gyu midterm MCQs

Question 1

used cars sell for much less that new cars because

a) imperfect competition in automobile industry
b) buyers know much more about the quality of used cars than sellers do
c) sellers know much more about the quality of used cars than buyers do
d) physical depreciation of cars is very high
e) of licensing agreements by the government

Answer 1

c) sellers know much more about the quality of used cars than buyers do

Question 2

if the cross price elasticity of demand of milk with respect to the price of cookies is -1.6

and the price of cookies is reduced by 15%, the consumption of milk will:

a) increase by 24%
b) decrease by 24%
c) increase by 9.375%
d) decrease by 9.375%
e) none of the above

Answer 2

a) increase by 24%

Question 3

a production function in which the inputs are perfect substitutes have isoquants that are:

a) convex
b) linear
c) L-Shaped
d) concave
e) vertical

Answer 3

b) linear

Question 4

when demand is inelastic, will an increase in price decrease or increase revenue?

Answer 4

increase revenue

Question 5

Although the U. S. airline industry has only a relatively small number of sellers, the market is nevertheless highly competitive. The reason is that:

A) the number of buyers is very large.

B) due to fierce competition, no firm has significant control over prices.

C) due to fierce competition, no firm has significant control over the quantity supplied.

D) most airline routes are served by relatively many sellers.

Answer 5

B) due to fierce competition, no firm has significant control over prices.