question
The Higher the interest rate:
A) The greater the present value of a future amount
B) The greater the level of inflation
C) The smaller the present value of a future amount
D) None of the above
A) The greater the present value of a future amount
B) The greater the level of inflation
C) The smaller the present value of a future amount
D) None of the above
answer
C) The smaller the present value of a future amount
question
Economics:
answer
Exists because of scarcity
question
If the interest rate is 10 percent and cash flows are $1000 at the end of year one and $2000 at the end of year two, then the present value of these cash flows is
answer
$2562
question
Accounting profits are:
A) marginal revenue minus total cost
B) total revenue minus total cost
C) total revenue minus marginal cost
D) total cost minus total revenue
A) marginal revenue minus total cost
B) total revenue minus total cost
C) total revenue minus marginal cost
D) total cost minus total revenue
answer
B) Total revenue minus total cost
question
What is the marginal revenue of producing the third unit?
No. of units Total Rev. Total Costs
0 0 0
1 100 50
2 180 110
3 250 180
4 290 270
5 310 380
No. of units Total Rev. Total Costs
0 0 0
1 100 50
2 180 110
3 250 180
4 290 270
5 310 380
answer
70
question
Economic Profits are:
A) Total profits of the economy as a whole
B) marginal revenue minus marginal cost
C) Total revenue minus total cost
D) total revenue minus total opportunity cost
A) Total profits of the economy as a whole
B) marginal revenue minus marginal cost
C) Total revenue minus total cost
D) total revenue minus total opportunity cost
answer
total revenue minus total opportunity cost
question
Economic Profits are:
answer
total revenue minus total opportunity cost
question
What is the marginal cost of producing the fifth unit?
No. of units Total Rev. Total Costs
0 0 0
1 100 50
2 180 110
3 250 180
4 290 270
5 310 380
No. of units Total Rev. Total Costs
0 0 0
1 100 50
2 180 110
3 250 180
4 290 270
5 310 380
answer
110
question
Which of the following is an implicit cost of going to college?
A) Cost of books and supplies
B) Foregone wages
C) Room and board
D) Tuition
A) Cost of books and supplies
B) Foregone wages
C) Room and board
D) Tuition
answer
Foregone wages
question
If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer:
A) Must buy the good at that price
B) must revalue the good
C) Will refuse to purchase the good
D) none of the above
A) Must buy the good at that price
B) must revalue the good
C) Will refuse to purchase the good
D) none of the above
answer
Refuse to purchase the good
question
The additional benefits that arise by using an additional unit of the managerial control variable is defined as the:
A) marginal benefit
B) present value of benefits
C) total benefit
D) opportunity cost
A) marginal benefit
B) present value of benefits
C) total benefit
D) opportunity cost
answer
marginal benefit
question
The primary inducement for new firms to enter an industry is:
answer
presence of economic profits
question
Which of the following is (are) True?
A) Accounting costs generally understate economic costs
B) In the absence of any opportunity costs, accounting profits equal economic profits
C) Accounting profits generally overstate economic profits
D) All of the above
A) Accounting costs generally understate economic costs
B) In the absence of any opportunity costs, accounting profits equal economic profits
C) Accounting profits generally overstate economic profits
D) All of the above
answer
All of the above
question
The optimal amount of studying is determined by comparing:
A) total benefit and total cost of studying
B) marginal benefit and marginal cost of studying
C) marginal benefit and the total cost of studying
D) marginal benefit and the total benefit of studying
A) total benefit and total cost of studying
B) marginal benefit and marginal cost of studying
C) marginal benefit and the total cost of studying
D) marginal benefit and the total benefit of studying
answer
marginal benefit and the marginal cost of studying
question
Which of the following is the incorrect statement?
A) The marginal benefits curve is the slope of the total benefits curve
B) dB(Q)/dQ= MB
C) The difference in the slope of the total benefit curve and the total cost curve is maximized at the optimal level of Q
D) The slope of the net benefit curve is horizontal where MB = MC
A) The marginal benefits curve is the slope of the total benefits curve
B) dB(Q)/dQ= MB
C) The difference in the slope of the total benefit curve and the total cost curve is maximized at the optimal level of Q
D) The slope of the net benefit curve is horizontal where MB = MC
answer
C) The difference in the slope of the total benefit curve and the total cost curve is maximized at the optimal level of Q
question
IF marginal benefits exceed marginal costs, it is profitable to:
Stay at the level of Q
decrease Q
Increase Q
All of the above
Stay at the level of Q
decrease Q
Increase Q
All of the above
answer
Increase Q
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:
Surplus or Shortage of how many units
Surplus or Shortage of how many units
answer
shortage of 30 units
question
In a competitive market, the market demand is Qd=60-6P and the market supply is Qs=4P. The full economic price under a price ceiling of $3 is:
answer
8
question
The buyer side of the market is known as the:
answer
Demand Side
question
Which of the following can explain an increase in the dmand for housing in retirement communities?
