question
An isocost line represents:
answer
all combinations of a firm's factors of production that have the same total cost.
question
If ac(q) is less then mc(q), then
answer
ac(q) is increasing
question
Cost minimization
answer
determine what mix of labor and capital produces output at the lowest cost. In other words, what the most cost-effective method of delivering goods and services would be while maintaining a desired level of quality.
question
In the short run, a firm in a perfectly competitive market will earl
answer
profits that could be positive, negative, or zero.
question
In a perfectly competitive market with a subsidy, what can we say?
answer
there will be one value for the consumer surplus and the producer surplus.
question
consumer surplus is?
answer
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
question
producer surplus is?
answer
the amount a seller is paid for a good minus the seller's cost of providing it
question
a subsidy is?
answer
a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.
question
an analysis determines the equilibrium prices and quantities in more then one market simultaneously is called?
answer
general equilibrium analysis
question
which of the following would lead to an excess supply?
answer
Price Floor
question
which statement about the long-run and short-run total cost curve is true?
answer
The short-run total cost is greater than or equal to the long-run total cost.
question
when the government introduces a subsidy in a market, which of the following is true?
answer
Both consumer surplus and producer surplus increase
question
Suppose the demand is given Q=10-P. What is the consumer surplus when the price is P=4?
answer
18
question
To solve the long-run cost-minimization problem, you do the following
answer
Fix an isoquant and find the isocost furthest to the southwest that still intersects the given isoquant line
question
An endogenous variable in the firms cost-minimizing problem would be?
answer
The amount of labor and capital
question
an example of an implicit cost for you if you decide to build your own house would be a
answer
the cost of spending time working on the house rather than at your job (implicit costs are opportunity costs)
question
An isoquant line repersents
answer
all combinations of of inputs in which the firm has the same level of total cost
question
A firm has a production function with diminishing MRTS L,K is currently producting Q=25 units of output at the cost minimizing combination of labor and capital. if the cost of capital decreases then the new cost minimizing combination of labor and capital will have?
answer
more capital and less labor
question
Assume that a firm operates with production function Q(K,L)=KL with production target Q=32. The price of labor w=2 and the price of capital r=1. How much labor should the firm produce in the LONG RUN.
answer
4
question
A firm is trying to produce Q0=100 units of output and faces a production function of Q(L,K)=LK. Currently the firm is producing 100 units of output, has MPL=10 and MPK=20 and faces a price of labor w=1 per unit and price of capital r=3 per unit.
answer
Use less capital more and more labor
question
Assume that a firm operates in the short run with fixed levels of capital K bar=5 and production function Q(K,L)=KL with production target Q=100 how much labor should the firm produce in the short run.
answer
20
question
If the short-run total cost is given by STC(Q) =32+2Q^2, and 7 of the fixed costs are sunk what is minimum efficent scale?
answer
25
question
which statement about the long-run and short-run total cost curve is true
answer
the short-run total cost is greater than or equal to the long-run total cost
question
If the total cost of producing two units is 70 and the average fixed cost of producing two units is 20 what is the average variable cost of producing two units
answer
...
question
assume the amount of labor is on the x-axis and the amount of capital is on the the y-axis. If the price of the labor doubles what happens to the slope of the isocost lines?
answer
They become steeper(more negative)
question
If the short-run total cost is given by STC(Q)=15 +2Q^2 and 7 of the fixed costs are sunk what is the total variable cost when production is Q=3
answer
...
question
economics of scale occur when
answer
When average cost is decreasing
question
Which of the following is true about the relationship between the long-run total cost(TC(Q)) and the short-run total cost (STC(Q))?
answer
STC(Q) is always higher or equal to TC(Q)
question
The long-run total cost curve shows
answer
The minimum total cost to produce any level of output holding input prices fixed and choosing all inputs to minimize cost.
question
In a perfectly competitive market with a subsidy what can we say?
answer
there will be only one value for consumer and producer surplus
question
An analysis that determines the equilibrium prices and quantities in more than one market at a time simultaneously is called
answer
general equilbrium analysis
question
if the incidence of a tax is less than the negative one (the demand curve is relatively more inelastic than the supply curve) what can we say?
