 1) 

    Which of the following will cause the demand curve for a normal good to shift
to the right?

a. A fall in the income levels of consumers.

b. An increase in the price of a complementary good.

C. An increase in the price of a substitute good.

D. An increase in the cost of the inputs used to produce the good

2)     If the price of steel, a primary input used in manufacturing automobiles, rises,

the supply curve for the automobile industry will ___________________.

a)     Shift to the right

b)     Become vertical

c)      Become horizontal

d)    Shift to the left

3)     A firm's output increases from 1760 units to 2000 units when labour employed
increases from 167 to 168 workers. The marginal product of labour is
_____________ units.

a)     1890

b)     1130

c)     240

d)     189

4) Which of the following will affect a good's price elasticity of demand?

a)The income level of the consumer.

b)The price of complements.

C)The cost of the inputs used to produce the good.

d)The number of substitutes that the good has.

5) What kind of data is used to model an industry's cost curves?

a)The fiscal policy of the government.

b)The financial accounts of the firms in the industry.

C)Stock market movements.

d)Currency movements in the foreign exchange market.

6)    What is meant by a product differentiation strategy?

a) A firm sells its product at a price below the current market price, even if it makes a loss.

b) A firm merges with another company in the same line of business.

c) A firm reduces its costs of production by using new production technology

d) A firm introduces a new product feature that other products in the market do not have

7)     A firm should shut down in the short run if the market price of its product doesn't
cover its _____________ of production

a)     Total fixed cost

b)     Average total cost

C)  Average variable cost

d)   Average fixed cost

 
 

8. A small firm employs only 5 workers. 4 workers produce a total of 154 units of output.
With the addition of the 5th worker, output increases by 70 units. What is the total output
of the firm?

a)     50 units.

b)     84 units.

 c) 224 units.

d) 100 units

9)     When the marginal product of a factor of production is falling, it follows

that _______________.

A)    The marginal cost of the factor is rising

b    The average total cost is constant

C)     The average fixed cost is rising

D)    The average variable cost is constant

·        

10) Suppose the market for wheat is in equilibrium. Which of the following is most likely to be
true at the equilibrium price?

a)The demand curve for wheat will intersect the supply curve of wheat at a minimum of two
points.

b)Sellers will not be willing to supply the quantity of wheat that buyers want to buy.

c)The quantity demanded of wheat will be equal to the quantity of wheat supplied.

d)No trades will take place in the market.

·        
11) Tesco wants to gain a cost advantage in the global marketplace. What must Tesco to
establish its business in a country?

a)     Must establish it where the country has trade restrictions on imports

b)     Must establish it where the minimum wage is relatively average

c)     Must establish it where labour productivity is high

d) Must establish it where the population is on the increase

MCQ 6

1. A firm that has a first-mover advantage over rival firms is likely to be a leader in the
market.

TRUE

FALSE

2. A market with two interdependent firms is called a duopoly.

3. The kinked demand curve model of oligopoly suggests that if one firm increases its price
then the other firms will do the same.
4. One of the features of a monopolistically competitive market is that the number of sellers
in the market is very low.
5. Under a second-price sealed-bid auction with private values, each bidder's dominant
strategy is to submit a bid equal to their maximum willingness to pay.
6. In the long run, monopolistically competitive firms are not productively efficient.
7. An example of a natural barrier to entry in an industry is a very high minimum efficient
scale.
8. An auction where the bidders place a single bid in writing and the highest bidder wins is
called a first-price sealed-bid auction.
9. A successful brand name owned by an incumbent firm can form barrier to entry in the
industry.
10. An endogenous cost is one which cannot be influenced by a firm.
11. An individual firm in a cartel is likely to earn more profits by cheating on the cartel and
reducing prices.
12. A Nash equilibrium occurs when each player in a game does what is best for themselves,
irrespective of what their opponent may do.
13. Demand below the equilibrium price is inelastic in a kinked demand curve model of an
oligopoly.
14. In a Cournot model of an oligopoly, firms treat the prices of rival firms as given.
15. A dominant strategy is a player’s best response when the rival's decision is known.
16. A cartel faces a horizontal demand curve.
17. The Bertrand model predicts that an oligopolistic market will have a leader firm and rival
firms that follow.
18. A contestable market is one where firms can enter and exit a market freely.
19. An industry where the minimum efficient scale is large when compared to the overall
market is likely to be an oligopoly.
20. Monopolistic competition is the same as perfect competition except for the existence of
product differentiation.
21. In auctions with private values, the value of the item being auctioned is identical for all
bidders.
22. Revenue equivalence theorem states that under private values each auction format will
generate the same level of revenue for the seller.
23. The winner's curse is where a winning bid in an auction is lower than the true value of the
sale item.
24. Tangency equilibrium in a monopolistically competitive market occurs when the firm's
average profit line just touches the firm's average total cost line.
25. The kinked demand curve model predicts that prices in the market will be relatively
stable.
26. Firms that use a tit-for-tat strategy will move from a co-operative Nash equilibrium to a
non-co-operative Nash equilibrium.
27. Collusion is likely to fail when there are a large number of firms in the market.
28. One of the primary characteristics of oligopolistic industries are barriers to entry.
29. If all the firms in an oligopoly agree to co-operate, their joint profits will be maximized if
they act as one monopolist.
30. The soft drinks industry, which is a market with a small number of large players, is likely
to be an oligopoly.