A) Mandatory government legislation
B) A drop in the average age of retirees
C) A drop in real estate prices
D) An increase in the population of the elderly
A) Mandatory government legislation
B) A drop in the average age of retirees
C) A drop in real estate prices
D) An increase in the population of the elderly
answer
An increase in the population of the elderly
question
The demand function recognizes that the quantity of a good consumed depends on:
A) demand shifters and price
B) demand shifters only
C) price and supply shifters
D) the prices of other goods only
A) demand shifters and price
B) demand shifters only
C) price and supply shifters
D) the prices of other goods only
answer
Demand shifters and price
question
Suppose the demand for good X is given by Qdx= 10 +axPx+ayPy=AmM. From the law of demand we know that ax will be:
Greater than, less than, or equal to 0.
Greater than, less than, or equal to 0.
answer
less than 0. Figure out why.
question
Suppose the demand for good X is given by Qdx= 10 +axPx+ayPy=AmM. IF ay is positive, then:
A) goods y and x are normal goods
B) goods y and x are inferior goods
C) goods y and x are substitutes
D) goods y and x are compliments
A) goods y and x are normal goods
B) goods y and x are inferior goods
C) goods y and x are substitutes
D) goods y and x are compliments
answer
goods y and x are substitutes
question
For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:
A) Shift to the right
B) Become parallel to the price axis
C) become flatter
D) shift to the left
A) Shift to the right
B) Become parallel to the price axis
C) become flatter
D) shift to the left
answer
Shift to the right
question
The economic principle that producers are willing to produce more output when price is high is depicted by the:
answer
upward slope of the supply curve
question
CHanges in the price of a good lead to:
A) no effects in quantity demanded or supplied
B) changes in demand
C) changes in quantity supplied of a good
D) changes in supply
A) no effects in quantity demanded or supplied
B) changes in demand
C) changes in quantity supplied of a good
D) changes in supply
answer
Changes in the quantity supplied of the good
question
Technological advances will cause the supply curve to:
answer
Shift to the right
question
Suppose the supply of good X is given by Qsx=10+2Px. How many units of good x are produced if the price of good x is 20.
answer
50
question
Suppose the market demand and supply are given by Qd=100-2P and Qs=5+3P. The equilibrium pice is:
answer
19
question
The maximum legal price that can be charged in a market is:
answer
A price ceiling
question
Suppose market demand and supply are given by Qd=100-2P and Qs=5+3P. IF a price ceiling of $15 is imposed,
there will be shortage of 20 units
there will be a surplus of 40 units
there will be a surplus of 20 units
there will be a shortage of 40 units
there will be neither a shortage or surplus
there will be shortage of 20 units
there will be a surplus of 40 units
there will be a surplus of 20 units
there will be a shortage of 40 units
there will be neither a shortage or surplus
answer
Shortage of 20 units
question
Demand shifters do not include:
Price of the good
Price of other goods
the level of advertising
the consumers income
Price of the good
Price of other goods
the level of advertising
the consumers income
answer
the price of the good
question
Suppose both supply and demand decrease. What effect will this have on price?
It will rise
It will fall
It will remain the same
It may rise or fall
It will rise
It will fall
It will remain the same
It may rise or fall
answer
It may rise or fall
question
Suppose you produce wooden desks, and govermnet legislation protecting the spotted owl has made it more expensive to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?
Price will decrease but quantity will increase
Price and quantity will increase
Price and quantity will decrease
Price will increase but quantity will decrease
Price will decrease but quantity will increase
Price and quantity will increase
Price and quantity will decrease
Price will increase but quantity will decrease
answer
Price will increase but quantity will decrease
question
Suppsoe market demand and supply are given by Qd=100-2P and Qs=5+3P. If a price floor of $30 is set, what will be the size of the resulting surplus?
answer
55
question
Good X is a normal good if an increase in income leads to:
answer
In increase in the demand for good x
question
Which of the following is least likely to be a normal good?