answer
the consumer will bear more of the burden of the tax than the producer
question
Which of the following is not a characteristic of perfect competition
answer
The industry does not have a lot of buyers and sellers
question
Which of the following leads to an excess supply?
answer
Price Floor
question
When the goverment introduces a subsidy in a market which of the following is true
answer
Both consumer surplus and producer surplus increase
question
Suppose the demand is given by Q=10-P what is the consumer surplus when the price is P=4
answer
18
question
Which market would you expect to have the lowest deadweight loss
answer
a perfectly competitve market
question
A monopsony market is one with
answer
one buyer and many sellers
question
For a level of production Q1 such that 0<MC(Q1)<MR(Q1) an increase in production will lead to?
answer
an increase in profits because cost will increase and revenue will increase even more
question
If a monopolist is producing where marginal revenue is less than marginal cost then in order to increase profits the monopolist should
answer
Produce less
question
which of the following would lead to the highest producer surplus for a monopolist in a market
answer
First-Degree price discrimination
question
Wildcar pizza charges students $4 to regular customers $2 for students this is an example of
answer
Third-Degree Price Discrimination
question
Tesla selling cars with batteries that are limited by software is an example of
answer
damaged goods
question
With _______ degree price discrimination the firm tries to price each unit at the consumers reservation price
answer
first
question
Wildcat pizza charges students $4 for the first 10 slices of pizza they buy in a given year. Any additional slices of pizza only cost the student $2 for the rest of the year. This is an example of
answer
Second-Degree Price discrimination
question
Which of the following will make price discrimination difficult?
answer
the firm is a price taker
question
Under first-degree price discrimination
answer
DWL and Consumer surplus are zero
question
Which of the following is a real-world example of tying?
answer
The manufacturer of an instant-prints camera is the only manufacturer of the film the camera uses
question
amazon.com selling different versions of a book (audiobook,kindle,paperback) is an example of?
answer
Third-degree price discriminitation
question
Intel spending additional money processing a computer chip to make it worse is an example
answer
third-degree price discrimination
question
if firms in a perfectly competitive market are earning postive profits in the long-run what would happen?
answer
more firms would enter the market
question
In a long-run perfectly competitive equilibrium, the condition P = MC (Q) guarantees what?
(a) Each firm earns zero profits.
(b) Firms can freely adjust all inputs.
(c) Each firm maximizes profits.
(d) None of the other answers are correct.
(e) Supply equals demand.
(a) Each firm earns zero profits.
(b) Firms can freely adjust all inputs.
(c) Each firm maximizes profits.
(d) None of the other answers are correct.
(e) Supply equals demand.
answer
Each rm maximizes prots.
question
Which of the following is least like first-degree price discrimination?
(a) A used-car salesman trying to determine how much a buyer is willing to pay based on what clothes
they are wearing.
(b) Uber determining the fare of ride based on information about the consumer and the destination.
(c) Priceline asking customers to name their own price.
(d) Intel spending additional money processing a computer chip to make it worse.
(a) A used-car salesman trying to determine how much a buyer is willing to pay based on what clothes
they are wearing.
(b) Uber determining the fare of ride based on information about the consumer and the destination.
(c) Priceline asking customers to name their own price.
(d) Intel spending additional money processing a computer chip to make it worse.
answer
Intel spending additional money processing a computer chip to make it worse.
question
Monopolist #1 operates in a market with demand Q = 15P^-1. Monopolist #2 operates in a market
with demand Q = 5P^-3. Both monopolists face marginal cost MC(Q) = 10. Which of the following is true?
(a) Monopolist #2 has more freedom to raise the price above marginal cost.
(b) They have equal ability to raise the price above marginal cost.
(c) Monopolist #1 has more freedom to raise the price above marginal cost.
(d) Neither has the freedom to raise the price above marginal cost.
with demand Q = 5P^-3. Both monopolists face marginal cost MC(Q) = 10. Which of the following is true?
(a) Monopolist #2 has more freedom to raise the price above marginal cost.
(b) They have equal ability to raise the price above marginal cost.
(c) Monopolist #1 has more freedom to raise the price above marginal cost.
(d) Neither has the freedom to raise the price above marginal cost.
answer
Monopolist #1 has more freedom to raise the price above marginal cost.
question
Which of the following must be true:
(a) Long-run total cost at Q = 0 must be equal to 0.
