Given that digital music players are used to play music downloaded from the Internet, a
fall in the price of digital music players will lead to:
a) an increase in the price of a song download.
b) an increase in the demand for downloaded songs.
c) an increase in the price of broadband plans.
d) a fall in the demand for digital music players.
e) an increase in the price of personal laptops.
An individual is risk neutral if her utility curve for wealth is:
a) linear.
b) concave.
c) convex.
d) decreasing.
e) horizontal.
If both parties have perfect information about all economic facts of the negotiation:
a) the parties should reach an efficient agreement.
b) the parties are sure to reach an equitable agreement.
c) any mutually-beneficial profit split can be supported as an efficient outcome.
d) a 50-50 profit split is the sole equilibrium outcome.
e) a price offered by one party is most likely to fall beyond the zone of agreement.
During the 1990s, one of the dominant firms in the U.S. cigarette industry would raise
prices once or twice a year by about 50 cents per carton. Other firms in the industry
typically raised their prices by the same amount. This is an example of:
a) predatory pricing
b) price skimming
c) price leadership
d) profit maximization
e) a kinked demand curve
According to the model of the firm, the management’s main goal is to:
a) increase revenue from sales.
b) maximize profit.
c) maximize its market share.
d) minimize its variable cost per unit.
e) maintain a steady and predictable growth in earnings.
Which of the following is most likely to be true of a firm organized along functional
lines?
a) There will be optimal coordination of information and decisions.
b) The firm will face decreasing returns to scale.
c) Information required for decisions will be generic and therefore easy to use.
d) Functional managers may not act in accordance with the firm’s larger objectives.
e) Decision making in the organization will be highly centralized.
A beverages company wants to launch a new diet soda aimed at diabetics and
health-conscious customers. It will use a _____ economic model to identify its target
customers.
a) deterministic
b) dynamic
c) qualitative
d) stochastic
e) probabilistic
If the price of a good or service increases, what happens to the firm’s demand curve?
a) The demand curve shifts inward toward the origin.
b) The demand curve shifts outward away from the origin.
c) There is an upward movement along the demand curve.
d) There is a downward movement along the demand curve.
e) The slope of the demand curve changes.
A profit-maximizing firm will produce at the level where:
a) marginal cost equals average revenue.
b) the per unit cost is minimized.
c) price equals average fixed cost.
d) marginal revenue equals marginal cost.
e) price equals average cost.
Carefully explain why the marginal product of labor first rises and then falls as the use
of labor increases. In which portion of the marginal product of labor curve will the firm
typically produce?
What factors typically lead a firm to centralize decision making? What causes it to
decentralize?
How can regression analysis use uncontrolled data to estimate demand?
The following table shows the probabilities of A, B, X, and Y. Compute the joint
probability table. Then calculate Pr(Bï¼Y) and Pr(Xï¼B).
A chemical company is in the process of studying two long-term plans. The first plan
involves expansion of their industrial division. The second plan emphasizes expansion
in the business of consumer pharmaceuticals. Market research reveals the following
(preliminary) results (returns are in $ millions):
The planning committee has the (risk averse) utility function U = 10M ‘“ 0.05M2.
Discuss the long-term planning decision based on the preliminary predictions and the
given utility function: