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BUSINESS 802 THIRD EXAM KEY FALL 1993 MANAGERIAL ECONOMICS MULTIPLE CHOICE QUESTIONS (25 pts, 1pts each) 1. Unit costs are constant if: > A. input prices are constant and the total cost function is linear. B. input prices are constant. C. the total cost function is linear. D. constant returns to scale are operative. 2. Profits rise in a linear fashion with output if: A. output prices are constant. B. profit contribution is constant. > C. both output prices and unit costs are constant. D. unit costs are constant. 3. If the labor slack variable = 0, then: A. excess labor capacity exists. > B. the shadow price on labor is > 0. C. the marginal product of labor = 0. D. the marginal revenue product of labor = 0. 4. Constrained profit maximization requires: > A. constrained maximization of the total profit contribution. B. no excess capacity. C. excess capacity. D. a linear profit function. 5. If Q A > 0, then the marginal value of inputs employed: A. exceeds the marginal value of output. > B. equals the marginal value of output. C. is less than the marginal value of output. D. equals current input prices. 6. Perfect competition always prevails in markets with: A. a single buyer. B. few buyers and sellers. C. many buyers and sellers. > D. an even balance of power between sellers and buyers. 7. In monopoly and perfectly competitive markets, profits are maximized when: A. MR = P. B. MC = AC. C. P > AC. > D. MR = MC. 8. Competition tends to be light when: A. regulatory barriers are modest. > B. potential entrants are few. C. capital requirements are nominal. D. standards for skilled labor and other inputs are modest. 9. By itself, a reduction in import tariffs (taxes) will: A. reduce import competition. B. reduce quantity demanded. > C. enhance domestic competition. D. enhance the profits of domestic competitors. 10. Government-mandated wage arbitration for employers can enhance efficiency when the labor market involves: > A. monopsony.
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2 B. monopoly. C. excess seller power. D. perfect competition. 11. The vigor of competition always decreases with a fall in: A. the number of competitors. B. product differentiation. C. barriers to entry. > D. the level of available information. 12. When prices in monopolistically competitive markets exceed those in a perfectly competitive equilibrium, this difference is the cost of: > A. product differentiation. B. information. C. market power. D. inefficiency. 13. Monopolistic competition always entails: A. constant LRAC. B. declining LRAC. > C. vigorous price competition. D. increasing LRAC. 14. Monopolistic competition is characterized by: A. few buyers and sellers. B. homogeneous products. C. barriers to entry and exit. > D. perfect dissemination of information. 15.
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