(b) Short-run total cost at Q = 0 must be less than 0.
(c) Short-run total cost at Q = 0 must be equal to 0.
(d) Long-run total cost at Q = 0 must be greater than 0.
(a) Long-run total cost at Q = 0 must be equal to 0.
(b) Short-run total cost at Q = 0 must be less than 0.
(c) Short-run total cost at Q = 0 must be equal to 0.
(d) Long-run total cost at Q = 0 must be greater than 0.
answer
Long-run total cost at Q = 0 must be equal to 0.
question
If marginal product is greater than average product:
(a) average product must be increasing.
(b) marginal product must be increasing.
(c) marginal product must be decreasing.
(d) total product must be increasing.
(a) average product must be increasing.
(b) marginal product must be increasing.
(c) marginal product must be decreasing.
(d) total product must be increasing.
answer
(a) average product must be increasing.
question
The region where the isoquant has positive slope, is called the
(a) Uneconomic region of production.
(b) Marginal rate of technical substitution.
(c) Economic region of production.
(d) Marginal rate of production.
(a) Uneconomic region of production.
(b) Marginal rate of technical substitution.
(c) Economic region of production.
(d) Marginal rate of production.
answer
Uneconomic region of production.
question
Which of the following pairs of goods are perfect complements?
(a) liters of Coke and gallons of Pepsi.
(b) food and clothing.
(c) gasoline and cars.
(d) liters of Coke and number of t-shirts.
(a) liters of Coke and gallons of Pepsi.
(b) food and clothing.
(c) gasoline and cars.
(d) liters of Coke and number of t-shirts.
answer
(c) gasoline and cars.
question
Suppose that you have a graph that has good x on the x-axis and good y on the y-axis. What happens
to the budget line as the price of good y increases?
(a) Moves outward along the x-axis, doesn't move on y-axis.
(b) Moves inward along the x-axis, doesn't move on y-axis.
(c) Moves inward along the y-axis, doesn't move on x-axis.
(d) Moves outward along the y-axis, doesn't move on x-axis.
to the budget line as the price of good y increases?
(a) Moves outward along the x-axis, doesn't move on y-axis.
(b) Moves inward along the x-axis, doesn't move on y-axis.
(c) Moves inward along the y-axis, doesn't move on x-axis.
(d) Moves outward along the y-axis, doesn't move on x-axis.
answer
c) Moves inward along the y-axis, doesn't move on x-axis.
question
Suppose that the demand for widgets is QW = 100 -3PW -4PG where PG is the price of gadgets and PW is the price of widgets. Which of the following is true:
(a) widgets and gadgets are demand substitutes.
(b) widgets and gadgets are neither substitutes nor complements.
(c) widgets and gadgets are sometimes complements and other times substitutes depending on the
prices.
(d) widgets and gadgets are demand complements.
(a) widgets and gadgets are demand substitutes.
(b) widgets and gadgets are neither substitutes nor complements.
(c) widgets and gadgets are sometimes complements and other times substitutes depending on the
prices.
(d) widgets and gadgets are demand complements.
answer
(d) widgets and gadgets are demand complements.
question
What happens to the Q = 100 isoquant after technological progress has occurred?
a) The slope of the isoquant curve increases.
b) The slope of the isoquant curve decreases.
c) Shifts inward toward the origin.
d) Shifts outward away from the origin.
a) The slope of the isoquant curve increases.
b) The slope of the isoquant curve decreases.
c) Shifts inward toward the origin.
d) Shifts outward away from the origin.
answer
c) Shifts inward toward the origin.
question
Which of the following statements represents normative analysis?
a) Raising taxes on gasoline will reduce automobile traffic on our nation's highways.
b) Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
c) Eliminating rent controls in New York City leads to greater supply of housing in the future.
d) Eliminating the minimum wage leads to lower unemployment.
a) Raising taxes on gasoline will reduce automobile traffic on our nation's highways.
b) Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
c) Eliminating rent controls in New York City leads to greater supply of housing in the future.
d) Eliminating the minimum wage leads to lower unemployment.
answer
Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
on foreign oil.
question
If the income elasticity of demand is negative for good x, then what can we say that good x is a:
(a) normal good
(b) inferior good
(c) luxury good
(d) giffen good
(a) normal good
(b) inferior good
(c) luxury good
(d) giffen good
answer
inferior
question
The marginal rate of substitution MRSx;y(x; y) is equal to
(a) The negative slope of the indifference curve at point (x; y).
