Under limit pricing, the incumbent will produce:
A. more than the monopoly output and charge a price that is greater than the monopoly
price.
B. less than the monopoly output and charge a price that is greater than the monopoly
price.
C. more than the monopoly output and charge a price that is less than the monopoly
price.
D. less than the monopoly output and charge a price that is less than the monopoly
price.
Which of the following factors reduces the need for government involvement in the
marketplace?
A. The presence of externalities
B. The incentive to rent-seek
C. The need for public goods
D. Incomplete information
The domestic demand and supply for sugar are Qd = 40,000 – 200P and QSD = 10,000 +
300P. The foreign supply is QSF = 20,000 + 100P. Suppose an import quota of 5,000 is
imposed in the domestic market. How many units of sugar will domestic producers
supply after the quota is imposed?
A. 20,000
B. 25,000
C. 30,000
D. 35,000
Which of the following is a correct statement?
A. The lower the marginal cost, the higher the profit-maximizing price.
B. The lower the average cost, the higher the profit-maximizing price.
C. The less elastic the demand, the higher the profit-maximizing markup.
D. The more elastic the demand, the higher the profit-maximizing markup.
What are the advantages to a firm of selling gift certificates?
A. Greater quantity sold if your good is a normal good.
B. Greater quantity sold if your good is an inferior good.
C. Reduced strain on the refund department and greater quantity sold if your good is a
normal good.
D. Reduced strain on the refund department and greater quantity sold if your good is an
inferior good.
You are the bidder in an independent private values auction. Each bidder perceives that
valuations are evenly distributed between $0 and $1,000. Your own valuation of the
item is $900. Determine your optimal bidding strategy in a first-price, sealed-bid
auction with:a. Two bidders.b. Three bidders.c. 20 bidders.
Other things equal, the greater the interest rate:
A. the lower the NPV.
B. the higher the NPV.
C. the higher the PV.
D. None of the statements associated with this question are correct.
Suppose you are the marketing manager for Fruit of the Loom. An individuals inverse
demand for Fruit of the Loom womens underwear is estimated to be P = 25 – 3Q (in
cents). If the cost to Fruit of the Loom to produce an item of womens underwear is
C(Q) = 1 + 4Q (in cents), compute the number of womens underwear items that should
be packaged together.
A. 1
B. 3
C. 4
D. 7
If shoes and socks are complements and both are normal goods, show graphically what
would happen to the consumption of shoes and socks if:
a. the price of shoes decreased.
b. consumer incomes increased.
Some firms find conglomerate mergers advantageous since they permit firms to:
A. take advantage of economies of scope.
B. take advantage of economies of scale.
C. pool cash flows resulting from products with low and high periods.
D. reduce input costs.
The production function for good X exhibited in the table below is for the:
A. long run, since K is the fixed input.
B. short run, since L is the fixed input.
C. long run, since K is the variable input.
D. short run, since L is the variable input.
If demand increases, then the
A. demand curve shifts to the left.
B. demand curve shifts to the right.
C. equilibrium price goes down.
D. equilibrium quantity goes down.
Two identical firms compete as a Cournot duopoly. The inverse market demand they
face is P = 80 – 4Q. The cost function for each firm is C(Q) = 8Q. The price charged in
this market will be:
A. $12.
B. $32.
C. $48.
D. $56.
You are the manager of a monopolistically competitive firm. The inverse demand for
your product is given by P = 200 – 10Q and your marginal cost is MC = 5 + Q.
a. What is the profit-maximizing level of output?
b. What is the profit-maximizing price?
c. What are the maximum profits?
d. What do you expect to happen to the demand for your product in the long run?
Explain.
With a linear production function there is a:
A. perfect complementary relationship between all inputs.
B. perfect substitutable relationship between all inputs.
C. fixed-proportion relationship between all inputs.
D. variable-proportion relationship between all inputs.
The first-order conditions for maximizing profits, € = P x F(K, L) – wL – rK, are:
A.
B. P x MPK – r = 0 and P x MPL – w = 0.
C. VMPK = r and VMPL = w.
D. All of the answers are correct.
Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If
the wage rate is $5 and the price of capital is $2, then in order to minimize costs the
firm should use:
A. more capital and less labor.
B. more labor and less capital.
C. equal amounts of labor and capital.
D. None of the statements is correct.
As more firms enter an industry:
A. accounting profits increase.
B. economic profits decrease.
C. prices rise.
D. None of the statements associated with this question are correct.