ECO 318 - Assignment Essays

question

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is:
A. $439.
B. $3,200.
C. $2,562.
D. $3,000.

answer

C. $2,562.

question

Accounting profits are:
A. total revenue minus marginal cost.
B. total cost minus total revenue.
C. total revenue minus total cost.
D. marginal revenue minus total cost.

answer

C. total revenue minus total cost.

question

Which of the following is an implicit cost to a firm that produces a good or service?
A. Costs of operating production machinery
B. Costs of renting or buying land for a production site
C. Labor costs
D. Foregone profits of producing a different good or service

answer

D. Foregone profits of producing a different good or service

question

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A price ceiling of $3 will result in a
A. surplus of 12 units.
B. surplus of 30 units.
C. shortage of 15 units.
D. shortage of 30 units.

answer

D. shortage of 30 units.

question

An increase in the price of steak will probably lead to:
A. an increase in the supply for chicken.
B. no change in the demand for steak or chicken.
C. an increase in demand for steak.
D. an increase in demand for chicken.

answer

D. an increase in demand for chicken.

question

Suppose the demand for good X is given by Qdx = 10 - 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and income is $100. Given these prices and income, how much of good X will be purchased?
A. 1,000.
B. 515.
C. 115.
D. None of the statements associated with this question are correct.

answer

D. None of the statements associated with this question are correct.

question

Consider a market characterized by the following inverse demand and supply functions: PX = 10 - 2QX and PX = 2 + 2QX. Compute the surplus received by consumers and producers.
A. $24 and $24, respectively.
B. $4 and $4, respectively.
C. $6 and $2, respectively.
D. $2 and $6, respectively.

answer

B. $4 and $4, respectively.

question

Suppose both supply and demand increase. What effect will this have on the equilibrium quantity?
A. It will rise.
B. It will remain the same.
C. It may rise or fall.

answer

A. It will rise.

question

If the cross-price elasticity between ketchup and hamburgers is −1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent:
A. drop in quantity demanded of hamburgers.
B. increase in quantity demanded of ketchup.
C. increase in quantity demanded of hamburgers.
D. drop in quantity demanded of ketchup.

answer

A. drop in quantity demanded of hamburgers.

question

Which of the following provides a measure of the overall fit of a regression?
A. t-statistic
B. The F-statistic and R-square
C. F-statistic
D. R-square

answer

B. The F-statistic and R-square

question

The demand for good X is estimated to be Qxd = 10,000 − 4PX + 5PY + 2M + AXwhere PX is the price of X, PY is the price of good Y, M is income, and AX is the amount of advertising on X. Suppose the present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. What is the demand curve for good X?
A. 61,500 − 4PX
B. 61,300
C. 61,300 − 4PX
D. 61,500

answer

A. 61,500 − 4PX

question

Suppose the income elasticity for transportation is 1.8. Which of the following is an INCORRECT statement?
A. Expenditures on transportation will fall less rapidly than income falls.
B. Transportation is a normal good.
C. Whenever the income increases by 1 percent, the expenditure on transportation increases by 1.8 percent.
D. Expenditures on transportation grow more rapidly than income grows.

answer

A. Expenditures on transportation will fall less rapidly than income falls.

question

The manager can be 95 percent confident that the true value of the underlying parameters in a regression is not zero if the absolute value of the t-statistic is:
A. less than 2.
B. greater than 1.
C. less than 1.
D. greater than 2.

answer

D. greater than 2.

question

For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is:
A. 2.
B. 3.
C. 14.
D. 12.

answer

C. 14.

question

Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage, there exist:
A. diseconomies of scale.
B. economies of scale.
C. diseconomies of scope.
D. economies of scope.

answer

A. diseconomies of scale.

question

Which of the following cost functions exhibits cost complementarity?
A. −4Q1Q2 + 8Q1.
B. −4Q2 + 8Q1.
C. 6Q1Q2 − Q1.
D. 4Q2Q1 + 8Q1.

answer

A. −4Q1Q2 + 8Q1.

question

Which of the following cost functions exhibits economies of scope when three (3) units of good one and two (2) units of good two are produced?
A. C = 5 + Q1Q2 + Q12Q22.
B. C = 15 + 5Q1Q2 + 2Q1 + 4Q2.
C. C = 10 + 4Q1Q2 + Q12 + Q22.
D. C = 50 − 5Q1Q2 + 0.5Q12 + Q22.

