Suppose the market for good X has a four-firm concentration ratio of 0.70. Having
worked for the four largest firms in the industry, you know the sales for these four firms
are given by $2,000,000, $2,250,000, $2,500,000, and $2,750,000. Based on this
information, we know that sales for the remaining firms in the industry are:
A. $9,433,320.
B. $6,875,000.
C. $5,505,000.
D. $4,071,430.
A new firm enters a market which is initially serviced by a Cournot duopoly charging a
price of $10. What will the new market price be should the three firms coexist after the
entry?
A. $10
B. Below $10
C. Above $10
D. None of the answers is correct.
Suppose the production function is given by Q = 3K + 4L. What is the average product
of capital when 5 units of capital and 10 units of labor are employed?
A. 3
B. 4
C. 11
D. 45
Which of the following is NOT a benefit associated with producing inputs within a
firm?
A. reduction in transaction costs.
B. gains of specializing.
C. reductions in opportunism.
D. mitigation of hold-up problem.
An isocost line:
A. represents the combinations of w and K that cost the firm the same amount of
money.
B. represents the combinations of K and L that cost the firm the same amount of money.
C. represents the combinations of r and w that cost the firm the same amount of money.
D. has a convex shape.
Technological advances will cause the supply curve to:
A. shift to the left.
B. shift to the right.
C. become flatter.
D. become steeper.
Suppose supply decreases and demand increases. What effect will this have on the
price?
A. It will fall.
B. It will rise.
C. It may rise or fall.
D. It will remain the same.
The horizontal intercept of the budget line is:
A. -PX/PY.
B. M/PX.
C. M/PY.
D. PYY.
A Nash equilibrium is a condition that:
A. results in the highest payoff to a player regardless of the opponents action.
B. guarantees the highest payoff given the worst possible scenario.
C. describes a set of circumstances in which no player can improve her payoff by
unilaterally changing her own strategy, given the other players strategies.
D. randomizes over two or more available actions in order to keep rivals from being
able to predict a players action.
The production function for a competitive firm is Q = K.5L.5. The firm sells its output at
a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The
profit-maximizing quantity of labor is:
A. 2/5
B. 1
C. 10
D. None of the answers are correct.
A single firm that charges the monopoly price in the market earns $1,300. If another
firm successfully enters the market, the incumbents profits fall to $700 and the entrant
earns $575. If the interest rate is 0.5, how high must the firms profits from limit pricing
be for limit pricing to be a profitable strategy for the incumbent?
A. L > $200
B. L > $500
C. L > $900
D. L > $1,000
Suppose that the demand in a particular industry is given by Qd = 100 – 2P. When the
market price in the industry is $10 per unit, total demand in the industry is ___.
Furthermore, assume that each of the four largest firms in the industry sell 15 units.
Based on this information, the four-firm concentration ratio is ____.
A. 80 units; 1.00
B. 45 units; 0.75
C. 80 units; 0.75
D. 45 units; 0.25
A firm has a total cost function of C(Q) = 75 + 25Q1/2. The firm experiences:
A. economies of scale.
B. diseconomies of scale.
C. constant returns to scale.
D. All of the statements associated with this question are correct.
As the usage of an input increases, marginal product:
A. initially increases then begins to decline.
B. initially decreases then begins to increase.
C. consistently decreases.
D. consistently increases.
Determine whether the following transactions involve spot exchange, contracts, or
vertical integration.
a. A major oil company refines gasoline from crude oil produced by oil wells that it
owns.
b. Transcontinental, an interstate natural-gas pipeline, has a legal obligation to purchase
a specified amount of gas per week from a well owned by Fred Smith in Enid,
Oklahoma.
c. A cabinetmaker purchases a dozen wood screws from the local hardware store.d. An
electric utility purchases coal from an underground mine.