Which of the following is true about where a profit-maximizing monopoly will produce
on a linear demand curve when it has positive marginal costs?
A. It will produce output on the inelastic portion of the demand curve.
B. It will produce output where MR < 0
C. It will produce output where MR = 0
D. It will produce output on the elastic portion of the demand curve.
A profit-sharing pay scheme:
A. increases both productivity and profits.
B. decreases productivity but increases profits.
C. increases productivity but decreases profits.
D. decreases both productivity and profits.
In perfect competition, which is NOT true?
A. Every firm has a small but perceivable market power.
B. There are a large number of firms.
C. Firms are price-takers.
D. Firms produce homogenous goods.
Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm
1s marginal cost:
A. firm 1 will increase its output.
B. firm 2 will lose market share.
C. firm 1 will enjoy higher profits.
D. None of the statements is correct.
You are considering entering a market serviced by a monopolist. You currently earn $0
economic profits, while the monopolist earns $5. If you enter the market and the
monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If
the monopolist doesnt engage in a price war, you will each earn profits of $2.
a. Write out the extensive form of the above game.
b. There are two Nash equilibria for the game. What are they?
c. Is there a subgame perfect equilibrium? Explain.
d. If you were the potential entrant, would you enter? Explain why or why not.
Total product begins to fall when:
A. Marginal product is maximized.
B. Average product is below zero.
C. Average product is negative.
D. Marginal product is zero.
Which curve(s) does the marginal cost curve intersect at the (their) minimum point?
A. Average total cost curve
B. Average fixed cost curve
C. Average variable cost curve
D. Average total cost curve and average variable cost curve
You are the manager of a monopolistically competitive firm. The present demand curve
you face is P = 100 – 4Q. Your cost function is C(Q) = 50 + 8.5Q2.a. What level of
output should you choose to maximize profits?b. What price should you charge?c. What
will happen in your market in the long run? Explain.
Economics:
A. exists because of scarcity.
B. is not related to decision making.
C. is the science of the rich.
D. has nothing to do with the allocation of resources.
Suppose a consumer with an income of $100 is faced with Px = 1 and Py = 1/ What is
the market rate of substitution between good X (horizontal axis) and good Y (vertical
axis)?
A. 0.50
B. -1.0
C. -2.0
D. -4.0
A monopolist earns $80 million annually and will maintain that level of profit
indefinitely, provided no other firm enters the market. If another firm successfully
enters the market, the incumbents profits remain at $80 million the first period, but fall
to $35 million annually thereafter. The opportunity cost of funds is 20 percent, and
profits in each period are realized at the beginning of each period. If the monopolist can
earn $45 million indefinitely by limit pricing, should it do so?
A. Yes, it will earn $225 million in present value if it does this.
B. Yes, it will earn $270 million in present value if it does this.
C. No, it will earn $225 million in present value if it does this.
D. No, it will earn $270 million in present value if it does this.
You are a hotel manager and you are considering four projects that yield different
payoffs, depending upon whether there is an economic boom or a recession. The
potential payoffs and corresponding payoffs are summarized in the following table.
The variance in the returns of project B is:
A. 900
B. 225
C. 0
D. 1,600