Airline travel
bologna
home
steak
Airline travel
bologna
home
steak
answer
bologna
question
Suppose good x is a normal good. Then a decrease in income would lead to:
An inward shift in the demand curve
A movement along the demand curve
An outward shift in the demand curve
No shift of the demand curve
An inward shift in the demand curve
A movement along the demand curve
An outward shift in the demand curve
No shift of the demand curve
answer
An inward shift of the demand curve
question
Which of the following are least likely to be substitutes?
cars and trucks
automobile and gasoline
chicken and beef
automobile and housing
cars and trucks
automobile and gasoline
chicken and beef
automobile and housing
answer
Automobile and gasoline
question
Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to:
remain constant
decrease
increase
either increase or remain constant, depending on the size of the price increase.
remain constant
decrease
increase
either increase or remain constant, depending on the size of the price increase.
answer
decrease
question
Good x is a normal good and its demand is given by Qxd=a0+axPx+ayPy+amM+ahH. Then we know that:
ah>0
am>0
ay>0
ax>0
ah>0
am>0
ay>0
ax>0
answer
am>0. BECAUSE ITS NORMAL GOOD, with positive income elasticity of demand!
question
Consider a market characterized by the following inverse demand and supply functions. Px=10-2Qx and Px=2+2Qx. Compute the loss in social welfare when an $8 per unit price floor is imposed on the market.
answer
$2. LEARN HOW TO DO
question
A price elasticity of zero corresponds to a demand curve that is
answer
vertical
question
The demand for good X has been estimated by Qxd=12-3Px+4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity
answer
-.6. =X Demand Coefficient* P/Q
question
The own price elasticity of demand for apples is -1.2. If the price of apples fall by 5 percent. what will happen to the quantity of apples demanded.
answer
It will increase by 6 percent
question
If quantity demanded for sneakers falls by 10 percent when price increases 25%, we know that the absolute value of the own price elasticity of sneakers is:
answer
.4 (CHange in demand/Change in price)
question
The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:
Unitary
Inelastic
Elastic
Falling
Unitary
Inelastic
Elastic
Falling
answer
Inelastic
question
Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:
infinite
unknown
zero
one
infinite
unknown
zero
one
answer
Infinite
question
Suppose Qxd=10000-2Px+3Py-4.5M, where Px=$100, Py=$50, and M=$2,000. What is the own price elasticity of demand?
answer
-.21
question
Lemonade, a good with many close substitutes, should have an one price elasticity that is:
Relatively inelastic
Relatively elastic
Perfectly inelastic
Unitary
Relatively inelastic
Relatively elastic
Perfectly inelastic
Unitary
answer
relatively elastic
question
If the cross-price elasticity between goods A and B is negative, we know the goods are:
compliments
substitutes
inferior
inelastic
compliments
substitutes
inferior
inelastic
answer
Substitutes
question
END OF EXAM 1
answer
...
question
Suppose a consumer with an income of $100 is faced with Px=1 and Py=1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?
answer
-2.0 Figure out why.
question
The difference between a price decrease and an increase in income is that
A) A price decrease decreases real income, while an increase in income increases real income
B) A price decrease does not affect the consumption of other goods, while an in increase in income does
C) An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope
D) A price decrease leaves real income unchanged, while an increase in income increases real income
A) A price decrease decreases real income, while an increase in income increases real income
B) A price decrease does not affect the consumption of other goods, while an in increase in income does
C) An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope
D) A price decrease leaves real income unchanged, while an increase in income increases real income
answer
C) An increase in income does not affect the slope of the budget line, while a decrease in price does change the slope
question
Joe prefers a three-pack of soda to a six-pack. What properties does this preference violate?
answer
More is better
question
Which of the the following is true?
A) At a point of consumer equilibrium, the MRS always equals 1.
B) If income increases, a consumer will always consume more of a good.
C) Indifference curves may intersect
D) None of the statements are correct
A) At a point of consumer equilibrium, the MRS always equals 1.
B) If income increases, a consumer will always consume more of a good.
C) Indifference curves may intersect
D) None of the statements are correct
answer
None of the statements are correct
question
If a consumer's income decreases, what will happen to the budget line?
A) It will shift outward
B) It will shift inward
C) It will become steeper
D) It will become flatter
A) It will shift outward
B) It will shift inward
C) It will become steeper
D) It will become flatter
answer
It will be a shift inward
question
The absolute value of the slope of the indifference curve is called the:
A) Average rate of substitution
B) Marginal cost
C) Marginal Revenue
D) Marginal rate of substitution
A) Average rate of substitution
B) Marginal cost
C) Marginal Revenue
D) Marginal rate of substitution
answer
Marginal Rate of Substitution
question
A price increase causes a consumers "real" income to:
answer
decrease
question
If you wish to open a store and you do not like risk, it would be wise to sell:
A) A mix of normal and inferior goods
B) only normal goods
C) all inferior goods
D) None of the above
A) A mix of normal and inferior goods
B) only normal goods
C) all inferior goods
D) None of the above
answer
Mix of normal and inferior goods
question
Which of the following is most likely not an example of a normal good?
