Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3,
and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4).
Table 12-1
If firm A uses the maximin criterion, which strategy will it choose?
a. A1
b. A2
c. A3
d. A4
Critics of the huge net returns on, for example, oil production will claim that the returns
are
a. interest on the capital investment.
b. rents on a natural resource.
c. profits on entrepreneurial activity.
d. exorbitant and should be taxed away.
In a mixed economy, there is some public influence over the workings of free markets.
a. True
b. False
At equilibrium, the market will clear, with no surpluses or shortages occurring.
a. True
b. False
The issue of bonds in corporate financing
a. is cheaper than stocks in the long run to the issuer.
b. is riskier than stocks to the issuer.
c. commits the issuer to make fixed annual payments even if profits are negative.
d. All of the above are correct.
When consumers or businessmen stop collecting information to make decisions at the
point where marginal cost of data collection equals the marginal utility of the data,
economists would call the decisions based on existing data
a. perfect decisions.
b. optimally imperfect decisions.
c. joint decisions.
d. rent seeking.
Which of the following is an example of an indirect tax?
a. value-added tax
b. income tax
c. inheritance tax
d. head tax
A natural monopoly occurs when a single firm can produce the entire output of the
market at a lower average cost than could many firms.
a. True
b. False
Voluntary exchange requires that there must be mutual gain.
a. True
b. False
Specialization permits larger outputs and offers economies of large-scale production.
a. True
b. False
Only economists and other ‘social” scientists have areas of dispute within their
disciplines.
a. True
b. False
Loopholes reduce the efficiency of the tax system.
a. True
b. False
A policy of marginal-cost pricing will ensure that many regulated industries will lose
money.
a. True
b. False
Where marginal cost is less than average cost,
a. opportunity cost must have been excluded from the calculation of marginal cost.
b. marginal cost must be falling.
c. marginal cost must be rising.
d. marginal cost may be rising, falling, or constant.
While demand shifts have an effect on equilibrium price and quantity, supply shifts
have no such effect.
a. True
b. False
Everything else equal, the AC curve will shift downward if
a. input prices rise.
b. input MPPs rise.
c. output rises.
d. output falls.
From 2012-2013, which of the following countries increased its expenditures by more
than 10%?
a. China
b. Germany
c. Japan
d. the U.S.
If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent
drop in quantity demanded.
a. True
b. False
The Rand Corporation estimates that the external costs imposed by alcohol
consumption (for example, deaths caused by drunk drivers) to be 48 cents per ounce
consumed. Taxes on alcohol amount to 23 cents per ounce consumed. This information
suggests: (i) alcohol is overconsumed; (ii) alcohol taxes should be raised. Which of
these statements is correct?
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii
A union acts like a monopoly seller of labor.
a. True
b. False