- Which of the following statements are true of
consumer utility-maximizing behavior?
I. Utility from consumption of good X is
maximized when the marginal utility is
equal to zero.
II. Total utility from consumption of good X
rises at a decreasing rate.
III. The consumer spends limited income until
the quantity of good X consumed is equal
to the quantity of good Y.(A) I only
(B) II only
(C) III only
(D) I and II only
(E) II and III only- Oligopoly has at times been the subject of
government antitrust regulation. Which of the
following is a reason for this government regu-
lation?
(A) Price is approximately equal to marginal
cost.
(B) Price is approximately equal to average total
cost.
(C) Deadweight loss lessens over time.
(D) Consumer surplus is lost as market power
increases.
(E) Market efficiency is maximized.- The production of chicken often results in
offending odors that are picked up by the wind
and blown over rural communities. This is an
example of a __ externality, the result of
which are spillover __ and an ___ of
resources to chicken production.
(A) negative, costs, underallocation
(B) negative, benefits, overallocation
(C) negative, benefits, underallocation
(D) positive, costs, overallocation
(E) negative, costs, overallocation- Which of the following are shared by perfectly
competitive firms and monopolistically com-
petitive firms?
I. Barriers to entry
II. Normal profits in the long run
III. Excess capacity
IV. A homogenous product(A) I only
(B) II only
(C) III only
(D) II and IV only
(E) I, II, and III only- The monopolistically competitive price is above
marginal revenue because
(A) firms have differentiated products.
(B) firms are price takers.
(C) firms produce a homogenous product.
(D) the market is allocatively efficient.
(E) profits are normal in the long run.- Deadweight loss in industries with market
power is a result of
(A) profit-maximizing output occurs where
price equals marginal revenue.
(B) profit-maximizing output occurs where
price exceeds marginal cost.
(C) profit-maximizing output occurs where
price equals marginal cost.
(D) profit-maximizing output occurs where
price exceeds average total cost.
(E) profit-maximizing output occurs where
price equals average total cost.- If the government wishes to regulate a natural
monopoly so that it earns a normal profit, it sets
(A) Price =Marginal cost.
(B) Marginal revenue =Marginal cost.
(C) Price =Average total cost.
(D) Price =Marginal revenue.
(E) Marginal revenue =Average total cost.196 › Step 5. Build Your Test-Taking Confidence
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