Managerial Economics

2017-18
Quiz 2
 Time: 15 minutes. Maximum points: 10.
 Each question carries 1 point.
 Answer all questions.
 Each multiple-choice question has one best answer.
 No notes, no calculators, no neighbors.
 Good luck!

1) When the demand curve is downward sloping, marginal revenue is

A) less than price. - C B) more than price.
C) equal to price. D) equal to average revenue.

2) How much profit will the monopolist whose cost and demand curves are shown below earn at output Q1?

A) 0BEQ1 B) 0AFQ1 C) ACDF D) 0CDQ1 E) BCDE - C

3) Which of the following is NOT true regarding monopoly?

A) Monopoly demand curve is downward sloping.
B) Monopoly price is determined from the demand curve.
C) Monopoly is the sole producer in the market.
D) Monopolist can charge as high a price as it likes. - C

4) A monopolist has set her level of output to maximize profit. The firm's marginal revenue is $20, and the
price elasticity of demand is -2.0. The firm's profit maximizing price is approximately:
A) $40 - C
B) $20
C) $0
D) $10
E) This problem cannot be answered without knowing the marginal cost.
 5) Jim left his previous job as a sales manager and started his own sales consulting business. He previously
earned $70,000 per year, but he now pays himself $25,000 per year while he is building the new business.
What is the economic cost of the time he contributes to the new business?
A) $45,000 per year - C
B) $25,000 per year
C) $70,000 per year
D) zero

6) Carolyn knows average total cost and average variable cost for a given level of output. Which of the
following costs can she not determine given this information?
A) fixed cost
B) average fixed cost
C) variable cost
D) total cost
E) Carolyn can determine all of the above costs given the information provided. - C

Table 1
Q P TR MR TC MC
0 $30 $0 --- $15 ---
1 $30 $30 $30 $25 $10
2 $30 $60 $30 $40 $15
3 $30 $90 $30 $60 $20
4 $30 $120 $30 $85 $25
5 $30 $150 $30 $115 $30
6 $30 $180 $30 $150 $35

7) That Table 1 shows a short-run situation is evident from

A) the increasing marginal cost.
B) the absence of marginal values at Q = 0.
C) the constant price.
D) the linear marginal revenue function.
E) the presence of positive costs at Q = 0. - C

8) The average revenue graph consistent with Table 1 is

A) linear and downward-sloping.
B) concave downwards.
C) linear and upward-sloping.
D) linear and vertical.
E) linear and horizontal. - C

9) Consider the following statements when answering this question.

I. Increases in the rate of income tax decrease the opportunity cost of attending college.
II. The introduction of distance learning, which enables students to watch lectures at home, decreases the
opportunity cost of attending college.
A) I and II are both true. - C
B) I is true, and II is false.
C) I and II are both false.
D) I is false, and II is true.
10) The total cost (TC) of producing computer software diskettes (Q) is given as: What is the
marginal cost?
A) 5Q
B) 5 - C
C) 200
D) 5 + (200/Q)
E) none of the above