The average product of labor can be illustrated geometrically as the:
a. slope of the total product curve with respect to labor.
b. slope of the total product curve with respect to capital.
c. slope of a chord from the origin out to the total product curve at the specified level of
labor.
d. inverse of the slope of a chord from the origin out to the total product curve at the
specified level of labor.
e. slope of the total product curve with respect to labor divided by the slope of the total
product curve with respect to capital.
The market demand curve shows the quantity of a good or service that:
a. households would sell at various prices.
b. households would buy at various outputs.
c. firms would sell at various prices.
d. firms would buy at various prices.
e. households would buy at various prices.
If Y = (10 ” X 2)1/2, then dY/dX is:
a. “X(10 ” X 2) “1/2.
b. 1/2 (10 ” X 2) “1/2.
c. “X(10 ” X 2)1/2.
d. 1/2(10 ” X 2) “1/2.
e. none of the above.
The signaling model of education would be ineffective if:
a. skills learned in school were useful in employment and could be effectively tested.
b. the costs of acquiring education were equal for individuals of different abilities.
c. individuals could not identify their own abilities.
d. b and c.
e. all of the above.
A simple, idealized representation of the real world is called a(n):
a. function.
b. illustration.
c. equation.
d. diagram.
e. model.
Whenever average profit is declining with increases in output, marginal
a. revenue is less than marginal cost.
b. revenue is greater than marginal cost.
c. revenue is equal to marginal cost.
d. profit is less than average profit.
e. profit is negative.
Suppose that firm A finds itself facing the following payoff matrix in its rivalry with
firm B:
A threatens to play strategy W. This threat is:
a. credible because the Nash equilibrium occurs where A plays W and B plays Z.
b. credible because the joint optimal solution occurs where A plays W and B plays Z.
c. not credible because A‘s dominant strategy is to play X.
d. credible because A‘s dominant strategy is to play W.
e. not credible because B will never play strategy Z.
Duopolists A and B face the following demand curves: QA = 100 ” 2PA + 5PB and QB =
120 ” 3PB + 4PA. If both firms have zero marginal cost, what are the profit-maximizing
prices and quantities?
a. PA = 300, QA = 600, PB = 220, QB = 660.
b. PA = 200, QA = 400, PB = 200, QB = 400.
c. PA = 200, QA = 700, PB = 200, QB = 320.
d. PA = 300, QA = 750, PB = 250, QB = 570.
e. PA = 300, QA = 1,250, PB = 350, QB = 270.
Gliberace’s Fashion Accessories of Las Vegas produces gemstone-encrusted formal
wear for sale in Los Angeles and San Francisco subject to total cost TC = 100 + 5(QLA
+ QSF). Demand for Gliberace’s stones in the two cities is given by QLA = 70 ” 2PLA
and QSF = 55 ” PSF. If Gliberace price discriminates between the two cities, what will
its maximum profits be?
a. $750.
b. $825.
c. $1,075.
d. $975.
e. $1,175.
If Hilltop Turf Farm’s total cost of producing acres of sod is TC = 0.2Q2 + 120Q +
5,000, the marginal cost of producing the 50th acre of sod is:
a. $110.
b. $120.
c. $130.
d. $140.
e. $150.
When Pan United Airlines gives a $400 fare discount to persons with student IDs, they
are practicing:
a. first-degree price discrimination.
b. second-degree price discrimination.
c. third-degree price discrimination.
d. markup pricing.
e. tying.
If Y = 12 ” 6X + 3X3, then d2Y/dX2 is:
a. “6 + 9X 2.
b. 9X.
c. “6 + 18X 2.
d. 18X.
e. none of the above.
The vacancy rates for commercial office space in 2001 for selected cities are given in
the following table. What is the intercept coefficient estimate a of the regression of the
vacancy rate downtown as a function of the vacancy rate in the suburbs?
a. 5.0.
b. 16.0.
c. 14.0.
d. 18.0.
e. 7.5.
Suppose duopolists in the market for spring water share a market demand curve given
by P = 50 ” 0.02Q, where P is the price per gallon and Q is thousands of gallons of
water per day. The marginal cost of producing water is near zero for both firms. If firm
A produces zero, firm B‘s best response is producing:
a. 0 gallons of water per day.
b. 48 gallons of water per day.
c. 833 gallons of water per day.
d. 1,250 gallons of water per day.
e. 2,500 gallons of water per day.
The per-week demand for use of the Golden Gate Bridge in San Francisco is P = 12 ”
0.15Q during peak traffic periods and P = 9 ” 0.1Q during off-peak hours, where Q is
the number of cars crossing the bridge in thousands and P is the toll in dollars. If the
marginal congestion cost of using the bridge is MC = 5 + 0.2Q, what is the optimal
off-peak load toll for crossing the bridge?
a. 6.5.
b. 8.0.
c. 8.7.
d. 9.9.
e. 10.6.
