“An oligopoly is an oligopoly. Firms behave the same no matter what type of oligopoly
it is.” This statement is:
A. true.
B. false.
C. true of homogeneous product industries.
D. None of the answers is correct.
If a firm’s production function is Leontief and the price of capital goes down, the:
A. firm must use less labor in order to minimize the cost of producing a given level of
output.
B. firm must use more capital in order to minimize the cost of producing a given level
of output.
C. firm must use less capital in order to minimize the cost of producing a given level of
output.
D. cost-minimizing combination of capital and labor does not change.
Use indifference curve and constraint analysis to analyze the behavior of employees
who are paid:a. An hourly wage rate of $4 per hour.b. A fixed hourly wage of $4 per
hour, plus an overtime bonus of $4 for every hour worked in excess of eight hours.c. A
fixed salary of $40 per day, plus $4 for each hour worked.d. Which of the above
schemes would yield the largest number of hours worked? Explain.
The domestic demand and supply for sugar are Qd = 60,000 – 400P and QSD = 20,000 +
500P. The foreign supply is QSF = 20,000 + 100P. How many units of sugar will
domestic producers supply after the quota is imposed?
A. 35,000
B. 30,000
C. 58,000
D. 23,000
Shirking can take the form of:
A. long lunch hours.
B. sleeping at work.
C. leaving work early.
D. All of the statements associated with this question are correct.
A risk-neutral monopoly must set output before it knows the market price. There is a 50
percent chance the firm’s demand curve will be P = 40 – Q and a 50 percent chance it
will be P = 60 – Q. The marginal cost of the firm is MC = 3Q. The expected
profit-maximizing price is:
A. $10.
B. $20.
C. $30.
D. $40.
Refer to the following game.
What are the secure strategies for firm A and firm B respectively?
A. (low price, high price)
B. (high price, low price)
C. (high price, high price)
D. (low price, low price)
Suppose total benefits and total costs are given by B(Y) = 600Y – 12Y2 and C(Y) =
20Y2. What level of Y will yield the maximum net benefits?
A. 600/64
B. 600/32
C. 300/64
D. 300/32
Refer to the following game.
Which of the following strategies constitutes a Nash equilibrium?
A. S1, t1
B. S2, t2
C. S2, t3
D. S1, t2
If you are in the business of selling chicken and the price of chicken and the price of
beef both were to drop dramatically, what should you do with your inventory level of
chicken?
A. Keep it the same.
B. Decrease the inventory.
C. Increase the inventory.
D. Get into the beef business.
At what level of output does marginal cost equal marginal revenue?
A. 10
B. 20
C. 30
D. 40
You are the manager of a firm that produces output in two plants. The demand for your
firm’s product is P = 78 – 15Q, where Q = Q1 + Q2. The marginal costs associated with
producing in the two plants are MC1 = 3Q1 and MC2 = 2Q2. What price should be
charged in order to maximize revenues?
A. $39
B. $47
C. $52
D. $56
Which of the following are least likely to be complements?
A. Peanut butter and jelly.
B. Bread and butter.
C. Sports coats and dress slacks.
D. Cars and trucks.
Sam Voter prefers Jack to Rob, Rob to Mark, and Jack to Mark. Sam’s preferences:
A. are not consistent with our assumptions about consumer behavior.
B. indicate that he is a liberal.
C. are not complete.
D. are transitive.
A single firm that charges the monopoly price in the market earns $500. If another firm
successfully enters the market, the incumbent’s profits fall to $325 and the entrant earns
$250. If the incumbent engages in limit pricing, its profits are $400. For what interest
rate, i, is limit pricing a profitable strategy for the incumbent?
A. i < 0.75
B. 0.75 < i < 1.0
C. 1.0 < i < 1.33
D. i > 1.33
Suppose you are the marketing manager for Fruit of the Loom. An individual’s inverse
demand for Fruit of the Loom women’s underwear is estimated to be P = 25 – 3Q (in
cents). If the cost to Fruit of the Loom to produce an item of women’s underwear is
C(Q) = 1 + 4Q (in cents), compute the profit Fruit of the Loom will earn by charging
the optimal block price.
A. $0.74
B. $1.37
C. $108.50
D. $136.50