(b) The negative slope of the budget line at point (x; y).
(c) The slope of the budget line at point (x; y).
(d) The slope of the indierence curve at point (x; y).
(a) The negative slope of the indifference curve at point (x; y).
(b) The negative slope of the budget line at point (x; y).
(c) The slope of the budget line at point (x; y).
(d) The slope of the indierence curve at point (x; y).
answer
The negative slope of the indifference curve at point (x; y).
question
Assume that our standard assumptions on preference are true. Identify the truthfulness of the following statements:
I. Every basket that lies to the Southeast of basket A gives a higher level of utility.
II. Every basket that lies to the Northwest of basket A costs more.
(a) I is false; II is true.
(b) Both I and II are true.
(c) I is true; II is false.
(d) Both I and II are false.
I. Every basket that lies to the Southeast of basket A gives a higher level of utility.
II. Every basket that lies to the Northwest of basket A costs more.
(a) I is false; II is true.
(b) Both I and II are true.
(c) I is true; II is false.
(d) Both I and II are false.
answer
(d) Both I and II are false.
question
Comparative statics
a) examines how exogenous variables change as endogenous factors change.
b) presents a comparison of two separate markets at a single point in time.
c) examines how endogenous variables change as exogenous factors change.
d) is often rendered useless because exogenous variables can never be expected to remain constant
for long.
a) examines how exogenous variables change as endogenous factors change.
b) presents a comparison of two separate markets at a single point in time.
c) examines how endogenous variables change as exogenous factors change.
d) is often rendered useless because exogenous variables can never be expected to remain constant
for long.
answer
examines how endogenous variables change as exogenous factors change.
question
Which of the following assumptions on preferences is not needed to guarantee that the preferences can
be represented with a utility function?
a) Preferences satisfy "More is Better".
b) Preferences are diminishing.
c) Preferences are complete.
d) Preferences are transitive.
be represented with a utility function?
a) Preferences satisfy "More is Better".
b) Preferences are diminishing.
c) Preferences are complete.
d) Preferences are transitive.
answer
Preferences are diminishing.
question
Which of the following goods would we expect to have the most inelastic demand:
a) restaurant meals
b) toothpicks
c) foreign travel
d) fresh tomatoes
a) restaurant meals
b) toothpicks
c) foreign travel
d) fresh tomatoes
answer
d) fresh tomatoes
question
Which of the following statements represents normative analysis?
a. Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence on foreign oil.
b. Eliminating rent controls in NY City leads to greater supply of housing in the future.
c. Raising taxes on gasoline will reduce automobile traffic on our nations highways.
d. Eliminating the minimum wage leads to lower unemployment.
a. Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence on foreign oil.
b. Eliminating rent controls in NY City leads to greater supply of housing in the future.
c. Raising taxes on gasoline will reduce automobile traffic on our nations highways.
d. Eliminating the minimum wage leads to lower unemployment.
answer
. Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence on foreign oil.
question
Farmer John owns A acres of farm and is trying to maximize profits (π) by looking at the price of corn (Pc) and the price of soybeans (Ps) choosing how many acres of corn (C) and how many acres of soybeans (S) to plant. Identify the truthfulness of the following statements:
I. The endogenous variables are C, S, and A.
II. The objective function is A=C+S
a. I is true; II is false.
b. Both I and II are false.
c. Both I and II are true.
d. I is false; II is true.
