Economics Micro & Macro (CliffsAP)

34. Which one of the following best describes what
    the long-run average total cost curve is often
    referred to as:
    A. planning curve
    B. capital growing illustration
    C. total-product curve
    D. production possibilities curve
    E. None of the above


35. The table below represents points on an
    economy’s production possibility curve.
    Apples Oranges

1000 0

900 100

800 200

700 300

What is the opportunity cost of increasing the

production of apples from 700 to 900 units?

A. 1000 units of oranges

B. 800 units of good oranges

C. 200 units of good oranges

D. 100 units of good oranges

E. 10 units of good oranges

36. Which of the following best illustrates a
    monopolistic market?
    A. Over the past 10 years, many small firms
    have entered the market for medical care.
    B. Demand for athletic shoes increases with
    income.
    C. The supply for oil is determined by a few
    countries in the Middle East.
    D. Cable TV keeps the prices for their service
    above marginal cost and creates an economic
    profit in the long run.
    E. The price of suntan lotion is determined by
    the quantity demanded.


37. Assume that a perfectly competitive firm can hire
    labor for $10 an hour, and that each unit produced
    sells for $5. According to the following table, how
    many hours of labor would the firm pay for if
    labor is the only input considered?
    Hours of Labor Units of Output

00

15

27

310

411

513

A. 1

B. 2

C. 3

D. 4

E. 5

38. Suppose that a consumer can purchase two goods:
    good X and good Y. The price of X is PXand the
    marginal utility is MUX. And assume that the price
    of Y is PYand the marginal utility of Y is MUY.
    Which expression maximizes consumers’ utility?
    A. MUX= MUY
    B. PX = PY
    C. PX/ PY= - MUY/MUX
    D. PX= PYMUX/MUY
    E. PX/PY= - Y/X


39. The condition for allocative efficiency holds when:
    A. Short-run profits exist in a competitive
    industry.
    B. The market demand curve is inelastic in a
    competitive industry.
    C. The market demand curve is elastic in a
    competitive industry.
    D. Firms are price makers.
    E. Price equals marginal total cost.


40. When is a Nash equilibrium achieved?
    A. When each firm chooses its best strategy
    regardless of the other firms’ strategies.
    B. Other strategies exist that would better suit
    the firm given the other firms’ strategy.
    C. The firm’s strategy maximizes the utility of
    another firm.
    D. The least desirable strategies for both firms
    are achieved.
    E. Firms choose their best strategy given the
    strategy the other firm has chosen.


41. Which of the following explain why the average
    total cost is U-shaped?
    A. Average fixed costs always decline as output
    rises.
    B. Average variable cost decreases as output
    increases.
    C. Total profit increase as output increases.
    D. Average total cost is the difference between
    average fixed cost and average variable cost.
    E. None of the above.

Microeconomics Full-Length Practice Test 1

Microeconomics Full-Length

Practice Test 1

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