In the presence of large sunk costs, which of the following market structures generally
leads to the highest price?
A. Stackelberg
B. Cournot
C. Bertrand
D. Monopoly
Nonrivalry, as it relates to public goods, means that:
A. consumer rivalry does not exist in this market.
B. producer rivalry does not exist in this market.
C. consumer-producer rivalry does not exist in this market.
D. government-producer rivalry does not exist in this market.
Which cost measures the cost to society of producing a good?
A. Internal cost
B. External cost
C. Social cost
D. External cost and social cost
Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 –
2Q. The cost function for each firm is C(Q) = 4Q. In equilibrium, the deadweight loss
is:
A. $128.
B. $256.
C. $384.
D. $512.
Management and a labor union are bargaining over how much of a $50 surplus to give
to the union. The $50 is divisible up to one cent. The players have one shot to reach an
agreement. Management has the ability to announce what it wants first, and then the
labor union can accept or reject the offer. Both players get zero if the total amounts
asked for exceed $50. Which of the following is a Nash equilibrium?
A. Management requests $50 and the labor union accepts $0.
B. Management requests $35 and the labor union accepts $10.
C. Management requests $20 and the labor union accepts $20.
D. Management requests $25 and the labor union accepts $10.
Consumers spend a lot more time searching for good bargains during recessions
because:
A. goods are more expensive during recessions and hence expected benefits of a search
are higher.
B. in recessions, many individuals are out of work, which lowers their opportunity cost
of time.
C. goods are more expensive during recessions and hence expected benefits of a search
are higher and in recessions, many individuals are out of work, which lowers their
opportunity cost of time.
D. None of the statements is correct.
Which of the following occurs as firm size grows?
A. A decrease in the number of managers needed.
B. A decrease in transaction costs.
C. A loss of opportunity cost.
D. Administrative and bureaucratic costs rise at an increasing rate.
Long-term contracts are generally preferable to:
A. spot markets.
B. short-term contracts.
C. vertical integration.
D. None of the statements is correct.
If income increases, the budget line:
A. shifts to the right.
B. shifts to the left.
C. rotates clockwise.
D. rotates counterclockwise.
Suppose the production function is given by Q = 4K + 6L. What is the average product
of capital when 10 units of capital and 5 units of labor are employed?
A. 14
B. 10
C. 7
D. 5