I. The endogenous variables are C, S, and A.
II. The objective function is A=C+S
a. I is true; II is false.
b. Both I and II are false.
c. Both I and II are true.
d. I is false; II is true.
answer
B
question
Which of the following statements is a comparative statics statement:
a. The income elasticity of demand is positive.
b. An increase in the demand curve leads to an increase in prices.
c. The consumer is trying to maximize utility subject to their budget constraint.
d. The equilibrium is at the intersection of the supply and demand curve.
a. The income elasticity of demand is positive.
b. An increase in the demand curve leads to an increase in prices.
c. The consumer is trying to maximize utility subject to their budget constraint.
d. The equilibrium is at the intersection of the supply and demand curve.
answer
B An increase in the demand curve leads to an increase in prices.
question
An endogenous variable in a consumers choice problem would typically be:
a. income.
b. basket of goods.
c. utility function.
d. prices.
a. income.
b. basket of goods.
c. utility function.
d. prices.
answer
B basket of goods
question
Which of the following statements regarding
exogenous variables is correct?
a. Exogenous variables change as a result of changes in endogenous variables.
b. Endogenous variables will always be determined within the model.
c. The only variables that are relevant to the market equilibrium are the endogenous variables, as they are determined within the model.
d. The set of exogenous variables in any economic model should take into account the rich detail of the world and so should be limitless.
exogenous variables is correct?
a. Exogenous variables change as a result of changes in endogenous variables.
b. Endogenous variables will always be determined within the model.
c. The only variables that are relevant to the market equilibrium are the endogenous variables, as they are determined within the model.
d. The set of exogenous variables in any economic model should take into account the rich detail of the world and so should be limitless.
answer
B Endogenous variables will always be determined within the model.
question
Suppose that the demand for widgets is Qw=100-3Pw+4Pg where Pg is the price of gadgets and Pw is the price of widgets. Which of the following is true:
a. widgets and gadgets are demand complements.
b. widgets and gadgets are demand substitutes.
c. widgets and gadgets are neither substitutes nor complements.
d. widgets and gadgets are sometimes complements and other times substitutes depending on the prices.
a. widgets and gadgets are demand complements.
b. widgets and gadgets are demand substitutes.
c. widgets and gadgets are neither substitutes nor complements.
d. widgets and gadgets are sometimes complements and other times substitutes depending on the prices.
answer
widgets and gadgets are demand substitutes.
question
Which of the following would cause an unambiguous decrease (decrease for sure) in the equilibrium market price?
a. a leftward shift in supply and a rightward shift in demand.
b. a rightward shift in supply and a rightward shift in demand.
c. a rightward shift in supply and a leftward shift in demand.
d. a leftward shift in supply and a leftward shift in demand.
a. a leftward shift in supply and a rightward shift in demand.
b. a rightward shift in supply and a rightward shift in demand.
c. a rightward shift in supply and a leftward shift in demand.
d. a leftward shift in supply and a leftward shift in demand.
answer
a rightward shift in supply and a leftward shift in demand.
question
Which of the following would allow us to estimate the demand curve in a given market:
a. many years of data
b. Two equilibrium points; one before and one after a shift in a demand curve
c. Two equilibrium points; one before and one after a shift in the supply curve
d. many different markets simultaneously
a. many years of data
b. Two equilibrium points; one before and one after a shift in a demand curve
c. Two equilibrium points; one before and one after a shift in the supply curve
d. many different markets simultaneously
answer
Two equilibrium points; one before and one after a shift in the supply curve
question
Which of the following statements is false?
a. Brand-level price elasticity of demand is more negative than industry-level price elasticity of demand.
b. The distinction between market-level and brand-level elasticity reflects the impact of availability of substitutes.
c. Demand often is both inelastic at market level and highly elastic at the brand level.
d. Demand often is both highly elastic at the market level and inelastic at the brand level.
a. Brand-level price elasticity of demand is more negative than industry-level price elasticity of demand.
b. The distinction between market-level and brand-level elasticity reflects the impact of availability of substitutes.
c. Demand often is both inelastic at market level and highly elastic at the brand level.
d. Demand often is both highly elastic at the market level and inelastic at the brand level.
answer
D Demand often is both highly elastic at the market level and inelastic at the brand level.
question
A measure of the rate of percentage change of quantity demanded with respect to price, holding all other determinants of demand constant is called the...
a. Price elasticity of market equilibrium.
b. Price elasticity of equilibrium.
c. Price elasticity of demand.
d. Price elasticity of supply.
a. Price elasticity of market equilibrium.
b. Price elasticity of equilibrium.
c. Price elasticity of demand.
d. Price elasticity of supply.
answer
C Price elasticity of demand.
question
Suppose the supply curve for strawberries is Qs= 10 + 4P and the demand curve for strawberries is Qd= 25- P. What can we say about the market when the price is P=6?
