ECON E 78401

subject Type Homework Help
subject Pages 15
subject Words 2305
subject Authors Austan Goolsbee

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page-pf1
Suppose a firm's inverse demand curve is given by P = 160 " 4Q. Which of the
following statements is TRUE?
I. The firm's marginal revenue curve is given by MR = 160 " 8Q.
II. The firm's marginal revenue cannot be negative.
III. The firm's marginal revenue curve is given by MR = 40 " 0.50Q.
IV. When Q = 10, MR = $80.
A) I and II
B) I and IV
C) II and III
D) III only
In the supply and demand model, we assume that there are ______ buyers and ______
sellers in the market.
A) many; many
B) several; several
C) many; several
D) several; many
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In an identical-product Bertrand oligopoly, the market inverse demand curve is P = 100
" 0.5Q. Firm A's average cost and marginal cost are constant at $20; Firm B's average
cost and marginal cost are constant at $10. What is the equilibrium price in this market?
A) $10
B) $15
C) $20
D) $19.99
Table 12.21
(Table 12.21) In the table, payoffs represent profits in millions of dollars. Which of the
following statements is TRUE?
I. In a simultaneous game that is played only once, the Nash equilibria are (80, 100) and
(70, 40).
II. In a sequential game in which Player A moves first, the Nash equilibrium is (100,
90).
III. In a simultaneous game that is played only once, the dominated strategy for Player 1
is Middle.
A) I, II, and III
B) II and III
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C) I and III
D) I only
Which of the following are shortcomings of lab experiments?
I. People in lab experiments know that they are being studied, so they may behave
differently than usual.
II. The amount of money involved in lab experiments is small, which means the
participants do not stand to gain or lose much from their choices.
III. Many people in experiments are asked to do things that they have never done
before.
A) II only
B) I and II
C) III only
D) I, II, and III
Alumni donations to universities and colleges may at first appear ______, but further
examination reveals that they are motivated by ______.
A) self-interested; altruism
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B) self-interested; greed
C) altruistic; self-interest
D) altruistic; the sunk cost fallacy
Figure 6.1
(Figure 6.1) The average product at L = 2 and L = 8 are and respectively.
A) 2; 1.13
B) 0.5; 0.89.
C) 8; 72
D) 1.5; 0.5
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Table 12.10
(Table 12.10) The table shows the payoffs from the game rock-paper-scissors. Which of
the following statements is TRUE?
I. There is no pure-strategy Nash equilibrium.
II. The Nash equilibria are (Rock, Rock), (Paper, Paper), and (Scissors, Scissors).
III. The mixed-strategy Nash equilibrium is for each player to randomly select each
strategy one-third of the time.
A) II and III
B) I and III
C) III only
D) I and II
Figure 7.5
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(Figure 7.5) Which of the following statements is TRUE?
I. At point A, ATC > MC.
II. At point B, ATC = MC.
III. At point C, ATC < MC.
A) I and II
B) I, II, and III
C) III only
D) I only
The Affordable Care Act (aka Obamacare) mandates that everyone buy health insurance
or face a penalty. The rationale for this policy is to:
A) solve the adverse selection problem.
B) solve the moral hazard problem.
C) make sure that high-risk people pay higher premiums than low-risk people.
D) ensure that Medicare enrollees pay actuarially fair insurance premiums.
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Figure 9.10
(Figure 9.10) If the government regulates the price of this natural monopolist to achieve
a perfectly competitive output level, consumer surplus will change from ______ to
______.
A) $3,000; $2,500
B) $15,000; $75,350
C) $5,000; $11,000
D) $17,000; $54,600
Table 6.4
page-pf8
A) Q = 100KL
B) Q = 100K0.5L0.5
C) Q = 100K0.25L0.75
D) Q = 100K2L
Farmers can use their land to grow corn or cotton. Because of the increased demand for
moisture- wicking sportswear, the demand for cotton has decreased. What are the
general equilibrium effects in the market for corn and the market for cotton?
A) The price of cotton will fall from the decrease in demand, causing farmers to plant
less cotton. The decrease in the supply of cotton will raise cotton prices and cause the
demand for corn to rise.
B) The price of cotton will fall from the decrease in demand, causing farmers to plant
less cotton and more corn. The increase in the supply of corn will push down corn
prices.
C) The price of cotton will fall from the decrease in demand, causing farmers to plant
less corn. The decrease in the supply of corn will raise corn prices and cause the
demand for cotton to fall.
D) The price of cotton will rise from the decrease in demand, causing farmers to plant
more cotton and less corn. The decrease in the supply of corn will push up corn prices.
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Figure 8.19
(Figure 8.19) The graph represents three perfectly competitive firms. Which of the
following statements is TRUE?
I. In the long run, each firm will produce the same quantity of output.
II. Firm 1 is the highest-cost producer and Firm 3 is the lowest-cost producer.
III. Firm 3 will produce the most output in the long run.
A) II only
B) III only
C) II and III
D) I only
page-pfa
Behavioral economists find that people are ______; for example, ______ than 50% of
survey respondents report they are above-average drivers.
A) overconfident; less
B) underconfident; less
C) overconfident; more
D) underconfident; more
Figure 3.24
(Figure 3.24) In Figure 3.24,Sprivrepresents the supply of health care visits at private
clinics and Stot represents the total supply of health care visits at private and
government-operated clinics.
a. How many health care visits are provided by government-operated clinics?
page-pfb
b. Without government-operated clinics, how many health care visits are provided by
the private sector?
