Chapters 5&6 MC-IRS-2009

Chapters 5&6 MC-IRS-2009 - Practice Multiple Choice...

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Practice Multiple Choice Questions Chapters 5 and 6: Increasing Returns to Scale in Production and International Trade 1. Internal economies of scale arise when the cost per unit A. rises as the industry grows larger. B. falls as the industry grows larger. C. rises as the average firm grows larger. D. falls as the average firm grows larger. E. None of the above. Answer: D 2. Internal economies of scale A. may be associated with a perfectly competitive industry. B. cannot be associated with a perfectly competitive industry. C. are associated only with sophisticated products such as aircraft. D. cannot form the basis for international trade . E. None of the above. Answer: B 3. A monopolistic firm A. can sell as much as it wants for any price it determines in the market. B. cannot determine the price, which is determined by consumer demand. C. will never sell a product whose demand is inelastic at the quantity sold. D. cannot sell additional quantity unless it raises the price on each unit. E. None of the above. Answer: C 4. Monopolistic competition is associated with A. cut-throat price competition. B. product differentiation. C. explicit consideration at firm level of the feedback effects of other firms' pricing decisions. D. high profit margins. E. None of the above. Answer: B 5. Where there are economies of scale, the scale of production possible in a country (engaged in international trade) is constrained by
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A. the size of the country. B. the size of the trading partner's country. C. the size of the domestic market. D. the size of the domestic plus the foreign market. E. None of the above. Answer: D 6. Where there are economies of scale, an increase in the size of the market will A. increase the number of firms and raise the price per unit. B. decrease the number of firms and raise the price per unit. C. increase the number of firms and lower the price per unit. D. decrease the number of firms and lower the price per unit. E. None of the above. Answer: C 7. The simultaneous export and import of widgets by the United States is an example of A. increasing returns to scale. B. imperfect competition. C. intra-industry trade. D. inter-industry trade. E. None of the above. Answer: C 8. If output more than doubles when all inputs are doubled, production is said to occur under conditions of A. increasing returns to scale. B. imperfect competition. C. intra-industry trade. D. inter-industry trade. E. None of the above. Answer A 9. Intra-industry trade can be explained in part by A. transportation costs within and between countries. B. problems of data aggregation and categorization. C. increasing returns to scale. D. All of the above. E. None of the above. Answer: D
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This note was uploaded on 08/11/2011 for the course ECON 103 taught by Professor Larrygolb during the Spring '09 term at SUNY Canton.

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Chapters 5&6 MC-IRS-2009 - Practice Multiple Choice...

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