a. The market is in equilibrium.
b. None of the other answers are correct.
c. There is an excess supply of 15.
d. There is an excess demand of 15.
a. The market is in equilibrium.
b. None of the other answers are correct.
c. There is an excess supply of 15.
d. There is an excess demand of 15.
answer
C here is an excess supply of 15.
question
Which of the following goods would we expect to have the most inelastic demand:
a. fresh tomatoes
b. toothpicks
c. iPads
d. foreign travel
a. fresh tomatoes
b. toothpicks
c. iPads
d. foreign travel
answer
toothpicks
question
Suppose demand is given by Qd= 500- 15P and supply is given by Qs= 5P. If the government imposes a $30 price floor the excess supply will be:
a. 25
b. 50
c. 100
d. 150
a. 25
b. 50
c. 100
d. 150
answer
C 100
question
If indifference curves are upward sloping, this violates the assumption that preferences:
a. require that more to be better.
b. are transitive.
c. upward sloping indifference curves do not violate any of the assumptions about preferences.
d. are complete.
a. require that more to be better.
b. are transitive.
c. upward sloping indifference curves do not violate any of the assumptions about preferences.
d. are complete.
answer
A require that more to be better.
question
For a given utility function U(x,y)=xy, what happens to the indifference curve U(x,y)=100 as the income increases from I=10 to I=20?
a. nothing.
b. none of the other answers are correct.
c. the indifference curve shifts to the southwest.
d. the indifference curve shifts to the northeast.
a. nothing.
b. none of the other answers are correct.
c. the indifference curve shifts to the southwest.
d. the indifference curve shifts to the northeast.
answer
A
question
Which of the following assumptions on preferences is not needed to guarantee that the preferences can be represented with a utility function?
a. Preferences are complete.
b. Preferences are transitive.
c. Preferences satisfy "More is Better."
d. Preferences are diminishing.
a. Preferences are complete.
b. Preferences are transitive.
c. Preferences satisfy "More is Better."
d. Preferences are diminishing.
answer
D
question
Which of the following Utility Functions has a diminishing marginal rate of substitution?
a. U(x,y) = X^2 + y^2
b. U(x,y) = 2x + y
c. U(x,y) = x^2 + y
d. U(x,y) = x^1/2 * y
a. U(x,y) = X^2 + y^2
b. U(x,y) = 2x + y
c. U(x,y) = x^2 + y
d. U(x,y) = x^1/2 * y
answer
D U(x,y) = x^1/2 * y
question
If a consumer's preferences over good x and y are complete, transitive and satisfy the "more is better" assumption, what is true?
a. the consumers set of available baskets can be determined.
b. The marginal rate of substitution is diminishing on at least one of the consumer's indifference curves
c. The consumer's preferences can be represented with a utility function.
d. The consumer has diminishing marginal utility for at least one of the goods.
a. the consumers set of available baskets can be determined.
b. The marginal rate of substitution is diminishing on at least one of the consumer's indifference curves
c. The consumer's preferences can be represented with a utility function.
d. The consumer has diminishing marginal utility for at least one of the goods.
answer
C The consumer's preferences can be represented with a utility function.
question
If marginal product is greater than average product:
(a) average product must be increasing.
(b) marginal product must be increasing.
(c) marginal product must be decreasing.
(d) total product must be increasing.
(a) average product must be increasing.
(b) marginal product must be increasing.
(c) marginal product must be decreasing.
(d) total product must be increasing.
answer
(a) average product must be increasing.
question
The region where the isoquant has positive slope, is called the
(a) Uneconomic region of production.
(b) Marginal rate of technical substitution.
(c) Economic region of production.
(d) Marginal rate of production.
(a) Uneconomic region of production.
(b) Marginal rate of technical substitution.
(c) Economic region of production.
(d) Marginal rate of production.
answer
Uneconomic region of production.
question
Which of the following pairs of goods are perfect complements?
(a) liters of Coke and gallons of Pepsi.
(b) food and clothing.
(c) gasoline and cars.
(d) liters of Coke and number of t-shirts.
(a) liters of Coke and gallons of Pepsi.
(b) food and clothing.
(c) gasoline and cars.
