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Multiple choice questions on different topics in microeconomics.

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1. Each of the following, except one, is a condition that characterizes a perfectly competitive labor market. Which is the exception?
1.Workers appear identical to firms.
2.Workers receive wages that are above their marginal revenue product (MRP).
3.There are no barriers to entering the labor market.
4.There are no barriers to exiting from the labor market.
5.There are many buyers of labor in the market.

2. The term marginal revenue product (MRP) refers to the change in output if an additional unit of labor is employed.

3. The demand curve for labor by a perfectly competitive firm slopes downward because of
1.diminishing marginal revenue
2.increasing marginal returns to labor
3.economies of scale
4.diminishing marginal productivity of labor
5.the positive slope of the labor supply curve

4. A firm can maximize profit by hiring labor up to the point where
1.the marginal revenue product equals the wage rate
2.the marginal product equals marginal cost revenue equals total cost
4.the marginal revenue product equals marginal product
5.the marginal revenue product is zero

5. Which of the following could explain a movement from point F to point G in Figure 11-8? increase in the average reservation wage
2.a shift in tastes toward working in this labor market increase in the market wage in this labor market improvement in technology increase in the cost of training needed to work in this labor market

6. Assume that the labor market for auto mechanics is initially in equilibrium. Which of the following would lead to an increase in both the wage rate and employment for auto mechanics?
1.a decrease in the price of a substitutable input
2.a decrease in the price of a complementary input increase in training costs for auto mechanics
4.a decrease in wages in an alternate labor market
5.a decrease in demand for the output of firms employing auto mechanics

7. A perfectly competitive firm should hire additional units of labor in a competitive labor market if
1.marginal revenue is less than marginal cost
2.the marginal revenue product exceeds the wage rate revenue exceeds total cost
4.the marginal product of labor exceeds the wage rate
5.the marginal product of labor is less than the wage rate

8. Each of the following, except one, would lead to a rightward shift of the labor supply curve in a particular industry. Which is the exception?
1.increased preference for this type of work
2.increases in the demand for the good produced by labor
3.increases in the size of the population
4.reductions in the wage rates offered in alternative labor markets
5.reductions in the costs of acquiring human capital

9. The marginal revenue product (MRP) of labor is the revenue generated when one more worker is hired
2.change in average revenue when one more worker is hired revenue per worker when one more worker is hired
4.change in total revenue when one more worker is hired
5.change in employment when total revenue changes by one dollar

10. Of the four major market structures, perfect competition is the best at achieving economic efficiency.

11. Producer surplus for a particular unit of a good is the price the seller receives for that unit minus the largest amount the seller would accept for it.

12. The more elastic the demand for a good,
1.the more of an excise tax is that is collected by sellers
2.the more of an excise tax that is paid by buyers
3.the more an excise that that is paid by sellers
4.the more elastic the supply of that good
5.the smaller the burden of a tax on that good

13. Tax shifting the process by which buyers pass a tax onto sellers the process that causes some of a tax collected by one side of a market to be paid by the other side the process of avoiding taxes and lowering a tax burden a way of avoiding payment of a tax illegal in the United States

14. Because the market demand curve slopes downward
1.each unit of a good is worth more than the market price
2.each unit of a good is worth the market price paid for each
3.each unit of a good is worth less than the previous units are worth
4.diminishing marginal returns have set it
5.the market is efficient

15. If all opportunities for Pareto improvements have been exhausted,
1.economic efficiency has been achieved
2.the allocation of goods and services is fair
3.perfect competition has been achieved
4.the economy is in disequilibrium
5.economic inefficiency has been achieved

16. In an efficient economy, one could be made better off by a change in the way goods are allocated
2.revenue for all firms is maximized
3.a change in the way goods are allocated could make someone worse off
4.goods are allocated fairly among individuals one would be made worse off if there is a change in the way goods are allocated

17. At any quantity at which the demand curve lies above the supply curve,
1.economic efficiency is achieved
2.the cost of producing the last unit exceeds its value to some consumer
3.marginal cost exceeds the market price
4.the market is Pareto efficient
5.the value of the last unit to some consumer exceeds the cost of producing it

18. Which of the following is a distinguishing characteristic of oligopolies?
1.a standardized product
2.the goal of profit maximization
3.the interdependence among firms
4.downward-sloping demand curves faced by firms
5.a downward-sloping market demand curve

19. Cheating on a collusive agreement is more likely when
1.a price floor is in effect
2.firms are located in the same state is easy to observe the other firms' prices
4.there is a small number of firms demand is unstable

20. The minimum efficient scale for the firm in Figure below, less than Q1 Q1 Q2 Q3
5.cannot be determined from this graph

21. When oligopolists make joint decisions concerning their prices and output levels, they are
1.a natural oligopoly
3.a duopoly
4.a homogeneous oligopoly
5.practicing bilateralism

22. The total fixed cost in Figure 10-2 is
1.increasing as more is produced
2.decreasing as more is produced
3.larger than variable costs
4.less than $1,000
5.more than $1,000

23. Firms in a monopolistically competitive market follow the same MR = MC profit maximization rule used by firms in other market structures.

24. All of the following are examples of barriers to entry, except one. Which is the exception?
1.significant economies of scale
2.reputation of established firms
3.special deals with distributors
4.excessive prices

25. When the oil-producing countries of the Middle East meet to set prices and output levels, this is an example of
1.monopoly behavior
2.profit sharing distribution
4.explicit collusion
5.tacit collusion

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