1.In the short run

a)all costs are variable.

b)all inputs are fixed

c)there may be fixed and variable inputs.

d)all production decisions must be made on a daily basis.

2.The law of diminishing marginal returns says that as units of labor are added to the production of an output when all other inputs are fixed, eventually

a)total product declines

b)marginal product declines

c)total cost rises.

d)marginal costs decline.

3.Diminishing returns

a)characterize all stages of production.

b)eventually occur in all short-run production situations.

c)are always associated with declining average product in the short-run.

d)exist in the short run, because as additional units of an input are hired, the firm has to accept less satisfactory units.

4.A negative MP*

a)is consistent with a falling TP.

b)is associated with a negative AP.

c)may be consistent with rising or falling TP.

d)indicates that TP is increasing at a decreasing rate.

5.The average variable cost curve and average total cost curve tend to converge as output rises because*

a)the marginal cost curve intersects the average total cost curve at its minimum.

b)the average fixed costs are constant as output rises.

c)the difference between them (average fixed cost) declines.

d)output is rising more rapidly than inputs are being increased

6.An oligopoly is characterized by*

a)free entry and blocked exit.

b)few number of firms and blocked entry.

c)firms that sell homogeneous product but differentiated.

d)firms selling identical products but differentiated.

7.City hotels and restaurants are illustrative of*

a)pure competition.

b)monopolistic competition.

c)oligopoly.

d)monopoly.

8.In the long run, average total cost exhibits a pattern just like the short run average total cost because of this reason.*

a)Increasing and decreasing returns are associated with more outputs produced.

b)Economies and diseconomies of scale are experienced as a firm gets bigger in size.

c)Law of diminishing returns starts to set in.

d)None of the above explains the shape of a long run average total cost curve

9.In the short-run, the basic relationship between an individual firm's supply curve under perfect competition and the market supply curve under perfect competition is*

a)the individual firm's supply curve is horizontal, but the market supply curve is upward sloping

b)the individual firm's supply curve is vertical, but the market supply curve is upward sloping

c)the market supply curve is the summation of all the individual's firms' supply curves

d)the market supply curve is equal to the average of all the individual firm's supply curves

10.The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price:*

a)may be so low that the regulated monopoly can't break even.

b)may cause the regulated monopoly to engage in price discrimination.

c)may be higher than the monopoly price.

d)none of the above