Econ_198_Spr_06_Exam__2 - Introduction to Microeconomics...

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Introduction to Microeconomics Allen R. Sanderson Economics 19800 Spring 2006 SECOND HOUR EXAMINATION Name (Please Print): ______________________________________ [42 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 21 points total. 1. Which of the following is not a trait or assumption of competitive markets? a. Established firms have no cost advantages over new entrants. b. Production will occur where marginal cost equals price. c. There will be opportunities for price discrimination as a way of assisting those with more dire economic circumstances. . d. There are no restrictions on entry into the industry. e. There are a large number of firms, or at least there could be (that is, nothing would prevent it/more). 2. In a perfectly competitive industry the demand for a single firm’s product is perfectly elastic because: a. there are many buyers in the market. b. a firm’s output is a perfect substitute for any other firm’s output. c. it is determined by market demand and market supply. d. firms are organized as small proprietorships not large corporations. e. the firm has no control over the quantity of the product or output it can sell. 3. The important definition or defining characteristic with regard to what constitutes the “short run” is that it is a time frame in which: a. output cannot be varied. b. firms most likely are losing money. c. most of a firm’s costs are sunk costs. d. at least one resource, like a firm’s plant size or capital equipment, is fixed. e. diminishing returns are not yet an issue. 4. Compared with corporations, businesses organized as proprietorships: a. suffer more from principal-agent problems. b. can raise capital easier, faster and cheaper. c. are far more numerous. d. can offer prospective investors more limited liability. e. are better equipped to take advantage of scale economies. 5. Devising incentives that encourage employees to act in the best interest of the owners of a firm refer to and/or try to solve and/or are associated with: a. economies of scale. b. sunk costs. c. principal-agent problems. d. price searching. e. game theory. 6. Which of the following would one generally associate with monopolistic competition? a. differentiated products b. sizable barriers to entry – and to exit c. the presence of substantial economies of scope d. the capacity to earn economic profits in both the short run and the long run e. intense game theoretic (strategic) behavior among strongly interdependent firms 1
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7. We would recognize the level of output at which diminishing marginal returns first set in by:
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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_Spr_06_Exam__2 - Introduction to Microeconomics...

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