Bus travel
Jacuzzis
Lobster
Sports cars
Bus travel
Jacuzzis
Lobster
Sports cars
answer
Bus Travel
question
Which of the following pairs of goods is probably not an example of substitutes?
A) hamburgers and ketchup
B) Potatoes and stuffing
C) Chicken and steak
D) raincoats and umbrellas
A) hamburgers and ketchup
B) Potatoes and stuffing
C) Chicken and steak
D) raincoats and umbrellas
answer
Hamburgers and Ketchup
question
The upper boundary of the budget set is the:
Indifference curve
Budget Line
Vertical Intercept
Origin
Indifference curve
Budget Line
Vertical Intercept
Origin
answer
Budget Line
question
Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line?
answer
5 (Income/Py)
question
What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px=5, Py=10, X=20, and M=500?
answer
40
question
Which of the following cases violates the property of transitivity?
A>B, B>C, A>C
A~B, B~C, A~C
A>B, B>C, C>A
A>B, B>C, A>C
A~B, B~C, A~C
A>B, B>C, C>A
answer
A>B, B>C, C>A
question
If money income doubles and the prices of all goods triples, then the:
consumer will buy more of normal goods
budget line will shift out
consumer is worse off due to inflation
budget line remains unchanged
consumer will buy more of normal goods
budget line will shift out
consumer is worse off due to inflation
budget line remains unchanged
answer
Consumer is worse off due to inflation
question
The maximum quantity of good Y that is affordable is:
M/Px
M/Py
M/Y
M/X
M/Px
M/Py
M/Y
M/X
answer
M/Py
question
Consider a two-good world, with commodities X and Y. If X is an inferior good, then an increase in consumer income cannot:
Increase the demand for Y
Decrease the demand for X
make the consumer better off
decrease the demand for Y
Increase the demand for Y
Decrease the demand for X
make the consumer better off
decrease the demand for Y
answer
Decrease the demand for Y
question
What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and Px=$10, Py=$20, X=20, and M=400.
answer
10
question
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:
More labor and less capital
More capital and less labor
three times more capital than labor
none of the answers are correct
More labor and less capital
More capital and less labor
three times more capital than labor
none of the answers are correct
answer
More labor and less capital
question
Suppose the production function is given by Q=3K+4L. What is the marginal product of capital when 5 units of capital and 10 units of labor are employed?
answer
3
question
You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w=$40, r=$100, MPl=4, and MPk=40 the firm:
is profit maximizing but not cost minimizing
should use more K and less L to cost minimize
should use less L and more K to cost minimize
is cost minimizing
is profit maximizing but not cost minimizing
should use more K and less L to cost minimize
should use less L and more K to cost minimize
is cost minimizing
answer
should use more K and less L to cost minimize
question
For a cost function C=100 + 10Q+Q^2, the average variable cost of producing 20 units of output:
answer
30
question
For a cost function C=100+10Q+Q^2 the average fixed cost of producing 10 units of output is:
answer
10
question
If the last unit of input increases total product, we know that the marginal product is:
Postive, negative, indeterminate, zero
Postive, negative, indeterminate, zero
answer
positive
question
Total product begins to fall when:
Average product is below zero
Marginal product is maximized
Marginal product is zero
average product is negative
Average product is below zero
Marginal product is maximized
Marginal product is zero
average product is negative
answer
Marginal product is zero
question
It is profitable to hire units of labor as long as the value of marginal product:
exceeds wage
exceeds average product
equals price
is less than wage
exceeds wage
exceeds average product
equals price
is less than wage
answer
exceeds wage
question
Given the table below, how many workers should be hired to maximize profits?
Labor MPL VMP Wage
1 8 32 100
2 32 128 100
3 16 64 100
4 -1 -4 100
5 -12 -48 100
Labor MPL VMP Wage
1 8 32 100
2 32 128 100
3 16 64 100
4 -1 -4 100
5 -12 -48 100
answer
2.
question
Given the linear production function Q=10K+5L, if Q=10000 and K=500, how much labor is utilized?
