The long-run average cost curve defines the minimum average cost of producing
alternative levels of output, allowing for optimal selection of:
A. fixed factors of production.
B. variable factors of production.
C. all factors of production.
D. sunk cost factors of production.
Which of the following conditions is true when a producer minimizes the cost of
producing a given level of output?
A. The marginal product per dollar spent on all inputs is equal.
B. The MRTS is equal to the ratio of the quantity of inputs.
C. The marginal products of all inputs are equal.
D. The marginal product per dollar spent on all inputs is equal and the MRTS is equal to
the ratio of the quantity of inputs.
Suppose earnings are given by E = $60 + $7(24 – L), where E is earnings and L is the
hours of leisure. What is the price to the worker of consuming an additional hour of
leisure?
A. $24
B. $7
C. $12
D. $10
If a consumers income decreases, what will happen to the budget line?
A. It will shift outward.
B. It will become steeper.
C. It will become flatter.
D. It will shift inward.
Which of the following is(are) true?
A. Accounting costs generally understate economic costs.
B. Accounting profits generally overstate economic profits.
C. In the absence of any opportunity costs, accounting profits equal economic profits.
D. All of the statements associated with this question are correct.
When quantity demanded exceeds quantity supplied
A. there exists a surplus of a good.
B. the price tends to fall.
C. the price is below the equilibrium price.
D. there is no excess demand.
Consider a Stackelberg duopoly with the following inverse demand function: P = 100 –
2Q1 – 2Q2. The firms marginal costs are identical and are given by MCi(Qi) = ciQi.
Based on this information, the Stackelberg leaders marginal revenue function is:
A. MR(QL) = 50 – 2QL – 0.5cL.
B. MR(QL) = 50 – 2QL – 0.5cF.
C. MR(QF) = 100 – 2QF – 0.5cF.
D. MR(QF) = 100 – QF – 0.5cF.
A duopoly in which both firms have a Lerner index of monopoly power equal to 0 is
probably a:
A. Sweezy oligopoly.
B. Cournot oligopoly.
C. Stackelberg oligopoly.
D. Bertrand oligopoly.
If you advertise and your rival advertises, you each will earn $4 million in profits. If
neither of you advertises, you will each earn $10 million in profits. However, if one of
you advertises and the other does not, the firm that advertises will earn $1 million and
the non-advertising firm will earn $5 million. If you and your rival plan to be in
business for 10 years, then the Nash equilibrium is:
A. for each firm to advertise every year.
B. for neither firm to advertise in early years, but to advertise in later years.
C. for each firm to not advertise in any year.
D. for each firm to advertise in early years, but not advertise in later years.
Consider an auction with 1,000 risk-neutral bidders. It is known that these bidders have
affiliated values. Based on this information, we know the expected revenues for the
different auction types will be:
A. English > Second-price, sealed-bid > First-price, sealed-bid = Dutch.
B. English = Second-price, sealed-bid = First-price, sealed-bid = Dutch.
C. First-price, sealed-bid = Dutch > English > Second-price, sealed-bid.
D. First-price, sealed-bid > Second-price, sealed-bid > English > Dutch.
Which of the following is NOT true?
A. An extensive form representation usually provides more information than a
normal-form representation of a game.
B. A normal-form game is most useful for sequential-move games.
C. The notion of perfect equilibrium is more useful in analyzing extensive-form games
than normal-form games.
D. The notion of credible threats makes more sense in extensive-form representations
than in normal-form representations of a game.
You are a hotel manager 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.
Which of the following statements is true?
A. A risk-neutral manager will prefer project D.
B. A risk-averse manager will prefer project D.
C. A risk-loving manager will prefer project D.
D. All of the statements are correct.