Two-Firm Payoff Matrix
Suppose costs are identical for the two firms in Exhibit 10-5.
Each firm assumes without formal agreement that if it sets the
high price its rival will not charge a lower price. Under these
"tit-for-tat" conditions, equilibrium will be established by:
a.
Beta Co. charging $1,000 and Alpha Co. charging $500.
b.
Beta Co. charging $500 and Alpha Co. charging $1,000.
c.
Beta Co. charging $1,000 and Alpha Co. charging $1,000.
d.
Beta Co. charging $500 and Alpha Co. charging $500.
4 points
Question 24
1. Which of the following is a game theory strategy for
oligopolists to avoid a low-price outcome?
a.
Win-win
b.
Second best
c.
Last in-first out
d.

14. Tit-for-tat
4 points
Question 25
1. Product differentiation makes the demand for a
monopolistically competitive firm's product:
a.
more elastic than for a monopoly.
b.
perfectly inelastic.
c.
perfectly elastic.
d.
more inelastic than for a monopoly.
4 points
Question 26
1. Which of the following is evidence of an ineffective cartel?
a.
Output changes are dictated by changes in demand.
b.
Price changes are dictated by changes in demand.
c.
Members do not agree on output quotas.
d.
All of these.
4 points
Question 27
1. Exhibit 10-6 Two-Firm Payoff Matrix

15. Assume costs are identical for the two firms in Exhibit 10-6. If
both firms were allowed to form a cartel and agree on their
prices, equilibrium would be established by:
a.
Widget Co. charging the low price and Ajax Co. charging the
low price.
b.
Widget Co. charging the low price and Ajax Co. charging the
high price.
c.
Widget Co. charging the high price and Ajax Co. charging the
high price.
d.
Widget Co. charging the high price and Ajax Co. charging the
low price.
4 points
Question 28
1. Suppose that R. J. Reynolds raises the price of cigarettes by
10 percent. Although they have no requirement or agreement to
do so, the other cigarette firms decide to raise their prices
accordingly. This situation is best described as:
a.
monopolistic competition.
b.
a cartel.
c.
a market with kinked demand.

16. d.
price leadership.
4 points
Question 29
1. Excluding foreign competition, which of the following is an
oligopoly in the United States?
a.
The computer industry.
b.
The automobile industry.
c.
The steel industry.
d.
All of these are oligopolies.
4 points
Question 30
1. Which of the following is true about advertising?
a.
If monopolistically competitive firms compete through
advertising, that creates brand loyalty, then advertising can be
an effective entry cost.
b.
Both a. and b. above are correct.
c.
Advertising has no impact on entry costs or market structure.
d.
Advertising may be the only way that a new entrant can
penetrate a market dominated by long-established firms.

17. 4 points
Question 31
1. Which of the following most closely approximates the
conditions of a monopolistically competitive market?
a.
The market for jumbo aircraft, where one major domestic firm
competes with one major foreign firm.
b.
The restaurant industry, which is characterized by firms
producing a differentiated product in a market with low entry
barriers.
c.
The market for Grade A eggs, which is characterized by a large
number of firms producing a homogeneous product.
d.
Local cable television service, where a licensed supplier
competes with firms offering satellite service.
4 points
Question 32
1. The purpose of a cartel is to:
a.
act like a monopoly.
b.
promote product innovation.
c.
increase market competition.
d.
decrease market concentration.

18. e.
diversify operations.
4 points
Question 33
1. Which of the following statements concerning the supply of
labor is true?
a.
The supply of labor is determined by the prevailing wage rate.
b.
The labor supply curve is downward sloping.
c.
The wage rate has no effect on the supply of labor.
d.
None of these.
4 points
Question 34
1. The demand for a factor of production depends on the:
a.
supply of other factors of production.
b.
demand for the products that it helps to produce.
c.
supply of the factor.
d.
demand for other factors of production.
4 points
Question 35

19. 1. Exhibit 11-12 A monopsonist
In Exhibit 11-12, suppose this labor market is unionized by a
powerful union which forces a wage of $35 upon the industry.
The firm would respond by hiring ____ workers and paying a
wage of ____.
a.
70; $27
b.
60; $35
c.
40; $35
d.
60; $30
e.
40; $30
4 points
Question 36
1. Firms should hire additional units of a resource as long as
the:
a.
marginal revenue product of the resource exceeds the cost of an
additional unit of the resource.
b.
marginal product of the resource exceeds the price of the
resource multiplied by the quantity of output produced.
c.

20. price of the output produced is positive.
d.
marginal product of the resource is less than the price of the
resource.
4 points
Question 37
1. If the wage rate is fixed at a certain level, the:
a.
total wage cost curve will increase at a decreasing rate.
b.
total wage cost curve is horizontal.
c.
total wage cost curve will increase at an increasing rate.
d.
MP must be constant.
e.
total wage cost curve is a straight upward sloping line.
4 points
Question 38
1. The profit-maximizing employment level for a monopsonist
occurs where:
a.
price = wage.
b.
wage = TWC.
c.
MRP = MFC

21. d.
wage = MFC.
e.
wage = MRP.
4 points
Question 39
1. Exhibit 11-11 Labor wage and cost data
Labor
Wage
TWC
MFC
10
$
$ 50.00
$
11
5.80
12
17.80
13
102.70
14
126.00
15

22. 46.50
2.
3. In Exhibit 11-11, the wage required to hire 14 employees is
equal to:
a.
$8.80.
b.
$8.10.
c.
$9.00.
d.
$5.50.
e.
$9.50.
4 points
Question 40
1. Which of the following would cause the demand for labor to
change?
a.
A change in the cost of living.
b.
Movements along the labor demand curve.
c.
c and e.
d.
A change in the price of the good produced.

23. e.
Changes in the wage rate.