Use the following profit function (per worker) for the Blue Delta Faucet Company to
answer this question.
P(e) = 40e ” (2e2 + 100)
Note that P = firm profits and e = worker-hours per day. Assume that effort is observed
perfectly. What is the profit-maximizing level of effort for the firm to set for workers?
a. There is no effort level that maximizes profits in this case.
b. 3.16 hours per day.
c. 8 hours per day.
d. 10 hours per day.
e. 12 hours per day.
The Supreme Court case that reestablished sheer size as a violation per se of the
antitrust laws was the:
a. Alcoa case.
b. Standard Oil case.
c. Von’s Grocery case.
d. Brown Shoe case.
e. IBM case.
Consider the following decision tree. This tree illustrates hypothetical payoffs to
General Mills (GM) and Quaker Oats (Q) if they engage in a price war.
If GM cuts prices, the greatest potential gain is:
a. $5 million per year.
b. $10 million per year.
c. $2 million per year.
d. $3 million per year.
e. none of the above.
Which of the following is an example of an ascending-bid auction?
a. Sealed-bid auction.
b. Japanese auction.
c. Dutch auction.
d. Vickrey auction.
e. Rabbit auction.
The winner’s curse is an issue only when:
a. an auction is conducted by sealed bid.
b. an auction is an increasing value auction.
c. an auction is a decreasing bid auction.
d. the true value of the good or service being auctioned is unknown.
e. bidders are able to collude.
The following diagram represents the market for paperback books. In the market for
paperback books, total surplus is:
a. $15.00.
b. $30.00.
c. $112.50.
d. $225.00.
e. None of the above.
Good drivers have a 20% chance, and bad drivers have a 50% chance, of getting into an
accident. A car is worth $900, and an accident would reduce its value to $400. Both
types of drivers have utility U = (car value)0.5. What is a bad driver’s expected utility
without insurance?
a. 20
b. 25
c. 28
d. 30
e. None of the above.
Given the following payoff matrix, who has a dominant strategy?
a. It depends on what the other player does.
b. Both players have it.
c. Neither player has it.
d. A does; B doesn”t.
e. B does; A doesn”t.
Campbell’s sells used trailers, U, and new trailers, N. Its profits are given by p = 100N +
68U ” 5N2 ” 5U2 ” 2NU. The profit-maximizing combination of trailers for Campbell’s
is:
a. N = 9 and U = 5.
b. N = 7 and U = 7.
c. N = 5 and U = 9.
d. N = 13 and U = 0.
e. N = 9 and U = 9.
If the profit-maximizing markup price is marginal cost times 2, the elasticity of demand
must be:
a. “0.
b. “1/2.
c. “1.
d. “4/3.
e. “2.
Average variable cost is equal to the:
a. change in total variable cost divided by the change in output levels.
b. total variable cost divided by the level of output.
c. marginal cost divided by the average product of the variable input.
d. marginal cost divided by the marginal product of the variable input.
e. total variable cost divided by the change in output levels.
The reservation prices, in dollars, for three classes of demanders (A, B, and C) for two
restaurants (1 and 2) are given in the following table. What is the maximum revenue
that can be generated by setting a separate price for each restaurant?
a. $49.
b. $45.
c. $36.
d. $84.
e. $60.
Profit-maximizing cartels allocate sales according to:
a. precartel sales.
b. potential to cheat on the cartel.
c. geographic location.
d. quantities where all firms’ marginal revenues are equal.
e. quantities where all firms’ marginal costs are equal.
Trudeau’s Body Shop incurs total costs given by TC = 2,400 + 100Q. If the price it
charges for a paint job is $120, what is its break-even level of output?
a. 20 paint jobs.
b. 40 paint jobs.
c. 60 paint jobs.
d. 90 paint jobs.
e. 120 paint jobs.
When an electrical utility charges higher prices during the day than at night, it is
practicing:
a. peak load pricing.
b. first-degree price discrimination.
c. second-degree price discrimination.
d. third-degree price discrimination.
e. fourth-degree price discrimination.
When consumers can purchase a set of goods as a bundle or separately, then the seller is
engaging in:
a. simple bundling.
b. complex bundling.
c. performance bundling.
d. mixed bundling.
e. engaged bundling.
The antitrust law that made certain specified practices that tend to reduce competition
or create monopoly illegal was the:
a. Sherman Act.
b. Clayton Act.
c. Federal Trade Commission Act.
d. Robinson-Patman Act.
e. Celler-Kefauver Act.