(d) liters of Coke and number of t-shirts.
answer
(c) gasoline and cars.
question
Suppose that you have a graph that has good x on the x-axis and good y on the y-axis. What happens
to the budget line as the price of good y increases?
(a) Moves outward along the x-axis, doesn't move on y-axis.
(b) Moves inward along the x-axis, doesn't move on y-axis.
(c) Moves inward along the y-axis, doesn't move on x-axis.
(d) Moves outward along the y-axis, doesn't move on x-axis.
to the budget line as the price of good y increases?
(a) Moves outward along the x-axis, doesn't move on y-axis.
(b) Moves inward along the x-axis, doesn't move on y-axis.
(c) Moves inward along the y-axis, doesn't move on x-axis.
(d) Moves outward along the y-axis, doesn't move on x-axis.
answer
c) Moves inward along the y-axis, doesn't move on x-axis.
question
Suppose that the demand for widgets is QW = 100 -3PW -4PG where PG is the price of gadgets and PW is the price of widgets. Which of the following is true:
(a) widgets and gadgets are demand substitutes.
(b) widgets and gadgets are neither substitutes nor complements.
(c) widgets and gadgets are sometimes complements and other times substitutes depending on the
prices.
(d) widgets and gadgets are demand complements.
(a) widgets and gadgets are demand substitutes.
(b) widgets and gadgets are neither substitutes nor complements.
(c) widgets and gadgets are sometimes complements and other times substitutes depending on the
prices.
(d) widgets and gadgets are demand complements.
answer
(d) widgets and gadgets are demand complements.
question
What happens to the Q = 100 isoquant after technological progress has occurred?
a) The slope of the isoquant curve increases.
b) The slope of the isoquant curve decreases.
c) Shifts inward toward the origin.
d) Shifts outward away from the origin.
a) The slope of the isoquant curve increases.
b) The slope of the isoquant curve decreases.
c) Shifts inward toward the origin.
d) Shifts outward away from the origin.
answer
c) Shifts inward toward the origin.
question
Which of the following statements represents normative analysis?
a) Raising taxes on gasoline will reduce automobile traffic on our nation's highways.
b) Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
c) Eliminating rent controls in New York City leads to greater supply of housing in the future.
d) Eliminating the minimum wage leads to lower unemployment.
a) Raising taxes on gasoline will reduce automobile traffic on our nation's highways.
b) Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
c) Eliminating rent controls in New York City leads to greater supply of housing in the future.
d) Eliminating the minimum wage leads to lower unemployment.
answer
Farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence
on foreign oil.
on foreign oil.
question
If the income elasticity of demand is negative for good x, then what can we say that good x is a:
(a) normal good
(b) inferior good
(c) luxury good
(d) giffen good
(a) normal good
(b) inferior good
(c) luxury good
(d) giffen good
answer
inferior
question
The marginal rate of substitution MRSx;y(x; y) is equal to
(a) The negative slope of the indifference curve at point (x; y).
(b) The negative slope of the budget line at point (x; y).
(c) The slope of the budget line at point (x; y).
(d) The slope of the indierence curve at point (x; y).
(a) The negative slope of the indifference curve at point (x; y).
(b) The negative slope of the budget line at point (x; y).
(c) The slope of the budget line at point (x; y).
(d) The slope of the indierence curve at point (x; y).
answer
The negative slope of the indifference curve at point (x; y).
question
Assume that our standard assumptions on preference are true. Identify the truthfulness of the following statements:
I. Every basket that lies to the Southeast of basket A gives a higher level of utility.
II. Every basket that lies to the Northwest of basket A costs more.
(a) I is false; II is true.
(b) Both I and II are true.
(c) I is true; II is false.
(d) Both I and II are false.
I. Every basket that lies to the Southeast of basket A gives a higher level of utility.
II. Every basket that lies to the Northwest of basket A costs more.
(a) I is false; II is true.
(b) Both I and II are true.
(c) I is true; II is false.
