Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing
stage, there exist:
A. economies of scope.
B. diseconomies of scope.
C. economies of scale.
D. diseconomies of scale.
Two firms compete in a Stackelberg fashion. If firm 2 is the leader, then:
A. firm 1 views the output of firm 2 as given.
B. firm 2 views the output of firm 1 as given.
C. Both firm 1 views the output of firm 2 as given and firm 2 views the output of firm 1
as given are correct.
D. None of the answers is correct.
Game theory suggests that, in the absence of patents, the privately motivated innovation
decisions of firms might lead to:
A. too little innovation.
B. too much innovation.
C. the socially efficient level of innovation.
D. None of the answers is correct.
What is the marginal net benefit associated with producing five units of the control
variable, Q (identify point F in the table)?
A. -100
B. -75
C. 0
D. 100
The industry elasticity of demand for good Y is -3, while the elasticity of demand for an
individual manufacturer of good Y is -12. Based on the Rothschild approach to
measuring market power, we conclude that:
A. 1/4, indicating there is significant monopoly power in this industry.
B. 1/4, indicating there is little monopoly power in this industry.
C. 4, indicating there is little monopoly power in this industry.
D. None of the answers are correct.
The recipe that defines the maximum amount of output that can be produced with K
units of capital and L units of labor is the:
A. Production function.
B. Technological constraint.
C. Research and development schedule.
D. Total product.
Under the merger guidelines written by the DOJ and FTC, a merger may not be
challenged if:
A. there is significant foreign competition.
B. the firms involved have monetary problems.
C. there is an emergence of new technology.
D. All of the statements associated with this question are correct.
Which of the following is true about a lump-sum tariff?
A. Domestic firms’ marginal cost curves are shifted up by the amount of the lump-sum
tariff.
B. Foreign firms’ average cost curves are shifted up by the amount of the lump-sum
tariff.
C. Domestic firms’ average cost curves are shifted up by the amount of the lump-sum
tariff.
D. Foreign firms’ marginal cost curves are shifted up by the amount of the lump-sum
tariff.
Suppose total benefits and total costs are given by B(Y) = 150Y – 10Y2 and C(Y) =
5Y2. Then marginal benefits are:
A. 150 – 20Y.
B. 150Y – 8Y2.
C. 15 – 4Y.
D. 5 – 20Y.
Which of the following profit functions exhibits a linear production function?
A. = P x K0.75L0.50 – 20L – 35K
B. = P x min(2L, 5K) – 20L – 35K
C. = P x (3K + 4L) – 20L – 35K
D. = P x (3K0.5 + 4L0.5)1/0.2 – 20L – 35K
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?
A. 40
B. 25
C. 50
D. 75