An oligopoly using a maximin strategy must believe that the losses from
underestimating a competitor’s skill are worse than those from overestimating it.
a. True
b. False
The marginal productivity theory of distribution has been criticized because
a. it assumes that the existing distribution of ownership factors is fair and just when it
may not be.
b. it does not tell us much about real policy matters.
c. a factor’s MRP does not in any way correspond to productive effort.
d. All of the above are correct.
Figure 10-3
In Figure 10-3, the profit maximizing firm will operate at a level of
a. OJ.
b. OG.
c. OI.
d. OH.
Firms that set prices equal to marginal costs will usually recover all of their R&D costs.
a. True
b. False
Figure 12-3
In Figure 12-3, according to economic theory, the kink in the demand curve will occur
at point
a. E.
b. A.
c. C.
d. D.
The elasticity formula solves the units problem because percentages are unaffected by
the units of measure.
a. True
b. False
What is the long-run effect on the demand curve of a monopolistically competitive firm
when more firms enter the market?
a. Demand curve shifts to left.
b. Demand curve remains the same.
c. Demand curve shifts to right.
d. Demand curve become flatter.
Which of the following is true?
a. A bondholder owes money to a corporation.
b. A corporation owes money to a bondholder.
c. A bondholder owns part of a corporation.
d. A bondholder votes on company management.
Unlike a perfectly competitive firm, a monopolistically competitive firm
a. faces a perfectly inelastic demand curve.
b. can earn positive economic profit in the short run and in the long run.
c. cannot earn positive economic profit even in the short run.
d. does not have the same marginal revenue at every output level.
Variable costs increase when output rises.
a. True
b. False
Company A manufactures a single automotive component. It had total revenue of
$100,000 and an economic profit of $20,000. What is the price of the component it
manufactures?
a. ($100,000/quantity sold).
b. ($100,000/quantity produced).
c. ($100,000/quantity sold) − average cost of the product
d. ($100,000/quantity produced) − average cost of the product
A perfectly contestable market is one which a firm can enter and exit without losing its
investment.
a. True
b. False
Some oligopolies may try to maximize sales revenue rather than maximize profits.
a. True
b. False
Increased concern about environmental problems derive partly from
a. concerns about increasing economic output.
b. concerns about unemployment and inflation.
c. new awareness that the problems exist.
d. concerns about the quality of life.
If stock exchanges did not exist,
a. the risk to the investor of buying stocks would be much greater.
b. the economy’s resources could be more efficiently allocated among firms.
c. there would be no organized way for firms to issue stock.
d. investment banks would no longer play a role in handling stocks.
Unequal incomes arise from
a. discrimination.
b. luck.
c. different schooling.
d. all of the above factors.
The task of deciding which consumer gets each of the goods produced in a free-market
economy is solved by
a. the price system.
b. the industries which produce the goods.
c. the central planners.
d. citizens with political power.