Example
The profit-maximizing monopolist sets output where
Before you even look at the options, you should know that the answer is MR =
MC. Find that option, and then quickly confirm to yourself that the others are
indeed wrong.
- Never say never. Words like “never” and “always” are called absolute qualifiers. If these
words are used in one of the choices, it is rarely the correct choice.
Example
Which of the following is true about production in the short run?
A. MP is always greater than AP.
B. MP is never increasing.
If you can think of any situation where the statements in (A) and (B) are untrue,
then you have discovered distractors and can eliminate these as valid choices.
- Easy is as easy does. It’s exam day and you’re all geared up to set this very difficult test on
its ear. The first question looks like a no-brainer. Of course! The answer is 7, choice C.
But rather than smiling at the satisfaction that you knew the answer, you doubt
yourself. Could it be that easy? Sometimes they are just that easy.
- Sometimes a blind squirrel finds an acorn. Should you guess? If you have no clue which
choice is correct, guessing is a no-lose strategy. Even with a wild guess, you have a
20 percent chance of getting it right. If you leave it blank, you have no chance. I am
sure that you can do the math.
- Draw it, nail it. Many questions can be easily answered if you do a quick sketch in the
margins of your test book. Hey, you paid for that test book; you might as well use it.
Example
In the automobile market, a decrease in consumer income will cause output and
the price to change in which of the following ways?
OUTPUT PRICE
(A) No change Increase
(B) Decrease Decrease
(C) Increase No change
(D) No change No change
(E) No change Decrease
These types of questions are particularly difficult because the answer requires
two ingredients. It also requires a very thorough understanding of the demand
and supply model, and here is where your graph comes in. The first thing
you should do is quickly draw the situation given to you in the question:
How to Approach Each Question Type ‹ 35
