Eco 561 Final Exam Essay

1523 Words Apr 9th, 2013 7 Pages

1) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

A. will be greater than $5

B. will also be $5

C. will be less than $5

D. may be either greater or less than $5

2) A firm that is motivated by self interest should:

A. always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output

B. hire each input so the productivity of each is equal at the margin

C. always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output

D. employ the combination of resources that will produce the profit-maximizing output at the minimum cost

3) If
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unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants

C. a steel manufacturer cuts back on its purchases of coke and iron ore

D. a farmer uses an extra dose of fertilizer on his corn crop

13) Paying an above-equilibrium wage rate might reduce unit labor costs by:

A. increasing the supply of labor

B. increasing the cost to workers of being fired for shirking

C. increasing voluntary worker turnover

D. permitting the firm to attract lower-quality labor

14) A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:

A. $21

B. $10

C. $15

D. $9

15) Price exceeds marginal revenue for the pure monopolist because the:

A. demand curve lies below the marginal revenue curve

B. demand curve is downsloping

C. monopolist produces a smaller output than would a purely competitive firm

D. law of diminishing returns is inapplicable

16) Oligopoly is difficult to analyze primarily because:

A. neither allocative nor productive efficiency is achieved

B. the price and output decisions of any one firm depend on the reactions of its rivals

C. output may be either homogenous or differentiated

D. the number of firms is too large to make collusion understandable

17) A competitive firm will maximize profits at that

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