Which of the following is an example of monopoly?
A. Shoe industry in the United States
B. Local utility industry in a small town
C. Newspaper industry in New York City
D. Bread industry in New York City
The inverse demand in a Cournot duopoly is P = a – b(Q1 + Q2), and costs are C1(Q1) =
c1Q1 and C2(Q2) = c2Q2. The government has imposed a per-unit tax of $t on each unit
sold by each firm. The tax revenue is:
A. t times the total output of the two firms should there be no sales tax.
B. less than t times the total output of the two firms should there be no sales tax.
C. greater than t times the total output of the two firms should there be no sales tax.
D. None of the answers is correct.
The idea of improving cash flow by exploiting the cyclical nature of different product
lines is represented in:
A. vertical integration.
B. horizontal integration.
C. cointegration.
D. conglomerate integration.
Long-term contracts become shorter:
A. when specialized investment becomes less important.
B. when the exchange environment is less complex.
C. when spot markets work poorly.
D. when marginal costs are increasing.
Suppose that the demand for a monopolist’s product is estimated to be Qd = 100 – 2P
and its total costs are C(Q) = 10Q. Under first-degree price discrimination, the optimal
price(s), number of total units exchanged, profit, and consumer surplus are:
A. P = $30; Q = 40, = $800; CS = $400.
B. 10 =< P =< 100; Q = 80; = $1,600; CS = $1,600.
C. 10 =< P =< 50 Q = 80, = $1,600; CS = $0.
D. P = $30; Q = 40, = $600; CS = $0.
Suppose a monopoly faces an inverse demand curve of P = 6 – Q and has constant
marginal cost of 2. If the government is considering legislation that would regulate
price to the competitive level, what is the maximum amount the monopoly would spend
on (legal) lobbying activities designed to thwart the regulation?
A. $2
B. $4
C. $6
D. None of the answers are correct.
When the price of one good decreases, the associated substitution effect is represented
by a:
A. move from one indifference to a higher indifference curve since real income is now
higher.
B. move from one indifference to a lower indifference curve since real income is now
lower.
C. move along a given indifference curve holding real income constant.
D. move along a given indifference curve since real income increases.
Persuasive advertising influences demand by:
A. providing information about the availability of a product.
B. offering reduced prices for the product.
C. altering the underlying tastes of consumers.
D. none of the statements are correct.
Tom and Jack are the only two local gas stations. Although they have different constant
marginal costs, they both survive continued competition. Tom and Jack do NOT
constitute a:
A. Sweezy oligopoly.
B. Cournot oligopoly.
C. Stackelberg oligopoly.
D. Bertrand oligopoly.
Which of the following pricing strategies is NOT used in markets characterized by
intense price competition?
A. Price matching
B. Transfer pricing
C. Randomized pricing
D. Inducing brand loyalty
During spring break, students have an elasticity of demand for a trip to Cancun,
Mexico, of -4. How much should an airline charge students for a ticket if the price it
charges the general public is $420? Assume the general public has an elasticity of -2.
A. $210
B. $280
C. $160
D. $105
In perfect competition, which is NOT true?
A. Both concentration ratios and Rothschild indexes tend to be close to zero.
B. There are a large number of firms, and each is small relative to the entire market.
C. At least one firm has a perceptible impact on the market price.
D. Firms produce homogenous goods.
The Lerner index in the paper industry is 0.58. Based on this information, a firm
charging $3.25 per ream of paper should have a marginal cost of:
A. $0.
B. $1.365.
C. $1.885.
D. $3.25.