c. With government-operated clinics, how many health care visits are provided by the
private sector?
d. Does the presence of government-operated clinics cause crowding out? Explain.
Figure 8.8
(Figure 8.8) Which of the following statements is TRUE?
I. The firm earns $120 of profit at 24 units of output.
II. At prices above $5, the firm earns positive profit.
III. At a price of $4, the firm would produce more than 24 units of output to offset the
lower price.
A) I only
B) II and III
page-pfc
C) II only
D) I and III
Goods X and Y are substitute goods. If the demand for good X increases, we expect that:
A) the price of good X will increase and cause the demand for good Y to increase. The
higher price for good Y will further cause the demand for good X to increase, while the
higher price for good X will further cause the demand for good Y to increase.
B) the price of good X will increase and cause the demand for good Y to decrease. The
lower price for good Y will now cause the demand for good X to decrease, while the
lower price for good X will further cause the demand for good Y to decrease.
C) the price of good X will decrease and cause the demand for good Y to decrease. The
lower price for good Y will now cause the demand for good X to decrease, while the
lower price for good X will further cause the demand for good Y to decrease.
D) the price of good X will decrease and cause the demand for good Y to increase. The
lower price for good Y will now cause the demand for good X to increase, while the
higher price for good X will further cause the demand for good Y to increase.
Figure 7.12
page-pfd
(Figure 7.12) The short-run average total cost curve is given by ______, and the
long-run average total cost curve is given by______.
A) CZW; AZY
B) CZY; AZW
C) AZY; CZW
D) AZW; CZY
Suppose that the cross-price elasticity of demand for movie popcorn with respect to
movie tickets is "0.75. If the price of movie tickets rises by 4%, the quantity demanded
of movie popcorn will:
A) fall by 18.75%.
B) fall by 30%.
C) rise by 3%.
D) fall by 3%.
page-pfe
Vehicle leasing ______ the number of high-quality used cars and ______ adverse
selection.
A) increases; reduces
B) increases; increases
C) decreases; reduces
D) decreases; increases
A monopolist with a marginal cost of MC = 5 + 10Q experiences a change in market
conditions. The inverse demand curves rotate from P = 40 " 5Q to P = 47 " 2Q. What
happens to the profit-maximizing price following the rotation of the demand curve?
A) The price falls from $18 to $15.
B) The price rises from $31.25 to $41.
C) The price rises from $26 to $34.
D) The price falls from $18.60 to $11.20.
page-pff
Suppose that there are 1,000 firms in a perfectly competitive industry, each with a
short-run total cost curve given by TC = 800 + 8Q + 0.1Q2 and marginal cost curve
given by MC = 8 + 0.2Q.
a. What is the profit-maximizing output level for each firm at a market price of $20?
b. How much profit does each firm make at a market price of $20?
c. Explain whether the industry will expand or contract in the long run.
Figure 3.16
page-pf10
(Figure 3.16) Which of the following statements is TRUE?
I. A $3-per-unit tax placed on buyers raises the price buyers pay to $6.
II. A $3-per-unit tax placed on sellers raises the price buyers pay to $6.
III. With a $3-per-unit tax placed on sellers, the share of the tax paid by buyers is 67%.
A) I, II, and III
B) I and III
C) II and III
D) I only
Figure 2.3
(Figure 2.3) An increase in quantity supplied could be indicated by:
A) the supply curve shifting from S1 to S2.
B) the supply curve shifting from S1 to S3.
C) movement up and along supply curve S1.
page-pf11
D) the supply curve shifting from S3 to S2.
A rock climbing school faces two demand curves. The demand by local residents is Q =
400 " 0.5P, and the demand by nonlocal residents is Q = 500 " 0.5P. The marginal cost
of serving either local or nonlocal residents is constant at $100. If the rock-climbing
school practices third-degree price discrimination, it will charge local and nonlocal
residents a price of ______ and ______, respectively.
A) $400; $800
B) $450; $550
C) $600; $650
D) $275: $325
Figure 4.4
page-pf12
(Figure 4.4) This figure violates the assumption of:
A) convex indifference curves.
B) indifference curves can never cross.
C) rankability.
D) the more you have of a good, the less you are willing to give up to get even more of
it.
Figure 5.2
(Figure 5.2) In the figure, hamburger meat is a(n) ______ good and canned tuna is a(n)
______ good.
page-pf13
A) normal; normal
B) inferior; normal
C) inferior; inferior
D) normal; inferior
For price discrimination to be successful using coupons, it must be TRUE that:
A) shoppers who take advantage of coupons have more elastic demands than shoppers
who do not use coupons.
B) shoppers who take advantage of coupons have more inelastic demands than shoppers
who do not use coupons.
C) there is a negative correlation between coupon use and the consumer's willingness to
shop around for the least expensive items.
D) firms can directly identify which consumers are the most price sensitive before the
shoppers purchase the good.
A firm can produce any quantity of good X with the following cost structure: TC =
450,000 + 20Q, where Q measures units of output.
a. What happens to the firm's average total cost of production as it expands output?
page-pf14
b. What type of firm is this an example of?
c. The industry demand for good X is Q = 100,000 " 500P. At the profit-maximizing
output level, calculate the firm's ATC of production.
d. Suppose the profit-maximizing output level you calculated to answer part c is split
evenly between two firms, each with the cost structure given by TC = 450,000 + 20Q.
What is the ATC of production in this two-firm industry?
A firm's long-run total cost curve is given by , where long-run marginal cost
is given by LMC = 2,000 " 20Q + Q2. What is the quantity of output that minimizes
long-run average total cost?
A) 15
page-pf15
B) 165
C) 500
D) 210

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