answer

D. C = 50 − 5Q1Q2 + 0.5Q12 + Q22.

question

Which of the following forms of payment is NOT an incentive plan?
A. Commission plans for salesmen
B. Bonuses for managers that increase as profits increase
C. Flat salary for a plant manager
D. None of the statements is correct.

answer

C. Flat salary for a plant manager

question

Which of the following are measures of industry concentration?
A. HHI index
B. Four-firm concentration ratio and HHI index
C. Consumer surplus
D. Four-firm concentration ratio

answer

B. Four-firm concentration ratio and HHI index

question

A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:
A. 0.75.
B. 0.20.
C. 0.50.
D. 0.33.

answer

C. 0.50.

question

Long-term contracts become longer:
A. when marginal costs are declining.
B. when specialized investment becomes more important.
C. when the exchange environment is more complex.
D. when spot markets work well.

answer

B. when specialized investment becomes more important.

question

Spot exchange can be inefficient in the presence of:
A. spot checks.
B. a complex contracting environment.
C. opportunism.
D. None of the statements is correct.

answer

C. opportunism.

question

The LEAST risky payment plan from the viewpoint of the worker is:
A. hourly wage.
B. piece rate.
C. revenue sharing.
D. profit sharing.

answer

A. hourly wage.

question

Which of the following occurs as firm size grows?
A. A decrease in the number of managers needed.
B. Administrative and bureaucratic costs rise at an increasing rate.
C. A decrease in transaction costs.
D. A loss of opportunity cost.

answer

B. Administrative and bureaucratic costs rise at an increasing rate.

question

If a firm manager has a base salary of $50,000 and also gets 2 percent of all profits, how much will his/her income be if revenues are $8,000,000 and profits are $2,000,000?
A. $250,000
B. $150,000
C. $210,000
D. $90,000

answer

D. $90,000

question

A Lerner index of 0 suggests:
A. monopolistic competition.
B. oligopoly.
C. monopoly.
D. perfect competition.

answer

D. perfect competition.

question

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 − 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 3Q1 and MC2 = 2Q2. What price should be charged in order to maximize revenues?
A. $39
B. $56
C. $47

answer

A. $39

question

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q. Your costs are C = 10 + 3Q. Your firm's maximum profits are:
A. 0.
B. 66.
C. 170.
D. 120.

answer

C. 170.

question

Which of the following statements concerning monopoly is NOT true?
A. A monopoly is always undesirable.
B. There is some deadweight loss in a monopolistic market.
C. A monopoly has market power.
D. A market may be monopolistic because there are some legal barriers.

answer

A. A monopoly is always undesirable.

question

You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 96 − 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 6Q1 and MC2 = 3Q2. How much output should be produced in plant 2 in order to maximize profits?
A. 3
B. 1
C. 2
D. 4

answer

C. 2

question

Clark Industries currently spends 5 percent of its sales on advertising. Suppose that the elasticity of advertising for Clark is 0.25. Determine the optimal profit margin over price (P − MC)/P.
A. 25 percent.
B. 15 percent.
C. 20 percent.
D. None of the answers is correct.

answer

C. 20 percent.

question

Which market structure has the most market power?
A. Monopolistic competition
B. Oligopoly
C. Perfect competition
D. Monopoly

answer

D. Monopoly

question

The Cournot theory of oligopoly assumes rivals will:
A. keep their output constant.
B. increase their output whenever a firm increases its output.
C. follow the learning curve.
D. decrease output whenever a firm increases its output.

answer

A. keep their output constant.

question

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is:
A. for each firm to advertise.
B. for your firm to advertise and the other not to advertise.
C. for neither firm to advertise.
D. None of the answers is correct.

answer

A. for each firm to advertise.

question

Which of the following is true?
A. In an infinitely repeated game, collusion is always a Nash equilibrium.
B. In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period.
C. All of the statements associated with this question are correct.
D. None of the answers is correct.

