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1)
Assume the figure applies to a pure monopolist and that MC is the same for both
graphs. If this firm is able to price discriminate between children and adults, its
economic profit will be:
A.(P2 - MC) (Q1C + Q2).
B.(P1 - MC) (Q1C + Q2).
C.(P2 - P1) (Q1C + Q2).
D.[(P1 - MC) Q1C] + [(P2 - MC) Q2].
2)
Refer to the above graph, which shows the market for bicycles. S1 and D1 are the
original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand
and supply curves. Starting from the initial equilibrium (point 1), which point on the
graph is most likely to be the new equilibrium after the introduction of technological
improvements in bicycle production, and successful publicity campaigns by the
government on the virtues of bicycling to work?
A.3
B.4
C.5
D.6
3) "Essential" water is cheaper than "nonessential" diamonds because:
A.new industrial uses for diamonds have been discovered.
B.the supply of water is great relative to demand and the supply of diamonds is small
relative to demand.
C.although the total utility of diamonds is greater, their marginal utility is small.
D.the supply of diamonds is great relative to demand and the supply of water is small
relative to demand.
4)
Refer to the data. If Firm B merged with Firm C, the industry's four-firm concentration
ratio would ____ and its Herfindahl index would ____.
A.rise; rise
B.fall; rise
C.remain the same; rise
D.remain the same; fall
5) The Illinois Central Railroad once asked the Illinois Commerce Commission for
permission to increase its commuter rates by 20 percent. The railroad argued that
declining revenues made this rate increase essential. Opponents of the rate increase
contended that the railroad's revenues would fall because of the rate hike. It can be
concluded that:
A.both groups felt that the demand was elastic but for different reasons.
B.both groups felt that the demand was inelastic but for different reasons.
C.the railroad felt that the demand for passenger service was inelastic and opponents of
the rate increase felt it was elastic.
D.the railroad felt that the demand for passenger service was elastic and opponents of
the rate increase felt it was inelastic.
6) Consider the currency market for British pounds and U.S. dollars. An increase in the
demand for British pounds results in:
A.An appreciation of the pound and a depreciation of the dollar
B.A depreciation of the pound and a depreciation of the dollar
C.An appreciation of the pound and an appreciation of the dollar
D.A depreciation of the pound and an appreciation of the dollar
7) Pure monopolists may obtain economic profits in the long run because:
A.of advertising.
B.marginal revenue is constant as sales increase.
C.of barriers to entry.
D.of rising average fixed costs.
8) When the price of a product is increased 15 percent, the quantity demanded
decreases 10 percent. We can therefore conclude that the demand for this product is:
A.Elastic
B.Inelastic
C.Cross-elastic
D.Unitary elastic
9) A merger of several firms operating in different industriesfor example, a trucking
company, a fast-food chain, and a brokerage houseis called:
A.an integrated merger.
B.a conglomerate merger.
C.a vertical merger.
D.a horizontal merger.
10) Graphically, the market demand curve is:
A.steeper than any individual demand curve that is part of it.
B.greater than the sum of the individual demand curves.
C.the horizontal sum of individual demand curves.
D.the vertical sum of individual demand curves.
11) The populations of the developing nations are growing:
A.at about 5 percent per year.
B.at about the same rate as those of the industrially advanced nations.
C.slower than those of the industrially advanced nations.
D.faster than those of the industrially advanced nations.
