The principle of minimum differentiation reflects the
A) tendency for firms to produce at minimum marginal cost in order to compete with one another.
B) tendency for political parties to make themselves identical to appeal to the median voter.
C) concept of minimizing the difference between total benefit and total cost to produce efficiently.
D) attempt to minimize the free-rider problem.
Ques. 2Consider a monopolistically competitive industry which is in long-run equilibrium. Which of the following is TRUE?
A) All firms charge a price equal to average total cost.
B) All firms charge a price equal to marginal cost.
C) All firms earn positive economic profit.
D) Demand, average total cost, and marginal cost all intersect.
Ques. 3Shaniq buys only soda and pizza and is buying the amounts that maximize her utility. The marginal utility from a soda is 30 and the price of a soda is 2. The marginal utility from a slice of pizza is also 30. The price of a slice of pizza must be
A) 30.
B) 2.
C) 1.
D) some amount that cannot be calculated without more information.
Ques. 4Katie finds that the marginal utility from a compact disc is 30 and the marginal utility from a pizza is 10. The price of a compact disc is 15 and the price of a pizza is 10. In order to increase her utility, Katie should
A) consume more compact discs and fewer pizzas.
B) consume fewer compact discs and more pizzas.
C) not change her consumption of pizza and compact discs.
D) consume fewer compact discs and fewer pizzas.
Ques. 5Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other.
III) Markets coordinate decisions through prices. A) I only
B) I and III
C) II and III
D) I, II and III
Ques. 6In the long run, a firm in monopolistic competition has its price equal to ________ and also has its price ________.
A) marginal cost; exceeding its average total cost.
B) marginal cost; equal to its average total cost
C) average total cost; exceeds its marginal cost
D) average total cost; less than its marginal cost
Ques. 7If the combination of goods consumed at point C is preferred to combination D then
A) point C is on a higher indifference curve.
B) point C is on the same indifference cure but at a point where the vertical axis value is greater than point D's vertical axis value.
C) point C is on a lower indifference curve.
D) point C is on the same indifference curve but at a point where the horizontal axis value is greater than point D's horizontal axis value.
Ques. 8The elasticity of supply for paintings by Monet is
A) perfectly elastic.
B) perfectly inelastic.
C) unit elastic.
D) inelastic.
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