answer

B. In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period.

question

Economists use game theory to predict the behavior of oligopolists. Which of the following is crucial for the success of the analysis?
A. Determine whether the oligopolists move simultaneously or sequentially.
B. Make sure the payoffs reflect the true payoffs of the oligopolists.
C. Determine whether the problem considered is of a one-shot or a repeated nature.
D. All of the statements associated with this question are correct.

answer

D. All of the statements associated with this question are correct.

question

Consider 45 risk-neutral bidders who are participating in a second-price, sealed-bid auction. It is commonly known that bidders have independent private values. Based on this information, we know the optimal bidding strategy for each bidder is to:
A. shade their bid to just below their own valuation.
B. bid their own valuation of the item.
C. bid according to the following bid function: b = v − (v − L)/n.

answer

B. bid their own valuation of the item.

question

The winner's curse occurs:
A. only in English auctions.
B. in a private-values auction.
C. only in second-price, sealed-bid auctions.
D. in a common-values auction.

answer

D. in a common-values auction.

question

An incumbent usually charges a higher price than a new entrant does. Which of the following is a plausible reason for this observation?
A. The incumbent is ignorant of the new entrant, hence it is still charging the old high price.
B. An incumbent usually has a bigger bureaucratic body than a new entrant does and hence has a higher marginal cost.
C. Consumers are risk averse, hence new firms charge lower prices to attract customers.
D. All of the statements associated with this question are correct.

answer

C. Consumers are risk averse, hence new firms charge lower prices to attract customers.

question

ane wants to buy a beautiful doll as a gift for her sister's birthday. She knows that the same product is offered in different shops with prices of $120, $100, and $80 with odds of one-third of finding each price. She just stopped at a shop and knows that the price is $100. If the search cost is $8 per time, what should she do?
A. She should toss a coin.
B. Accept the offer in hand.
C. Search once more and decide again upon knowing the price.
D. Insufficient information to determine.

answer

B. Accept the offer in hand.

question

Consider a consumer who is searching for the lowest price for good X. The consumer knows that 75 percent of the time she will find a store charging $10 and 25 percent of the times she will find a store charging $7. The consumer will search again if her marginal cost of searching is constant and is:
A. strictly higher than $3.
B. lower than or equal to $0.75.
C. exactly $0.
D. between $1.00 and $2.25.

answer

B. lower than or equal to $0.75.

question

Which of the following is true?
A. In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition.
B. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output.
C. In oligopoly a change in marginal cost never has an effect on output or price.
D. None of the answers is correct.

answer

D. None of the answers is correct.

question

In a Sweezy Oligopoly, a decrease in a firm's marginal cost generally leads to:
A. higher output and a higher price.
B. reduced output and a higher price.
C. increased output and a lower price.
D. None of the answers is correct.

answer

D. None of the answers is correct.

question

Which of the following is a profit-maximizing condition for a Cournot oligopolist?
A. MR = MC.
B. P = MR.
C. Q1 = Q2 = ... = Qn.
D. All of the statements associated with this question are correct.

answer

A. MR = MC.

question

A market is NOT contestable if:
A. there are sunk costs.
B. all producers have access to the same technology.
C. existing firms cannot respond quickly to entry by lowering their price.
D. consumers respond quickly to a price change.

answer

A. there are sunk costs.

question

An oligopolist faces a demand curve that is steeper at higher prices than at lower prices. Which of the following is most likely?
A. The firm competes with others in the Bertrand fashion.
B. The firm competes with others in the Cournot fashion.
C. Other firms match price increases but do not match price reductions.
D. Other firms match price reductions but do not match price changes.

answer

C. Other firms match price increases but do not match price reductions.

question

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is:
A. for neither firm to advertise in early years, but to advertise in later years.
B. for each firm to not advertise in any year.
C. for each firm to advertise in early years, but not advertise in later years.
D. for each firm to advertise every year.

answer

B. for each firm to not advertise in any year.

question

Collusion is:
A. not possible when firms interact repeatedly forever.
B. legal in the United States.
C. more likely in industries with a large number of firms.
D. None of the answers is correct.

answer

D. None of the answers is correct.

1 of 48

question

answer

C. $2,562.

question

Accounting profits are:
A. total revenue minus marginal cost.
B. total cost minus total revenue.
C. total revenue minus total cost.
D. marginal revenue minus total cost.

