December 2, 2020

Noun e-exam past question ECO231 – Micro Economic Theory I

noun i

_______ of Duopoly the players of this game are a leader and a follower and they compete on quantity _ Answer: Stackelberg’s Model

_______ of Duopoly the players of this game are a leader and a follower and they compete on quantity _ Answer: Stackelberg

The _____ leader is sometimes referred to as the market leader _ Answer: Firms

___ may engage in Stackelberg competition if one has some sort of advantage enabling it to move first _ Answer: monopolistic

A _____ competitive market has characteristics of both perfect competition and monopoly _ Answer: Price discrimination

_____ is a pricing strategy that enables monopolist to charge customers different prices for the same or service _ Answer: Price Discrimination

First Degree _____ is when monopolist charges the maximum price each client is willing to pay _ Answer: reservation price

The maximum price a client is willing to pay for a unit of the goods is the ____ _ Answer: Price Discrimination

Second Degree _____ is when a monopolist uses quantity to discriminate clients as he/she charged different prices based on how much they purchased _ Answer: purchased

Monopolists know that client’s willingness to buy decrease as more units are ____ _ Answer: Price Discrimination

Third Degree _____ is when the monopolist divides the clients into different groups according to their willingness to pay as measured by their price elasticity of demand

_____ results when two or more firms informally control the market with necessarily reaching a formal agreement _ Answer: Implicit collusion

Monopoly is a model where the firms move _____ _ Answer: sequentially

Cournot’s duopoly is a model where the ____ simultaneously choose quantities _ Answer: firms

The dominant _____ sets prices which are simply taken by the smaller firms in determining their profit maximizing levels of production _ Answer: firm

In market structure_____ leadership is almost as good as a cartel _ Answer: price

If the dominant firm knows that the other firms will definitely follow its price lead, then they can feel free to set a ___ profitable price _ Answer: high

A firm maximizes its profits by producing the level of output at which ____ equals marginal cost _ Answer: marginal revenue

In the _____ firms will enter the market if positive economic profits are received and will leave the market if economic losses are realized _ Answer: long run

The _____ divides commodity space into two _ Answer: budget line

Utility is defined as the level of happiness or satisfaction connected with alternative ______ _ Answer: choices

When workers are engaged or capital are borrowed, it does not offer any ___ satisfaction to the producer _ Answer: direct

The employer of factors of production only uses the factors in the ____ of goods and services to be finally sold in the product market _ Answer: production

The ____ for goods and services is direct demand _ Answer: demand

The demand of factor of product can also be Joint Demand because for producer to produce orange he/she has to ____ for all the factors of production _ Answer: demand

Interdependence means that oligopolistic firms perpetually _____ the need for competition against the benefits of cooperation _ Answer: balance

Firms operating in markets other than those of perfect competition are able to increase their profits by engaging in ____ _ Answer: Price discrimination

____ is maximized when marginal revenue = marginal cost _ Answer: Profit

Marginal revenue equals the market price for a firm facing a perfectly ____ demand curve _ Answer: elastic

The firm receives an economic loss equal to its fixed costs if it _____ _ Answer: Shut down

______ is defined in a similar manner as the net benefit received by producers from the sale of a good _ Answer: producer surplus

1 A well-organized cartel would probably set prices and quantity for the market at the same levels as would

a monopolist

2 To maximize satisfaction subject to a budget constraint, the consumer should choose the commodity basket that is located where

the highest possible indifference curve
the highest indifference curve has contact with the budget line
***all of the above

3 Which of the following is not a mathematical technique frequently used in microeconomics


4 Which of the following utilizes an ordinal scale of measurement


5 Over time, an increase in wages in one labour market, relative to others, will

increase labour force participation

6 The slope of the demand curve for an input such as labour will be


7 When input A is the only variable input for an imperfect competitor in the product market, the firm’s demand for input A is given by its

MRP curve

8 The demand for input is called

derived demand

9 With a single variable input, the demand curve for the input will be

the VMP curve

10 A profit maximizing firm selling its product in a competitive market should hire a single variable input up to the point where

the VMP equals the price of the input
the last unit of the input adds as much to costs as it does to revenue
the VMP equals the addition to costs
***all of the above

11 Payment received by households from the sale of resources and resource services are called

house hold income

12 The relationship between wages and leisure time for a worker is

indire ct

13 To maximize utility subject to budget constraint, the ratio of marginal utility to price should be

the same for all goods cons umed

14 Cartel agreements that are illegal or not enforceable may be short lived because

there is an incentive for members to cheat on their output quotas

15 Which of the following does not influence the market supply of labour

substit ute goods

16 Which of these is not assumed property of the ordinal preference function

a change in income will shift the budget line

17 When total utility increases, marginal utility is

posit ive and declining

18 In the resource markets

households are sellers and producers are buyers

19 Which of the following is not an assumption of the indifference curve model

consumers can make choices among comm odity basket

20 Oligopoly is characterized by

few sellers

The statement C = D = 10 utils implies

an ordinal and a cardinal measure of utility

2 Monopolistic competition there will be

strategy toward rival firms

3 In the case of price leadership by the dominant firm, all the firms in the purely oligopolistic industry will produce their best level of output


4 Which of these is not the property of budget line

diminishing marginal rate of substitution

5 Which form of monopoly regulation is most advantageous for the consumer

Price control

6 In monopolistic competition, we have

many firms selling a differentiated product

7 When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point on its LAC curve


8 Which of these is not the property of indifference curves

positive slope

9 Third degree price discriminating monopoly result in

different prices to buyers in different markets

10 With reference to the Cournot model, determine which of the following statements is false

The solution is stable

11 At long-run equilibrium, the average cost of production for a monopolist will be

on the LRAC curve

12 Profit must be equal to zero for a typical firm in the long run equilibrium because

firms maximizes profits

13 The quantity that will maximize profit for monopolist will occur where

marginal cost rises to equal marginal revenue

14 If the demand curves for a monopolist’s commodity are identical in two separate markets, then, by practicing third degree price discrimination, the monopolist

cannot increase TR and total pro fits

15 In long-run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make pure profits because of

blocked entry

16 Which of the following methods is not employed in microeconomics

dissect ion

17 One of these topics is covered under the heading if microeconomics


18 Microeconomic theory studies how a free-enterprise economy determines

the price of goods
the price of service s
the price of economi c resources
***all of the above

19 The demand curve facing the monopolist

has a negative slope

20 The meaning of the word “economic” is most closely associated with the word


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