The demand function
A. describes how much of good X will be purchased at the alternative price of good X,
given all the other variables being constant.
B. recognizes that the quantity of a good consumed depends on its price and demand
shifters.
C. shows the relationship between the quantity demanded of X and variables other than
its price.
D. does not include expectations.
In the game depicted below, firms 1 and 2 must independently decide whether to charge
high or low prices.
Which of the following are secure strategies for players 1 and 2, respectively?
A. (high price, high price)
B. (high price, low price)
C. (low price, high price)
D. (low price, low price)
You are the manager of a firm that sells its product in a competitive market at a price of
$60. Your firm’s cost function is C = 33 + 3Q2. The profit-maximizing output for your
firm is:
A. 3
B. 5
C. 6
D. 10
Which type of compensation mechanism works by threats?
A. Piece rate
B. Spot check
C. Revenue sharing
D. Profit sharing
The difference between a price decrease and an increase in income is that
A. A price decrease does not affect the consumption of other goods, while an increase in
income does.
B. An increase in income does not affect the slope of the budget line, while a decrease
in price does change the slope.
C. A price decrease decreases real income, while an increase in income increases real
income.
D. A price decrease leaves real income unchanged, while an increase in income
increases real income.
When the average cost curve lies above the entrant’s residual demand curve, an entrant:
A. can profitably enter the market.
B. cannot profitably enter the market.
C. is indifferent between entering and not entering the market.
D. lowers the incumbent’s average cost curve.
Which is the correct statement about the relationship between government and the
market?
A. Government should intervene on the consumers’ behalf.
B. Government should intervene on the producers’ behalf.
C. Government should not intervene on any party’s behalf.
D. Government often plays a role in disciplining the market process.
The property that implies that indifference curves are convex to the origin is:
A. more is better.
B. completeness.
C. transitivity.
D. diminishing marginal rate of substitution.
Inputs a manager may adjust in order to alter production are:
A. all factors.
B. variable factors.
C. long-run factors.
D. fixed factors.
An increase in the price of good X will have what effect on the budget line on a normal
X-Y graph?
A. A parallel outward shift of the line
B. An increase in the vertical intercept
C. A decrease in the horizontal intercept
D. A parallel inward shift of the line
In order to reduce the undesirable effects of moral hazard, an insurance company can:
A. introduce a deductible.
B. classify clients into different types according to their history.
C. reject the renewal of policies of those people with really bad records.
D. All of the statements associated with this question are correct.