answer
1000 units
question
With a linear production function there is a:
Variale Proportion relationship between all inputs
fixed-proportion relationship between all inputs
perfect complementary relationship between all inputs
perfect substitutable relationship between all inputs
Variale Proportion relationship between all inputs
fixed-proportion relationship between all inputs
perfect complementary relationship between all inputs
perfect substitutable relationship between all inputs
answer
perfect substitutable relationship between all inputs
question
The marginal product of capital for the Cobb-Douglas production function is given by:
bK^a L^b-1
aK^a-1 L^b-1
bK^a L^b
aK^a-1 L^b
bK^a L^b-1
aK^a-1 L^b-1
bK^a L^b
aK^a-1 L^b
answer
aK^a-1 L^b
question
An isoquant defines the combination of inputs that yield the producer:
The same level of output
Higher levels of output than the desired level of output
lower levels of output than the desired level of output
none of the statements are correct
The same level of output
Higher levels of output than the desired level of output
lower levels of output than the desired level of output
none of the statements are correct
answer
The same level of output
question
An isocost line:
has a convex shape
represents the combination of K and L that cost the firm the same amount of money
Represents the combinations of w and K that cost the firm the same amount of money
Represents the combinations of r and w that cost the firm the same amount of money
has a convex shape
represents the combination of K and L that cost the firm the same amount of money
Represents the combinations of w and K that cost the firm the same amount of money
Represents the combinations of r and w that cost the firm the same amount of money
answer
represents the combination of K and L that cost the firm the same amount of money
question
The difference between average total costs and average variable costs is:
fixed cost
average fixed cost
marginal cost
none of the statements are correct
fixed cost
average fixed cost
marginal cost
none of the statements are correct
answer
Average fixed cost
question
Suppose the cost function is C(Q)=50 +Q- 10Q^2+ 2Q^3. What are the fixed costs?
answer
$50
question
Suppose the cost function is C(Q)=50 +Q- 10Q^2+ 2Q^3. what is the total cost of producing 10 units?
answer
$1060
question
The cost of production include:
Accounting Cost
The costs that appear on the income statements
the opportunity costs foregone by producing a given product
accounting costs and opportunity costs
Accounting Cost
The costs that appear on the income statements
the opportunity costs foregone by producing a given product
accounting costs and opportunity costs
answer
Accounting Costs and opportunity costs
question
Which of the following "costs" could a firm that wants to remain in business avoid if it halted current production?
Fixed costs
Variable costs
Opportunity costs
Sunk costs
Fixed costs
Variable costs
Opportunity costs
Sunk costs
answer
Variable costs
question
If the production function is Q=K^.5 L^.5 and capital is fixed at 1 unit, then the average product of labor when L=36 is:
answer
1/6 (Q/L)
question
Often owners of firms who hire managers must install incentive or bonus plans to ensure that the:
manager will work hard
company will have positive economic profits
company is financially secure
manager will maintain employee morale
manager will work hard
company will have positive economic profits
company is financially secure
manager will maintain employee morale
answer
manager will work hard
question
A firm might choose to produce its own inputs if:
Spot markets for the input exist
specialized investment is not important
the exchange environment is not complex
long-term contracts are costly to write
Spot markets for the input exist
specialized investment is not important
the exchange environment is not complex
long-term contracts are costly to write
answer
Long-term contracts are costly to write
question
Suppose a firm manager has a base salary of $175,000 and earns .5 percent of all profits. Determine the manager's income if revenues are $10,000,000 and profits are $5,000,000.
answer
$200,000
question
If the production function is Q=KL and capital is fixed at 1 unit, then the marginal product of labor when L=25 is:
15
1/4
1/10
none are correct
15
1/4
1/10
none are correct
answer
None are correct
(1)
(1)
question
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?
The marginal products of all inputs are equal
The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal
The MRTS is equal to the ratio of input prices
The marginal product per dollar spent on all inputs is equal
The marginal products of all inputs are equal
The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal
The MRTS is equal to the ratio of input prices
The marginal product per dollar spent on all inputs is equal
answer
The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal
question
Given the Leontief production function Q=min (5.5K, 6.7L), how much output is produced when K=40 and L=35?
