Econ_198_Aut_05_Exam__2 - Introduction to Microeconomics...

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Introduction to Microeconomics Allen R. Sanderson Economics 19800 Autumn 2005 SECOND HOUR EXAMINATION Name (Please Print): ________________________________________ [39 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 18 points total. 1. Natural monopoly is primarily the result of: a. a patent, license or other legal protection against entry by competitors. b. a highly inelastic demand curve. c. mergers or predatory pricing behavior on the part of existing firms in an industry. d. declining long-run average total costs of production. e. rent-seeking. 2. The short run, as economists use the term, is characterized by: a. a period of time in which the law of diminishing marginal returns does not hold. b. the absence of any economic profits; only normal profits will be possible. c. a time range or period shorter than one year. d. an inelastic demand curve for a firm’s product. e. at least one input is fixed and firms may shut down but not exit the industry. 3. The law of diminishing returns applies most closely to our understanding of: a. economies of scale. b. economic profits. c. economies of scope. d. long-run average cost curve(s). e. a firm’s costs. 4. With regard to advertising, Parkin argues that: a. lower quality products are more likely to be advertised than high-quality ones. b. by increasing sales, advertising can end up lowering a firm’s average total costs. c. one possible effect of advertising is to make demand inelastic, and thus the price a firm can charge will be higher. d. more than half the price we pay for a product is the direct result of advertising expenditures and other selling costs. e. brand names, created through advertising, allow a firm the luxury of lowering quality without fear of losing customers. 5. When an increase in the range of goods produced decreases a firm’s average total cost, we refer to this as: a. a contestable market. b.
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This test prep was uploaded on 04/07/2008 for the course ECON 198 taught by Professor Sanderson during the Spring '08 term at UChicago.

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Econ_198_Aut_05_Exam__2 - Introduction to Microeconomics...

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