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Eco 561 Final Exam

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Eco 561 Final Exam
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1) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

A. will be greater than $5

B. will also be $5

C. will be less than $5

D. may be either greater or less than $5

2) A firm that is motivated by self interest should:

A. always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output

B. hire each input so the productivity of each is equal at the margin

C. always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output

D. employ the combination of resources that will produce the profit-maximizing output at the minimum cost

3) If price is above the equilibrium level, competition among sellers to reduce the resulting:

A. shortage will increase quantity demanded and decrease quantity supplied

B. surplus will increase quantity demanded and decrease quantity supplied

C. surplus will decrease quantity demanded and increase quantity supplied

D. shortage will decrease quantity demanded and increase quantity supplied

4) Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:

A. lower their price and increase their quantity supplied

B. raise their price and reduce their quantity supplied

C. lower their price and reduce their quantity supplied

D. raise their price and increase their quantity supplied

5) Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:

A. constitutes an exception to the law of supply in that they suggest a downward sloping supply curve

B. suggests that the supply of DVD players has increased

C. constitutes an exception to the law of

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