A cartel price will be established at the quantity where
A) total cost equals the industry total revenue.
B) average cost equals the industry revenue.
C) the sum of the members’ marginal costs equals industry marginal revenue.
D) marginal cost equals industry price.
The demand curve, which assumes that competitors will follow price decreases but not
price increases, is called
A) an industry demand curve.
B) an inelastic demand curve.
C) a kinked demand curve.
D) a competitive demand curve.
A movement along a demand curve may be caused by a change in
A) the non-price determinants of demand.
B) the change in consumer expectations.
C) the change in demand.
D) the change in supply.
Which indicator shows how well a regression line fits through the scatter of data
points?
A) F-test
B) R2
C) t-test
D) Durbin-Watson test
When the exponents of a Cobb-Douglas production function sum to more than 1, the
function exhibits
A) constant returns.
B) increasing returns.
C) decreasing returns.
D) either increasing or decreasing returns.
Which of the following instances will total revenue or receipts decline?
A) Price rises and demand is inelastic.
B) Price falls and demand is elastic.
C) Price rises and demand is elastic.
D) Price falls and demand is unit elastic.
A drawback in the use of sensitivity analysis in capital budgeting decisions is that it
doesn’t
A) permit evaluating alternative outcomes.
B) provide estimates of net present values.
C) assign probability values to outcomes.
D) consider different possible rates of discount.
Which level indicates the point of maximum economic efficiency?
A) lowest point on AC curve
B) lowest point on AVC curve
C) lowest point on MC curve
D) None of the above
Two goods are ________ if the quantity consumed of one increases when the price of
the other decreases.
A) normal
B) superior
C) complementary
D) substitute
A normal profit is
A) revenues minus opportunity cost of zero.
B) revenues minus accounting cost of zero.
C) a zero accounting profit.
D) revenues minus accounting and opportunity cost of zero.
The Herfindahl-Hirschman (HH) Index is used to
A) measure the degree of nonprice competition.
B) measure the degree of market concentration in an industry.
C) measure the extent of price leadership.
D) None of the above
Second-degree price discrimination occurs when
A) different prices are charged for different blocks of services.
B) different groups of buyers are charged different prices based on their price
elasticities of demand.
C) a different price is charged for each amount of a product purchased.
D) None of the above
In long-run equilibrium a perfectly competitive firm will operate where the price is
A) greater than MR but equal to MC and minimum ATC.
B) greater than MR and MC, but equal to minimum ATC.
C) greater than MC and minimum ATC, but equal to MR.
D) equal to MR, MC and minimum to ATC.
Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity
demanded falls from 10 units to 6 units, the coefficient of elasticity of demand for beans
using the arc elasticity approach is
A) -1.33.
B) -0.75.
C) -0.4.
D) -0.25.
Firms in monopolistic competition would
A) persistently realize economic profits in both the short and long run.
B) may realize economic profits in the long run and normal profits in the short run.
C) tend to incur persistent losses in both the short and long run.
D) tend to realize economic profits in the short run and normal profits in the long run.
Which of the following is not an argument in favor of the globalization of business?
A) More efficient use of resources lowers operating costs and selling prices.
B) More products are made available and new markets are opened.
C) Economic and political security are enhanced.
D) Technology transfers improve living standards in poorer countries.
Two projects have the following NPVs and standard deviations:
A person who selects project A over project B is
A) risk seeking.
B) risk indifferent.
C) risk averse.
D) None of the above
When mark-up equals 50% and AC = MC, then demand elasticity will be
A) -1.
B) -1.5.
C) -2.
D) -3.
Quantitative forecasting that projects past data without explaining the reasons for future
trends is called
A) scientific forecasting.
B) dumb forecasting.
C) empirical forecasting.
D) nave forecasting.
Which of the following represents a way in which multinational corporations can
protect themselves from exchange rate risks?
A) forward markets
B) futures markets
C) currency options
D) All of the above
In estimating short-run cost functions, one must adjust for
A) price level changes.
B) accounting procedure changes.
C) product heterogeneity.
