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CMA Part 1A Mircoeconomics

CMA Part 1A Mircoeconomics

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PART 1 AMICROECONOMICS193 QUESTIONS
[1] Source: CMA 1285 1-15In the short run, a purely competitive firm operating at aloss willA. Shut down.B. Continue to operate as long as price exceedsaverage variable costs.C. Raise the price of its product.D. Reduce the size of its plant to lower fixed costs.[2] Source: CMA 1285 1-16In an analysis of economic costs of Production, long runmeansA. More than 1 year but less than 5 years.B. Five or more years.C. A period of time long enough to turn over topmanagement.D. A period of time long enough for the firm to make allresource costs variable in nature.[3] Source: CMA 1285 1-17The marginal utility of a good refers toA. The point at which the consumer's total utility ismaximized.B. The point at which the consumer's total utility isminimized.C. The change in the amount of the good consumedthat increases total utility by one unit.D. The change in total utility when consumption of thegood increases by one unit.[4] Source: CMA 1286 1-4Economies and diseconomies of scale are importantdeterminants of theA. Type of product demand faced by individual firms.B. Market demand curve.C. Pattern of costs in the long run.D. Law of diminishing returns.[5] Source: CMA 1286 1-7If a rent control law in a competitive housing marketestablishes a maximum or ceiling rent that is above themarket or equilibrium rent,A. The law has no effect on the rental market.B. A surplus of rental housing units will result.C. Supply will decrease as price increases.D. Demand will increase as price increases.[6] Source: CMA 0687 1-1The distribution of income among households in theUnited States is primarily determined byA. Transfer payments to households.B. Household purchases of goods and services.C. The ownership of factors of production.D. Government taxes.[7] Source: CMA 0687 1-12Local electric utilities are considered to be naturalmonopolies because for these firmsA. Supply curves are upward sloping.B. Demand curves are upward sloping.C. Average total costs never fall.D. Significant economies of scale are present.[8] Source: CMA 1287 1-2If the demand for cigarettes in New York is relativelyelastic, and New York imposes high taxes on cigarettesthat result in higher cigarette prices, then in New YorkA. The quantity of cigarettes demanded wouldincrease.B. The demand for cigarettes would increase.C. The demand curve for cigarettes would becomevertical.D. Expenditures on cigarettes would fall.[9] Source: CMA 1287 1-5The quantity of output a competitive firm can supply atany price is determined in part byA. Average household income.B. Consumer tastes and preferences.C. Input prices.D. The distribution of income among households.[10] Source: CMA 1287 1-10In the economic theory of production and cost, the shortrun is defined to be a production processA. Which spans a time period of less than one year inlength.B. In which both fixed and variable inputs areemployed.C. That is subject to economies of scale.
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D. That always produces economic profits.[11] Source: CMA 1287 1-12Natural monopoly conditions, which often lead toeconomic regulation, refer toA. Rising marginal costs.B. Elastic consumer demand for the product.C. Declining average costs.D. Consumer demand for the product that is stronglyinfluenced by the business cycle.[Fact Pattern #1]The theory of price elasticity of consumer demand ishelpful when a firm is determining price changes for aconsumer good or service. The formula for the coefficient of elasticity,E, is(relative change in quantity demanded)E = --------------------------------------(relative change in price)[12] Source: CMA 1288 1-22(Refers to Fact Pattern #1)If the coefficient of elasticity is two, then the consumer demand for the product is said to beA. Perfectly inelastic.B. Elastic.C. Inelastic.D. Unit elastic.[13] Source: CMA 1288 1-23(Refers to Fact Pattern #1)If the coefficient of elasticity is zero, then the consumer demand for the product is said to beA. Perfectly inelastic.B. Elastic.C. Inelastic.D. Unit elastic.[14] Source: CMA 1288 1-27All of the following are true about perfect competitionexcept thatA. There is free market entry without large capitalcosts for entry.B. There are many firms participating in the market.C. In the long run, an increase in profit will have noeffect on the number of firms in the market.D. Firms are price takers.