Microeconomics MCQs
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The social cost of a single-priced monopoly is equal to its
- A. economic profit.
- B. fixed cost.
- C. dead weight loss.
- D. variable cost.
- Correct Answer: Option C
During the holiday season, high end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunter have time to shop around and frequently shop during the week. What do economists call the price strategy used by high end retailers?
- A. oligopoly
- B. price discrimination
- C. compensating differential
- D. in-kind transfers
- Correct Answer: Option B
What do economists call the business practice of selling the same good at difference prices to different customers?
- A. price discrimination
- B. colluding
- C. compensating differential
- D. oligopoly
- Correct Answer: Option A
A firm that is the sole seller of a product without close substitutes is
- A. perfectly competitive.
- B. monopolistically competitive.
- C. an oligopolist
- D. a monopolist
- Correct Answer: Option D
Government continues to price-regulate many segments of the electricity industry, e.g., the transmission system and the distribution system. Assuming that there are no transaction costs, because of the price regulations on these segments of the industry
- A. the price of these services is lower than the market price would be and total surplus is higher than if no price-regulation existed.
- B. the price of these services is higher than the market price would be and total surplus is lower than if no price-regulation existed.
- C. the price of these services is higher than the market price would be and total surplus is higher than if no price-regulation existed.
- D. the price of these services is lower than the market price would be and total surplus is lower than if no price-regulation existed.
- Correct Answer: Option A
After the patent runs out on a brand name drug, generic drugs, which have the same effect as the branded drug, enter the market. Because of this
- A. the price increases and total surplus decreases.
- B. the price decreases and total surplus decreases.
- C. the price decreases and total surplus increases.
- D. the price increases and total surplus increases.
- Correct Answer: Option C
For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because
- A. the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region.
- B. the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same
- C. the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region.
- D. electricity is a special non-excludable good that could never be sold in a competitive market.
- Correct Answer: Option A
Consider the cost and revenue data from Dreher’s Designer Shirt Company, a perfect price discriminating monopolist. Suppose Drehers’ fixed cost of production are now $700. Because of the higher fixed costs, in the short run,
- A. the company shuts down.
- B. the company exits the industry.
- C. the company stays open because their economic loss is lower than it would be if they shut down.
- D. the company's economic profits are lower, but still positive.
- Correct Answer: Option C
Consider the cost and revenue data from Dreher’s Designer Shirt Company, a perfect price discriminating monopolist. Suppose Drehers’ fixed cost of production are now $500. Because of the higher fixed costs
- A. the company shuts down.
- B. the company exits the industry.
- C. the company stays open because their economic loss is lower than it would be if they shut down.
- D. the company's economic profits are lower, but still positive.
- Correct Answer: Option D
Consider the cost and revenue data from Dreher’s Designer Shirt Company, a perfect price discriminating monopolist. What are Dreher’s Designer Shirt Company’s fixed costs?
- A. $100
- B. $150
- C. $354
- D. $654
- Correct Answer: Option A