(d) Both I and II are false.
answer
(d) Both I and II are false.
question
Comparative statics
a) examines how exogenous variables change as endogenous factors change.
b) presents a comparison of two separate markets at a single point in time.
c) examines how endogenous variables change as exogenous factors change.
d) is often rendered useless because exogenous variables can never be expected to remain constant
for long.
a) examines how exogenous variables change as endogenous factors change.
b) presents a comparison of two separate markets at a single point in time.
c) examines how endogenous variables change as exogenous factors change.
d) is often rendered useless because exogenous variables can never be expected to remain constant
for long.
answer
examines how endogenous variables change as exogenous factors change.
question
Which of the following assumptions on preferences is not needed to guarantee that the preferences can
be represented with a utility function?
a) Preferences satisfy "More is Better".
b) Preferences are diminishing.
c) Preferences are complete.
d) Preferences are transitive.
be represented with a utility function?
a) Preferences satisfy "More is Better".
b) Preferences are diminishing.
c) Preferences are complete.
d) Preferences are transitive.
answer
Preferences are diminishing.
question
Which of the following goods would we expect to have the most inelastic demand:
a) restaurant meals
b) toothpicks
c) foreign travel
d) fresh tomatoes
a) restaurant meals
b) toothpicks
c) foreign travel
d) fresh tomatoes
answer
d) fresh tomatoes
question
Which of following is true about a prisoner's dilemma?
(a) Strategic behavior causes players to reach a suboptimal outcome.
(b) The only Nash equilibrium is a mixed strategy Nash equilibrium.
(c) There are multiple Nash equilibria.
(d) Neither player has a dominant strategy.
(a) Strategic behavior causes players to reach a suboptimal outcome.
(b) The only Nash equilibrium is a mixed strategy Nash equilibrium.
(c) There are multiple Nash equilibria.
(d) Neither player has a dominant strategy.
answer
(a) Strategic behavior causes players to reach a suboptimal outcome.
question
If two firms are competing, each using a low price guarantee
(a) leads to lower profits for the firms but higher consumer surplus.
(b) leads to higher profits for the firms but lower consumer surplus.
(c) leads to higher profits for the firms and higher consumer surplus.
(d) leads to lower profits for the firms and lower consumer surplus.
(a) leads to lower profits for the firms but higher consumer surplus.
(b) leads to higher profits for the firms but lower consumer surplus.
(c) leads to higher profits for the firms and higher consumer surplus.
(d) leads to lower profits for the firms and lower consumer surplus.
answer
leads to higher profits for the firms but lower consumer surplus.
question
If we are trying to find the cost-minimizing combination of labor and captial with a Cobb-Douglas production function, which two equations do we use?
(a) Isocost line and Tangency Condition.
(b) Tangency Condition and Total Cost.
(c) Isoquant and isocost line.
(d) Isoquant and Tangency Condition.
(e) Isocost line and Total Cost.
(a) Isocost line and Tangency Condition.
(b) Tangency Condition and Total Cost.
(c) Isoquant and isocost line.
(d) Isoquant and Tangency Condition.
(e) Isocost line and Total Cost.
answer
(d) Isoquant and Tangency Condition.
question
Identify the truthfulness of the following statements:
I. In a first-price, private-value auction it is a dominant strategy to bid below your value.
II. In a second-price, private-value auction it is a dominant strategy to bid above your value.
(a) I is false; II is true.
(b) Both I and II are false.
(c) Both I and II are true.
(d) I is true; II is false.
I. In a first-price, private-value auction it is a dominant strategy to bid below your value.
II. In a second-price, private-value auction it is a dominant strategy to bid above your value.
(a) I is false; II is true.
(b) Both I and II are false.
(c) Both I and II are true.
(d) I is true; II is false.
answer
(d) I is true; II is false.
question
1. In a Bertrand oligopoly,
(a) firms choose quantities simultaneously.
(b) firms choose quantities sequentially.
(c) firms choose prices sequentially.
(d) firms choose prices simultaneously.
(a) firms choose quantities simultaneously.
(b) firms choose quantities sequentially.
(c) firms choose prices sequentially.
(d) firms choose prices simultaneously.
answer
firms choose prices simultaneously.
question
Suppose that the price of good x decreases. If the income effect is negative and larger in magnitude than the substitution effect. What can we say?
(a) None of the other answers are correct.
(b) Good x is a Giffen good.
(c) Good x is an inferior good.
(d) Good x is a normal good.
(a) None of the other answers are correct.
(b) Good x is a Giffen good.
(c) Good x is an inferior good.
(d) Good x is a normal good.
answer
b) Good x is a Giffen good.
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