INTERMEDIATE MICROECONOMICS

PART I: multiple choice (only 35 questions) 30 marks
Read each question carefully and select the best response. Tick or circle the appropriate response
that relates. There are 42 questions in this part. Answer only 30 questions.
1. If a person’s utility doubles when their income doubles, then that person is risk
a. averse.
b. neutral.
c. seeking.
d. There is not enough information given in the question to determine an answer.
2. Strategy A has an expected value of 10 and a standard deviation of 3. Strategy B has an
expected value of 10 and a standard deviation of 5. Strategy C has an expected value of 15
and a standard deviation of 10. Which one of the following statements is true?
a. A risk averse decision maker will always prefer A to B, but may prefer C to A.
b. A risk neutral decision maker will always prefer C to A or B.
c. A risk seeking decision maker will always prefer C to A or B.
d. d. All of the above are correct.
3. The coefficient of variation measures
a. the risk per unit of expected payoff.
b. the risk-adjusted expected value.
c. the payoff per unit of risk.
d. a decision maker’s risk-return tradeoff.
4. A strategy that yields an expected monetary payoff of zero is called a
a. risk-neutral strategy.
b. b. fair game.
c. zero-sum game.
d. certainty equivalent.
5. Which of the following circumstances in an industry will result in a Nash equilibrium?
a. All firms have a dominant strategy and each firm chooses its dominant strategy.
b. All firms have a dominant strategy, but only some choose to follow it.
c. All firms have a dominant strategy, and none choose it.
d. None of the above is correct.
ATTEMPT QUESTIONS IN EACH PART: (Time Allowed: 3
hours)
6. Which of the following describes a Nash equilibrium?
a. A firm chooses its dominant strategy, if one exists.
b. Every competing firm in an industry chooses a strategy that is optimal given the
choices of every other firm.
c. Market price results in neither a surplus nor a shortage.
d. All firms in an industry are earning zero economic profits.
7. In game theory, a situation in which one firm can gain only what another firm loses is called
a
a. nonzero-sum game.
b. prisoners’ dilemma.
c. zero-sum game.
d. cartel temptation.
8. A game that involves interrelated decisions that are made over time is a
a. sequential game.
b. repeated game.
c. zero-sum game.
d. nonzero-sum game.
9. A game that involves multiple moves in a series of identical situations is called a
a. sequential game.
b. repeated game.
c. zero-sum game.
d. nonzero-sum game.
10. The market demand curve for a perfectly competitive industry is QD = 12 – 2P. The market
supply curve is QS = 3 + P. The market will be in equilibrium if
a. P = 6 and Q = 9.
b. P = 5 and Q = 2.
c. P = 4 and Q = 4.
d. P = 3 and Q = 6.
11. A natural monopoly refers to a monopoly that is defended from direct competition by
a. economies of scale over a broad range of output.
b. a government franchise.
c. control over a vital input.
d. a patent or copyright.
12. The short-run supply curve of a perfectly competitive firm
a. is equal to that portion of the short-run marginal cost curve that is above the average
variable cost curve.
b. is equal to that portion of the short-run marginal cost curve that is above the average
total cost curve.
c. is equal to that portion of the short-run average total cost curve that is above the
average variable cost curve.
d. None of the above is correct.
13. A monopolist produces 14,000 units of output and charges $14 per unit. Its marginal
revenue is $8, its marginal cost is $7 and rising, its average total cost is $10, and its average
variable cost is $9. The monopolist should
a. increase output, which will result in an increase in the firm’s positive economic
profit.
b. increase output, which will reduce the firm’s economic losses.
c. shut down, which will reduce the firm’s economic losses.
d. decrease output, which will result in an increase in the firm’s positive economic
profit.
14. A competitive firm maximizes profit by choosing quantity at which marginal cost or
average total point.
a. Cost equals the price average total
b. Marginal cost equal average total cost
c. Marginal cost equals average total cost
d. Average total cost is at its minimum
15. What does the invisible hand in the market do?
a. Nothing. It doesn’t work
b. Show customers and producers which product to choose
c. Create a hostile environment for the demand and supply
d. Help demand and supply reach equilibrium
16. Which of these causes market failure
a. Free market
b. Public goods
c. Demand and supply
d. Equilibrium
17. A linear, downward sloping demand curve is
a. Inelastic at some points and elastic at others
b. Elastic
c. Unit elastic
d. Inelastic
18. The price of reganmian rises from 5 to 7 and the quantity demanded falls from 100 to 80
units. Calculated with the midpoint method, the elasticity is
a. 1/5
b. ½
c. 2
d. 5
19. Which statement is true about producer surplus
a. The amount a seller is paid for a good plus the sellers cost of providing it
b. The amount a seller is paid for a good minus the sellers cost of providing it
c. The value of everything a smaller must give up to produce a good
d. The extra money producers make extra
20. Which statement about deadweight loss is true:
a. The fall in total surplus that that results from a market distortion
b. Welfare spending is consumption
c. Deadweight is not a binding price ceiling
d. A larger at the equilibrium quantity and price more than any other quantity and
price.

Don't use plagiarized sources. Get Your Custom Essay on
INTERMEDIATE MICROECONOMICS
Just from $13/Page
Order Essay

Leave a Reply

Your email address will not be published. Required fields are marked *