[15] Source: CMA 1288 1-25If the average household income increases and there isrelatively little change in the price of a normal good, thentheA. Supply curve will shift to the left.B. Quantity demanded will move farther down thedemand curve.C. Demand will shift to the left.D. Demand curve will shift to the right.[16] Source: CMA 1288 1-29All of the following are characteristics of monopolisticcompetition except thatA. The firms sell a homogeneous product.B. The firms tend not to recognize the reaction of competitors when determining prices.C. Individual firms have some control over the priceof the product.D. The consumer demand curve is highly elastic.[17] Source: CMA 1288 1-30The cyclical and seasonal fluctuations in consumer demand for the products produced by an oligopoly arecharacteristic of A. Differentiated products.B. Sticky prices.C. Kinked demand curves.D. Homogeneous products.[18] Source: CMA 0689 1-20The measurement that uses the factors of production asinputs in physical terms isA. Economic efficiency.B. Opportunity cost.C. Technological efficiency.D. Comparative advantage.[19] Source: CMA 0689 1-21The measurement of using resources now in lieu of alternative uses of the resources isA. Economic efficiency.B. Opportunity cost.C. Comparative advantage.D. Absolute advantage.[20] Source: CMA 0689 1-22
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The principle of substitution states thatA. The costs of two factors of production are equal.B. Profit maximization is maintained while choosingeither factor of production.C. The firm chooses more of the less expensivefactor of production.D. The firm chooses more of the more expensivefactor of production.[21] Source: CMA 0689 1-24When making a decision to increase the roboticautomation equipment in an existing facility, a firm takesall of the following into consideration exceptA. Economies of scale.B. Opportunity cost.C. Technological efficiency.D. The initial cost of the current facility.[22] Source: CMA 0689 1-26A decrease in the price of a complementary good willA. Shift the demand curve of the joint commodity tothe left.B. Increase the price paid for a substitute good.C. Shift the supply curve of the joint commodity tothe left.D. Shift the demand curve of the joint commodity tothe right.[23] Source: CMA 0689 1-29If a product is part of the consumers' basket of goods,and the Consumer Price Index increased 7% for the year while the price of this normal good increased 3%, thenA. The supply curve will shift to the left.B. Neither the demand curve nor the supply curvewill be affected.C. The demand curve will shift to the right.D. The demand curve will shift to the left.[24] Source: CMA 1289 1-4If the elasticity of demand for a normal good is estimatedto be 1.5, a 10% reduction in its price would causeA. Total revenue to fall by 10%.B. Total revenue to fall by 15%.C. Quantity demanded to rise by 15%.D. Demand to decrease by 10%.[25] Source: CMA 1289 1-11An industry that is oligopolistic would be bestcharacterized byA. One firm selling a product with no closesubstitutes.B. The absence of the profit-maximizing goal.C. Significant barriers to entry.D. Horizontal or flat demand curves for the output of individual firms.[26] Source: CMA 0690 1-19If a normal good competes with three similar goods, andall four goods give the consumer equal utils of satisfaction, the demand for the normal goodA. Is relatively elastic.B. Is perfectly elastic.C. Responds as an inferior good.D. Is perfectly inelastic.[27] Source: CMA 0690 1-20If oil producers and retailers were to increase the price of gasoline for cars during the summer season by $.05 per gallon, these suppliers anticipate that the demand for gasolineA. Is relatively elastic.B. Is relatively inelastic.C. Responds as an inferior good.D. Is perfectly inelastic.[28] Source: CMA 0690 1-21The Waymand family typically ate hamburger as a staplein their diet. In the last few years, the family's incomehasdoubled, and they have now replaced hamburger withsteak as a staple in their diet. This is an example inwhichthe demand for hamburger A. Is relatively elastic.B. Is perfectly elastic.C. Is relatively inelastic.D. Responds as an inferior good.[29] Source: CMA 0690 1-22Utility companies can ordinarily price their product, agood that establishes a comfortable life-style (i.e.,electricity, gas for home heating), based on theassumption that the demandA. Is relatively elastic.B. Is perfectly elastic.C. Is relatively inelastic.
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