Consider an auctioneer who is selling an item through an auction. It is known that the
25 risk-neutral bidders have affiliated values that are distributed between $0 and $500
million. Based on this information, the auction type that will maximize expected
revenue is:
A. English auction.
B. second-price, sealed-bid auction.
C. first-price, sealed-bid auction and Dutch auction.
D. English auction and second-price, seal-bid auction.
An increase in firm 1s marginal cost will cause:
A. an upward shift in firm 1s reaction function, resulting in a new Cournot equilibrium
where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
B. a downward shift in firm 1s reaction function, resulting in a new Cournot
equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher
quantity.
C. an upward shift in firm 2s reaction function, resulting in a new Cournot equilibrium
where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
D. a downward shift in firm 2s reaction function, resulting in a new Cournot
equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower
quantity.
The Leontief production function implies:
A. straight-line isoquants.
B. convex-shaped isoquants.
C. A positive MRTS.
D. L-shaped isoquants.
The maximum quantity of good X that is affordable is:
A. M/PY.
B. M/X.
C. M/PX.
D. PYY.
A price increase causes a consumers “real” income to:
A. decrease.
B. increase.
C. remain unchanged.
D. vary along the budget line.
In a market where two firms compete by setting quantity, the Cournot equilibrium has
which of the following characteristics?
A. The two firms reaction functions intersect.
B. There is no incentive for the two firms to collude.
C. The two firms isoprofit curves intersect one another at the highest point.
D. The two firms reaction functions intersect at the highest point where the two firms
isoprofit curves intersect one another.
Which type of compensation method does NOT involve a performance bonus?
A. Profit sharing
B. Revenue sharing
C. Piece rate
D. None of the answers are correct.
The lower the interest rate:
A. the greater the present value of a future amount.
B. the smaller the present value of a future amount.
C. the greater the level of inflation.
D. None of the statements associated with this question are correct.
As the manager of We Do It Right Construction, you need to make a decision on how
many homes to build in a new residential area. There is a 20 percent chance of a
recession, a 60 percent chance the economy will remain as it is, and a 20 percent chance
there will be an economic upturn. If a recession hits, your inverse demand curve for
new homes will be P = 100,000 – 4Q. If things remain as they are, your inverse demand
curve will be P = 115,000 – 3Q. If economic growth occurs, your inverse demand curve
will be P = 130,000 – 2Q. Your cost function in all three scenarios is C(Q) = 70,000 +
2Q + 0.5Q2. If you are risk neutral, how many homes will you start?
When a worker announces that he plans to quit, say next month, the “threat” of being
fired has no bite. The worker may find it in his interest to shirk. What can the manager
do to overcome this problem?
A. Fire the worker as soon as he announces his plans to quit.
B. Provide the worker some rewards for good work that extend beyond the termination
of employment with your firm.
C. Monitor the worker more often than usual and fire him when he is caught shirking.
D. Pay the worker some rewards when he announces his plan to quit.
Consider a two-good world, with commodities X and Y. If X is an inferior good, then an
increase in consumer income cannot:
A. decrease the demand for Y.
B. increase the demand for Y.
C. decrease the demand for X.
D. make the consumer better off.
Which of the following cost functions exhibits economies of scope when three (3) units
of good one and two (2) units of good two are produced?
A. C = 50 – 5Q1Q2 + 0.5Q1
2 + Q2
2.
B. C = 10 + 4Q1Q2 + Q1
2 + Q2
2.
C. C = 15 + 5Q1Q2 + 2Q1 + 4Q2.
D. C = 5 + Q1Q2 + Q1
2Q2
2.
Suppose P = 20 – 2Q is the market demand function for a local monopoly. The marginal
cost is 2Q. The firm currently uses a standard pricing strategy. Which of the following
will allow the firm to enhance the profits?
A. Engage in two-part pricing.
B. Engage in commodity bundling.
C. Engage in randomized pricing.
D. Engage in two-part pricing and engage in commodity bundling.
An increase in the marginal cost arising from a more complex specialized investment
environment will cause the optimal contract length to:
A. increase.
B. decrease.
C. remain constant.
D. either increase or decrease.
The higher the interest rate:
A. the greater the present value of a future amount.
B. the smaller the present value of a future amount.
C. the greater the level of inflation.
D. None of the statements associated with this question are correct.
A fair coin is flipped. You will be paid $1 when it is heads and penalized $1 otherwise.
What is the variance of the payoffs?
A. 0
B. 1
C. 0.50
D. 0.25