answer
220
question
The cimbinations of inputs that produce a given level of output are depicted by:
Isoquants
budget lines
isocost curves
indifference curves
Isoquants
budget lines
isocost curves
indifference curves
answer
Isoquants
question
In order for isoquants to have a diminishing marginal rate of substitution, they must be:
straight lines
l-shaped
vertical
None of the above
straight lines
l-shaped
vertical
None of the above
answer
none of the above
question
As long as marginal product is increasing, marginal product is:
equal to total product
less than average product
greater than average product
equal to average output
equal to total product
less than average product
greater than average product
equal to average output
answer
greater than average product
question
the leontief production function:
implies inputs are used in fixed proportions
is Q=max (bK,cL)
is Q=aK+bL
implies inputs are used in variable proportions
implies inputs are used in fixed proportions
is Q=max (bK,cL)
is Q=aK+bL
implies inputs are used in variable proportions
answer
implies inputs are used in fixed proportions
question
The equilibrium consumption bundle is :
Any bundle that is the farthest from the origin
The bundle where the budget line and the indifference curve meet
The affordable bundle that yields the greatest satisfaction to the consumer
Any affordable bundle in the budget set
Any bundle that is the farthest from the origin
The bundle where the budget line and the indifference curve meet
The affordable bundle that yields the greatest satisfaction to the consumer
Any affordable bundle in the budget set
answer
the affordable bundle that yields the greatest satisfaction to the consumer
question
It is profitable to hire units of labor as long as the value of marginal product:
exceeds wage
exceeds average product
equals price
is less than wage
exceeds wage
exceeds average product
equals price
is less than wage
answer
exceeds wage
question
Two firms compete as a Stackelberg duopoly. The demand they face is P=100-3Q. The cost function for each firm is C(Q)=4Q. The outputs of the two firms are:
QL=20; QF=15
QL=24; QF= 12
QL=12; QF=8
QL=16; QF=8
QL=20; QF=15
QL=24; QF= 12
QL=12; QF=8
QL=16; QF=8
answer
QL=16; QF=8
question
A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms coexist after entry?
answer
$20
question
You are the manager of a monopoly that faces a demand curve described by P=230-20Q. Your costs are C=5+30Q. The profit maximizing output of your firm is:
answer
5
question
A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. The monopoly price is:
answer
$23
question
Which firm would you expect to make the lowest profits, other things equal?
Betrand
Sweezy
Cournot
Stackelberg
Betrand
Sweezy
Cournot
Stackelberg
answer
Betrand Oligopolist
question
What contributes to the existence of multi product firms?
Economies of scope and cost complementarity
Cost complementarity
Economies of Scope
Economies of Scale
Economies of scope and cost complementarity
Cost complementarity
Economies of Scope
Economies of Scale
answer
Economies of scope and cost complementarity
question
From a consumers point of view, which type of oligolpoly is most desirable?
Betrand
Cournot
Sweezy
Stackelberg
Betrand
Cournot
Sweezy
Stackelberg
answer
Bertrand
question
The Cournot theory of oligopoly assumes rivals will:
decrease output whenever a firm increases its output.
increase their output whenever a firm increases its output.
follow the learning curve.
keep their output constant.
decrease output whenever a firm increases its output.
increase their output whenever a firm increases its output.
follow the learning curve.
keep their output constant.
answer
keep their output constant
question
Suppose you compete in a Cornet oligopoly market consisting of six firms. The equilibrium market price and quantity are $5 and 10 units, respectively. The marginal cost for each firm is $3. Based on this information, we know the price elasticity of the market demand is:
answer
-.417
question
With a linear inverse demand function and the same constant marginal costs for both firms in a homogenous product stackelberg duopoly, which of the following will result?
PL>PF
QL=2QF
Profits of leader>Profits of follower
Profits of leader>Profits of follower and QL=2QF
PL>PF
QL=2QF
Profits of leader>Profits of follower
Profits of leader>Profits of follower and QL=2QF
answer
Profits of leader>Profits of follower and QL=2QF
question
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. The optimal commodity bundling strategy is:
Charge $100 for a suit
Charge $125 for a suit
Charge $75 for a suit
Charge $150 for a suit
Charge $100 for a suit
Charge $125 for a suit
Charge $75 for a suit
Charge $150 for a suit
answer
Charge $150 for a suit
question
There is no market supply curve in:
a monopolistic market
monopolistically competitive and monopolistic markets
a perfectly competitive market
a monopolistically competitive market
a monopolistic market
monopolistically competitive and monopolistic markets
a perfectly competitive market
a monopolistically competitive market
answer
monopolistically competitive and monopolistic markets
question
With linear demand and constant marginal cost, a Stackelberg leader's profits are ________ the follower.
less than
equal to
greater than
either less than or greater than
less than
equal to
greater than
either less than or greater than
answer
greater than
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. How much output should be produced in plant 1 in order to maximize profits?
answer
1
question
In a sweezy oligopoly, a decrease in a firm's marginal cost generally leads to:
Increased output and a lower price
reduced output and a higher price
higher output and a higher price
none of the above
Increased output and a lower price
reduced output and a higher price
higher output and a higher price
none of the above
answer
None of the Above
question
The bertrand model of the oligopoly reveals that:
perfectly competitive prices can arise in markets with only a few firms.
capacity constraints are not important in determining market performance.
changes in marginal cost do not affect prices.
All of the statements associated with this question are true.
perfectly competitive prices can arise in markets with only a few firms.
capacity constraints are not important in determining market performance.
changes in marginal cost do not affect prices.
