Exam in microeconomics (January, 2008)

Section 1. Multiple Choice Questions

Marking scheme: 1 point for a correct answer, -0.25 for a wrong answer, 0 if the answer has not been given.

1)In the perfectly competitive environment demand for a product of a single firm is:

1. Upward sloping

2. Downward sloping

3. Inelastic

4. Infinitely elastic

5. Unit elastic

2) In the perfectly competitive environment demand for a product of a whole industry is:

A) Upward sloping

B) Downward sloping

C) Inelastic

4. Infinitely elastic

5. Unit elastic

3) All of the following are the conditions for the existence of the perfectly competitive market except:

1. Product of different firms is identical

2. Producers are identical

3. Perfect information

4. No barriers to enter the market

5. Size of a single firm is small comparative to the market size

4) For a perfectly competitive firm the marginal revenue is:

1. Increasing with quantity produced

2. Decreasing with quantity produced

3. Constant

4. Equal to MC

5. Bigger then MC

5) The cost function of one of the identical firms in a competitive industry is the following:

Q	Cost
1	20
2	30
3	35
4	40
5	55

How much will this firm produce in the LR equilibrium? Assume that the good is indivisible.

1. Not enough information

2. 2

3. 3

4. 4

5. 5

6) Which statement is true for a perfectly competitive equilibrium in the short run:

1. All firms in the industry earn zero economic profits

2. All firms in the industry earn zero accounting profits

3. Some firms can earn economic profits

4. If a firm earns economic profit it is a monopoly

5. None of the above

7) Long run supply function of a perfectly competitive industry:

1. Can have a positive slope

2. Is always horizontal

3. Is a sum of MC curves of individual producers

4. Does not exist

5. More than one answer is correct

8) Which industry is most likely to be perfectly competitive:

1. Hairdressers in Moscow

2. Crude oil producers

3. Crude milk producers

4. Electronic goods

5. Aircraft manufacturers

9) Demand curve for a monopolist is

1. Upward sloping

2. Downward sloping

3. Inelastic

4. Infinitely elastic

5. Unit elastic

10) Supply curve for a multiplant monopolist

1. Is the same as the supply curve of a competitive industry

2. Is bellow the supply curve of a corresponding competitive industry

3. Is above the supply curve of a corresponding competitive industry

4. Has a positive slope

5. None of the above

11) Marginal revenue curve of a monopolist lies below the demand curve for its product because:

1. The equilibrium quantity produced is less then in perfectly competitive environment

2. His MC curve is upward sloping.

3. His MC differs from perfectly competitive producers

4. He incurs high fixed costs to became a monopolist

5. None of the above

12) Profit maximizing monopolist produces only on the following part of his demand curve