D) All of the above
If a price of corn is $3.00 a bushel, 5,000 bushels would be demanded. If the price rises
to $4.00 a bushel, 4,000 bushels would be demanded.
a. What is the (arc) price elasticity of demand?
b. Based on this answer, if the price of corn rose to $5.00 a bushel, what would be the
demand for corn?
c. If the price of corn decreased from $4.00 to $3.00 a bushel, what would be the
change in total revenue for sellers of corn?
d. If the price of corn increased from $4.00 to $5.00 a bushel, what would be the change
in total revenue for sellers of corn?
A good’s Demand Curve is QD = 50 – 2P, and its Supply Curve is QS = 40 + P.
a. When P = $10, what is the difference, if any, between QD and QS?
b. When P = $2, what is the difference, if any, between QD and QS?
c. What are the equilibrium values of P and Q?
A firm has two plants, one in the United States and one in Mexico, and it cannot change
the size of the plants or the amount of capital equipment. The wage in Mexico is $5.
The wage in the U.S. is $20. Given current employment, the marginal product of the
last worker in Mexico is 100, and the marginal product of the last worker in the U.S. is
500.
a. Is the firm maximizing output relative to its labor cost? Show how you know.
b. If it is not, what should the firm do?
A firm in an oligopolistic industry has the following demand and total cost equations:
P = 600 – 20Q and TC = 700 + 160Q + 15Q2
Calculate:
a. quantity at which profit is maximized
b. maximum profit
c. quantity at which revenue is maximized
d. maximum revenue
e. maximum quantity at which profit will be at least $580
f. maximum revenue at which profit will be at least $580
If total cost equals $2,000 and quantity produced is 100 units, then
A) fixed cost is $200 and average variable cost is $18.
B) fixed cost is $600 and average variable cost is $14.
C) fixed cost is $500 and marginal cost is $15.
D) Either A or B can be correct.
Which of the following holds true?
A) When the Marginal Product (MP) is rising, Marginal cost (MC) is rising; and when
MP is falling, MC is falling.
B) When MP is rising, MC is falling, and when MP is falling, MC is rising.
C) When MP is rising, MC is constant, and when MP is falling, MC is negative.
D) There is no relationship between MP and MC.
A monopolist’s demand function is P = 1624 – 4Q, and its total cost function is
TC = 22,000 + 24Q -4Q2 + 1/3 Q3, where Q is output produced and sold.
a. At what level of output and sales (Q) and price (P) will total profits be maximized?
b. At what level of output and sales (Q) and price (P) will total revenue be maximized?
c. At what price (P) should the monopolist shut down?
Goals which are concerned with creating and maintaining employee and customer
satisfaction and social responsibility are referred to as ________ objectives.
A) social
B) noneconomic
C) welfare
D) public relations
Answer the following questions on the basis of the following regression equation.
(Standard errors in parentheses, n = 200.)
Q = -6,500 – 100PA + 50PB + .3I + .2A; R2 =.12, (2,500) (50) (30) (.1) (.08)
where Q is the quantity demanded of good A; PA= $10, price of good A; PB= $8, price
of good B; I = $12,000, per capita income; and A = $20,000, monthly advertising
expenditures.
Which of the following cannot be determined on the basis of the above regression
results?
A) the degree of price elasticity of good B
B) whether or not good A is “normal”
C) the degree of competition between A and B
D) All of the above can be determined.
When a firm increased its output by one unit, its AFC decreased. This is an indication
that
A) the law of diminishing returns has taken effect.
B) MC < AFC.
C) AVC < AFC.
D) the firm is spreading out its total fixed cost.
For each of the following sets of supply and demand curves, calculate equilibrium price
and quantity.
a. QD = 1000 – P; QS = P
b. QD = 1500 – 2P; QS = 100 + 2P
c. QD = 2000 – 3P; QS = -300 + 3P
If a firm decreases the price of a good and total revenue decreases, then
A) the demand for this good is price elastic.
B) the demand for this good is price inelastic.
C) the cross elasticity is negative.
D) the income elasticity is less than 1.
A firm earns a normal profit when its total revenues just offset both the ________ cost
and ________ cost.
A) accounting; opportunity
B) accounting; replacement
C) historical; replacement
D) explicit; accounting
The demand for organically grown food is
A) increasing.
B) decreasing.
C) stagnant.
D) unpredictable.