All of the statements associated with this question are true.
answer
perfectly competitive prices can arise in markets with only a few firms.
question
Which of the following statements is true regarding profit-maximizing markup for a Cornet oligopoly with N identical firms?
P=((1+NEf)/NEf)MC
P(NEf/(1+NEf))=MC
P=(NEf/(1+NEf))MC
P(N(1+Ef)/NEf)=MC
P=((1+NEf)/NEf)MC
P(NEf/(1+NEf))=MC
P=(NEf/(1+NEf))MC
P(N(1+Ef)/NEf)=MC
answer
P=(NEf/(1+NEf))MC
question
You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C=40+5Q^2. The profit-maximizing output for your firm is:
answer
5
question
You are the manager of a mom and pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -4, then your profit maximizing price is:
answer
$4.00
question
You are the manager of a gas station and your goal is to maximize profits. Based on your past experience, the elasticity of demand by Texans for a car wash is -4, while the elasticity of demand by non-Texans for a car wash is -6. If you charge Texans $20 for a car wash, how much should you charge a man with Oklahoma license plates for a car wash?
answer
$18.00
question
Chris raises cows and produces cheese and milk because he enjoys:
economies of scope
economies of scale
cost complementarity
none of the answers are correct
economies of scope
economies of scale
cost complementarity
none of the answers are correct
answer
economies of scope
question
A local video store estimates its average customer's demand per year is Q=20-4P, and it knows the marginal cost of each rental is $1.00. How much should the store charge for an annual membership in order to extract the entire consumer surplus via an optimal to part pricing strategy?
20
32
64
40
20
32
64
40
answer
32
question
You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C=40+5Q^2. Your firm's maximum profits are:
answer
85
question
In perfect competition, which is NOT true?
Firms produce homogenous goods
Firms are price-takers
There are a large number of firms
Every firm has a small but perceivable market power
Firms produce homogenous goods
Firms are price-takers
There are a large number of firms
Every firm has a small but perceivable market power
answer
Every firm has a small but perceivable market power
question
Second-degree price discrimination:
Is the practice of posting a discrete schedule of declining prices for different ranges of quantities.
results in transfer pricing.
eliminates the problem of double marginalization.
none of the answers are correct.
Is the practice of posting a discrete schedule of declining prices for different ranges of quantities.
results in transfer pricing.
eliminates the problem of double marginalization.
none of the answers are correct.
answer
Is the practice of posting a discrete schedule of declining prices for different ranges of quantities.
question
Which of the following is true?
in oligopoly a change in marginal cost never has an effect on output or price.
In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output.
In cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition.
None of the answers is correct.
in oligopoly a change in marginal cost never has an effect on output or price.
In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output.
In cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition.
None of the answers is correct.
answer
None of the answers is correct
question
Which would you expect to make the highest profits, other things equal?
Cournot oligopolist
Bertrand Oligopolist
Stackelberg follower
Stackelberg leader
Cournot oligopolist
Bertrand Oligopolist
Stackelberg follower
Stackelberg leader
answer
Stackelberg leader
question
You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C=50+3Q^2. The profit-maximizing output for your firm is:
answer
10
question
In a competitive industry with identical firms, long run equilibrium is characterized by:
P=MC
MR=MC
P=AC
All of the statements are correct
P=MC
MR=MC
P=AC
All of the statements are correct
answer
All of the statements are correct.
question
Two firms compete in a Stackelberg fashion. If firm 2 is the leader, then:
firm 2 views the output of firm 1 as given.
Firm 1 views the output of firm 2 as given.
Both of the above are correct.
None of the answers are correct.
firm 2 views the output of firm 1 as given.
Firm 1 views the output of firm 2 as given.
Both of the above are correct.
None of the answers are correct.
answer
Firm 1 views the output of firm 2 as given.
question
You are the manager of a mom and pop store that can buy milk from a supplier at $2.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -3, then your profit-maximizing price is:
answer
$3.00
question
The spirit of equating marginal cost with marginal revenue is not held by:
oligopolistic firms
perfectly competitive firms and oligopolistic firms
perfectly competitive firms
none of the answers are correct
oligopolistic firms
perfectly competitive firms and oligopolistic firms
perfectly competitive firms
none of the answers are correct
answer
none of the answers are correct
question
Firms have market power in:
A) perfectly competitive markets
B) monopolistic markets
C) monopolistically competitive and monopolistic markets
D) monopolistically competitive markets
A) perfectly competitive markets
B) monopolistic markets
C) monopolistically competitive and monopolistic markets
D) monopolistically competitive markets
answer
C) monopolistically competitive and monopolistic markets
question
If firms compete in a cournot fashion then each firm views the:
output of rivals as given
profits of rivals as given
prices of rivals as given
All of the statements are corrrect
output of rivals as given
profits of rivals as given
prices of rivals as given
All of the statements are corrrect
answer
output of rivals as given
question
A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:
answer
.5
question
Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?
