Economics MCQs

Page No. 298

X inefficiency occurs when ?


aThe price is greater than the marginal cost


bThe price is greater than the average cost


cCosts are higher than they could be due to a lack of competitive pressure


d There are external cost



Which of the following is not put forth as a criticism of advertising and brand names ?


a Advertising manipulates people’s tastes to create a desire that otherwise would not exist


bAdvertising increase competition Which causes unnecessary bankruptcies and layoffs.


cAdvertising increases brand loyalty causes demand to be more inelastic and thus, increase mark-up over marginal cost.


dAll of these answers are criticisms of advertising and brand names



Which of the following firms is most likely to spend a large percentage of their revenue on advertising ?


athe producer of a highly differentiated consumer product


b the manufacturer of an undifferentiated consumer commodity


ca perfect competitor


dThe producer of a low-quality product that costs the same to produce as a similar high-quality product



The use of word “competition” in the name of the market structure called “monopolistic competition” refers to the fact that ?


a there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market


bMonopolistically competitive firms face a downward-sloping demand curve just like competitive firms.


cMonopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.


d The products are differentiated in a monopolistically competitive market just like in a competitive market.



One source of inefficiency in monopolistic competition is that since price is above marginal cost, some units are not produced that buyers value in ?


a Since price is above marginal cost surplus is redistributed from buyers to sellers


b monopolistically competitive firms earn economic profits in the long run


cmonopolistically competitive firms produce beyond their efficient scale


d excess of the cost of production and this causes a deadweight loss.



Which of the following firms has the least incentive to advertise ?


a a manual fracture of breakfast cereal


ba wholesaler of crude oil


c a restaurant


da manufacturer of home heating and air conditioning



In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes ?


alosses and firms exit the market


bprofits and firms exit the market


closses and firms enter the market


dprofits and firms enter the market



Which of the following products is least likely to be sold in a monopolistically competitive market ?


abreakfast


b cotton


cvideo games


dbeer


View Answer cotton

Which of the following is not an argument put forth by economists in support of the use of advertising ?


aAdvertising increases competition


bAdvertising provides information to customers about prices, new products and location of retail outlets.


c Advertising provides a creative outlet for artists and writers


dAdvertising provides new firms with the means to attract customers from existing firms.



Defenders of the use of brand names argue that brand names ?


aall of these answers


bare useful even in socialist economics such as the former Soviet Union


cprovide information about the quality of the product


dgive firms incentive to maintain high quality


View Answer all of these answers

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