Which of the following cases violates the property of transitivity?
A. A B, B C, A C.
B. A B, B C, A C.
C. A B, B C, C A.
D. None of the statements violates the transitivity property.
Suppose the growth rate of the firm’s profit is 7 percent, the interest rate is 9 percent,
and the current profits of the firm are $60 million. What is the value of the firm?
A. $289.4 million
B. $3,270 million
C. $4,480.6 million
D. None of the statements associated with this question are correct.
Which of the following statements is NOT correct about monopoly?
A. A monopolist generally faces a downward-sloping demand curve.
B. Monopolists always make positive profits in the long run.
C. A monopoly may make negative profits in the short run.
D. There is no close substitute for a monopoly’s product.
If the price of good X becomes lower, then the level of consumer surplus becomes
A. lower.
B. higher.
C. unchanged.
D. lower in the short-run but higher in the long run.
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 expected value of project A is:
A. $5.
B. $10.
C. $20.
D. None of the statements is correct.
The production function is Q = K.4 L.6. The marginal rate of technical substitution is:
A. 3/2 K-1 L.
B. K-1 L-1.
C. 3/2 K L-1.
D. K.6 L-.4.
A manager is attempting to assess the probability of a recession ending in the next six
months and its impact on expected profitability. The manager believes there is a 75
percent chance the recession will end in six months and profits will return to $400
million. However, there is a 25 percent chance the recession will not end in six months,
resulting in a $5 million loss. The expected profits over the next six months are:
A. $298.75 million.
B. $301.25 million.
C. $395 million.
D. $405 million.
The demand function recognizes that the quantity of a good consumed depends on:
A. the prices of other goods only.
B. price and supply shifters.
C. demand shifters and price.
D. demand shifters only.
A firm’s isoprofit curve is defined as the combinations of outputs produced by:
A. a firm that earns it the same level of profits.
B. all firms that yield the firm the same level of profit.
C. all firms that make total industry profits constant.
D. None of the answers is correct.
A single firm that charges the monopoly price in the market earns $800. If another firm
successfully enters the market, the incumbent’s profits fall to $500 and the entrant earns
$450. If the incumbent engages in limit pricing, its profits are $600. For what interest
rate, i, is limit pricing a profitable strategy for the incumbent?
A. i < 0.5
B. 0.5 < i < 1.0
C. 1.0 < i < 1.5
D. i > 1.5
As the interest rate increases, the opportunity cost of waiting to receive a future amount:
A. increases.
B. decreases.
C. may rise or fall.
D. remains the same.
Suppose that production for good X is characterized by the following production
function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental
rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average total cost of
using 81 units of capital and 9 units of labor is:
A. $5.
B. $75.
C. $80.
D. There is insufficient information to determine the average total costs.
It would be undesirable to reduce the executive’s compensation if her earnings are due
largely to:
A. a flat fee.
B. performance.
C. the owner’s demand.
D. the employee’s demand.
A price increase causes a consumer’s “real” income to:
A. increase.
B. decrease.
C. remain unchanged.
D. decrease or increase depending on the size of the price change.
A spot exchange involves a market where goods are bought and sold at a:
A. contracted market price.
B. prevailing market price.
C. predetermined market price.
D. post-determined market price.