question

Which of the following is the best alternative way to describe scarcity?

answer

limited resources

question

The main implication of scarcity is that

answer

decision-makers face trade-offs

question

For a rational buyer, the reservation price (RP) measures the

answer

maximum price the buyer is willing to pay for an incremental amount of a good, product, or service

question

The difference between the buyer's reservation price and the actual unit price of a transaction is referred to as

answer

consumer surplus

question

The lowest price at which quantity demanded equals 0 is referred to as the

answer

choke price

question

Consider the market demand function

D(p) = 100 - 4p

Which of the following is the corresponding inverse demand function?

D(p) = 100 - 4p

Which of the following is the corresponding inverse demand function?

answer

p(q) = 25 - 0.25q

question

Which of the following is the best definition for the price elasticity of demand?

answer

the percentage change in quantity demanded from an infinitesimally small percentage increase in the price

question

Consider the demand function:

D(p) = 150 - 12p.

What is the elasticity of demand at p = 10?

D(p) = 150 - 12p.

What is the elasticity of demand at p = 10?

answer

4 and -4

question

Suppose a firm has total cost function C(q)=1000+10q+3q2. Which of the following is the firm's marginal cost function?

answer

MC(q)=10+6q

question

If marginal cost increases as q increases, then the firm exhibits

answer

decreasing returns to scale

question

For a monopolist who wants to maximize profit, the key tradeoff it faces is that increasing its price leads to

answer

higher margin, but lower volume

question

Given a linear demand curve,

p(q) = a - bq

where a and b are constant parameters, the marginal revenue curve is given by

p(q) = a - bq

where a and b are constant parameters, the marginal revenue curve is given by

answer

MR(q) = a - 2bq

question

If Firm A's Lerner Index is 0.5, while Firm B's Lerner Index is 0.25, we can conclude that Firm B exercises a greater degree of market power than does Firm A.

answer

False

question

The marginal rate of technical substitution captures

answer

the rate at which one input can be decreased if the amount of the other input used is increased by a marginal (incremental) amount, while maintaining the same level of production

question

Consider the production function

f(K,L)=2.5K+10L

Which of the following is (the magnitude of) the slope of the Isoquant with K on the vertical axis and L on the horizontal axis?

f(K,L)=2.5K+10L

Which of the following is (the magnitude of) the slope of the Isoquant with K on the vertical axis and L on the horizontal axis?

answer

4

question

Consider the production function

f(K,L)=K2L0.5

Which of the following is the marginal rate of technical substitution of labor for capital for this production function?

f(K,L)=K2L0.5

Which of the following is the marginal rate of technical substitution of labor for capital for this production function?

answer

K/4L

question

Suppose the inverse demand equation in the market for a monopolist's product is given by p(q) = 45 - 0.5q

and suppose the monopolist maximizes profit by setting a price p = 35 and selling the quantity q = 20.

Calculate the total consumer surplus generated in the market.

and suppose the monopolist maximizes profit by setting a price p = 35 and selling the quantity q = 20.

Calculate the total consumer surplus generated in the market.

answer

100

question

Suppose a monopolist has the production function f(K,L)=3K+Land can purchase any amount of capital K at the per unit rent r=10 and any amount of labor L at the per unit wage w=5.

From this information, in order to produce q=12 units of output at minimum cost, the firm should use units of ____ capital and ____ units of labor.

From this information, in order to produce q=12 units of output at minimum cost, the firm should use units of ____ capital and ____ units of labor.

answer

4 and 0

question

According to the equal marginal principle, a firm with an imperfect substitutes production function minimizes cost by choosing the combination of inputs at which

answer

marginal product per dollar spent on each input is equalized