P=MC and positive long run profits
P=MC
Positive long run profits
MC=MR
P=MC and positive long run profits
P=MC
Positive long run profits
MC=MR
answer
P=MC
question
Oligopoly differs from monopoly as follows:
A) Oligopoly involves a few firms; monopoly involves a single firm and oligopoly involves free entry; monopoly involves no free entry
B) Oligopoly involves a few firms; monopoly involves a single firm
C) Oligopoly involves free entry; monopoly involves free entry
D) Oligopoly does use advertisement; monopoly does not use advertisement
A) Oligopoly involves a few firms; monopoly involves a single firm and oligopoly involves free entry; monopoly involves no free entry
B) Oligopoly involves a few firms; monopoly involves a single firm
C) Oligopoly involves free entry; monopoly involves free entry
D) Oligopoly does use advertisement; monopoly does not use advertisement
answer
B) Oligopoly involves a few firms; monopoly involves a single firm
question
The idea of charging two different groups of consumers two different prices is practiced in:
commodity bundling
two-part pricing
price matching
none of the answers are correct
commodity bundling
two-part pricing
price matching
none of the answers are correct
answer
none of the answers are correct
question
During spring break, students have an elasticity of demand for a trip to Cancun, Mexico, of -4. How much should an airline charge students for a ticket if the price it charges the general public is $420? assume the general public has an elasticity of -2.
answer
280
question
Which of the following market structures would you expect to yield the greatest product variety?
perfect competition
monopoly
bertrand oligopoly
monopolistic competition
perfect competition
monopoly
bertrand oligopoly
monopolistic competition
answer
Monopolistic competition
question
A monopoly produces widgets at a marginal cost of $8 per unit and zero fixed costs. It faces an inverse demand function given by P=38-Q. What are the profits of the monopoly at equilibrium?
answer
$225
question
Monopolistic competition is characterized by:
employing labor from a perfectly competitive labor market
no free entry
heterogenous products
large markets
employing labor from a perfectly competitive labor market
no free entry
heterogenous products
large markets
answer
heterogenous products
question
First-degree price discrimination:
A) results in the firm extracting all surplus from consumers
B) occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.
C) Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased
D) None of the above
A) results in the firm extracting all surplus from consumers
B) occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.
C) Occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased
D) None of the above
answer
occurs when a firm charges each consumer the maximum price he or she would be willing to pay for each unit of the good purchased and results in the firm extracting all surplus from consumers.
question
To engage in first-degree price discrimination, a firm must:
A) prevent low-value consumers from reselling to high-value consumers.
B) be able to set P>MC
C) Know each consumers maximum willingness to pay.
D) all of the answers are correct
A) prevent low-value consumers from reselling to high-value consumers.
B) be able to set P>MC
C) Know each consumers maximum willingness to pay.
D) all of the answers are correct
answer
All of the answers are correct
question
Which of the following is true under monopoly?
P=MR
Profits are always positive
P>MC
All of the choices are true
P=MR
Profits are always positive
P>MC
All of the choices are true
answer
P>MC
question
The market demand in a Bertrand duopoly is P=10-3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statements is are true?
A) Producers surplus for firm1=producers for firm 2
B) Profits of firm=profits of firm 2
C) P=$1
D) All of the above
A) Producers surplus for firm1=producers for firm 2
B) Profits of firm=profits of firm 2
C) P=$1
D) All of the above
answer
All of the above
question
The producer's surplus of all firms in a oligopoly is usually the least in the case of a:
Bertrand
Sweezy
Stackelberg
Cournot
Bertrand
Sweezy
Stackelberg
Cournot
answer
Bertrand
question
When firm 1 enjoys a first mover advantage in a stackelberg duopoly, it will produce:
A) less output and charge the same price as firm 2
B) Less output and charge a higher price than firm 2
C) more output and charge a lower price than firm 2
D) more output and charge the same price as firm 2
A) less output and charge the same price as firm 2
B) Less output and charge a higher price than firm 2
C) more output and charge a lower price than firm 2
D) more output and charge the same price as firm 2
answer
More output and charge the same price as firm 2
question
Consider a cournot oligopoly consisting of five identical firms producing good X. If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is -3, determine the profit-maximizing price.
answer
$7.50 per unit
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