answer

C. total revenue minus total cost.

question

answer

D. Foregone profits of producing a different good or service

question

answer

D. shortage of 30 units.

question

answer

D. an increase in demand for chicken.

question

answer

D. None of the statements associated with this question are correct.

question

answer

B. $4 and $4, respectively.

question

Suppose both supply and demand increase. What effect will this have on the equilibrium quantity?
A. It will rise.
B. It will remain the same.
C. It may rise or fall.

answer

A. It will rise.

question

answer

A. drop in quantity demanded of hamburgers.

question

Which of the following provides a measure of the overall fit of a regression?
A. t-statistic
B. The F-statistic and R-square
C. F-statistic
D. R-square

answer

B. The F-statistic and R-square

question

answer

A. 61,500 − 4PX

question

answer

A. Expenditures on transportation will fall less rapidly than income falls.

question

answer

D. greater than 2.

question

For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is:
A. 2.
B. 3.
C. 14.
D. 12.

answer

C. 14.

question

answer

A. diseconomies of scale.

question

Which of the following cost functions exhibits cost complementarity?
A. −4Q1Q2 + 8Q1.
B. −4Q2 + 8Q1.
C. 6Q1Q2 − Q1.
D. 4Q2Q1 + 8Q1.

answer

A. −4Q1Q2 + 8Q1.

question

answer

D. C = 50 − 5Q1Q2 + 0.5Q12 + Q22.

question

answer

C. Flat salary for a plant manager

question

Which of the following are measures of industry concentration?
A. HHI index
B. Four-firm concentration ratio and HHI index
C. Consumer surplus
D. Four-firm concentration ratio

answer

B. Four-firm concentration ratio and HHI index

question

A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:
A. 0.75.
B. 0.20.
C. 0.50.
D. 0.33.

answer

C. 0.50.

question

answer

B. when specialized investment becomes more important.

question

Spot exchange can be inefficient in the presence of:
A. spot checks.
B. a complex contracting environment.
C. opportunism.
D. None of the statements is correct.

answer

C. opportunism.

question

The LEAST risky payment plan from the viewpoint of the worker is:
A. hourly wage.
B. piece rate.
C. revenue sharing.
D. profit sharing.

answer

A. hourly wage.

question

answer

B. Administrative and bureaucratic costs rise at an increasing rate.

question

answer

D. $90,000

question

A Lerner index of 0 suggests:
A. monopolistic competition.
B. oligopoly.
C. monopoly.
D. perfect competition.

answer

D. perfect competition.

question

answer

A. $39

question

You are the manager of a monopoly that faces a demand curve described by P = 63 − 5Q. Your costs are C = 10 + 3Q. Your firm's maximum profits are:
A. 0.
B. 66.
C. 170.
D. 120.

answer

C. 170.

question

answer

A. A monopoly is always undesirable.

question

answer

C. 2

question

answer

C. 20 percent.

question

Which market structure has the most market power?
A. Monopolistic competition
B. Oligopoly
C. Perfect competition
D. Monopoly

answer

D. Monopoly

question

answer

A. keep their output constant.

question

answer

A. for each firm to advertise.

question

answer

B. In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period.

question

answer

D. All of the statements associated with this question are correct.

question

answer

B. bid their own valuation of the item.

question

The winner's curse occurs:
A. only in English auctions.
B. in a private-values auction.
C. only in second-price, sealed-bid auctions.
D. in a common-values auction.

answer

D. in a common-values auction.

question

answer

C. Consumers are risk averse, hence new firms charge lower prices to attract customers.

question

answer

B. Accept the offer in hand.

question

answer

B. lower than or equal to $0.75.

question

answer

D. None of the answers is correct.

question

answer

D. None of the answers is correct.

question

Which of the following is a profit-maximizing condition for a Cournot oligopolist?
A. MR = MC.
B. P = MR.
C. Q1 = Q2 = ... = Qn.
D. All of the statements associated with this question are correct.

answer

A. MR = MC.

question

answer

A. there are sunk costs.

question

answer

C. Other firms match price increases but do not match price reductions.

question

answer

B. for each firm to not advertise in any year.

question

Collusion is:
A. not possible when firms interact repeatedly forever.
B. legal in the United States.
C. more likely in industries with a large number of firms.
D. None of the answers is correct.

answer

D. None of the answers is correct.

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