Other things held constant, the lower the price of a good
A. the lower the demand.
B. the higher the demand.
C. the greater the consumer surplus.
D. the lower the consumer surplus.
If the interest rate is 4 percent, the present value of $500 received at the end of four
years is:
A. $427.40.
B. $431.71.
C. $416.41.
D. $432.68.
Which of the following phenomena shows that risk aversion is the characteristic of
many people?
A. Gambling
B. Looting
C. Investing in one stock rather than a portfolio
D. Auto insurance
Relationship-specific exchange:
A. is a consequence of profit sharing.
B. makes firms use spot markets.
C. occurs because of specialized investments.
D. reduces worker shirking.
Refer to the normal-form game of bargaining shown below.
Suppose that management and the union are bargaining over how much of a $500
surplus to give to the union. It is assumed that the surplus can only be split into $250
increments. Furthermore, negotiations are set up such that management and the union
must simultaneously and independently write down the amount of surplus to allocate to
the union. The payoff structure to this one-shot bargaining game is listed in Figure
10-16. The number of efficient outcomes resulting from the bargaining game is:
A. 3
B. 5
C. 6
D. 8
Which of the following is a correct statement about a Nash equilibrium in a two-player
game?
A. The joint payoffs of the two players are highest compared to other strategy pairs.
B. A Nash equilibrium is always unique in real-world problems.
C. Given another players strategy, no player can improve her welfare by unilaterally
changing her strategy.
D. All of the statements associated with this question are correct.
You are a manager in a perfectly competitive market. The price in your market is $14.
Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2. What level of profits will you make in
the short run?
A. $20
B. $40
C. $60
D. $80
Which of the following is probably not a normal good?
A. Designer jeans.
B. Diamond rings.
C. Intercity passenger bus travel.
D. New automobiles.
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per
day, and he can use 24 hours per day. What is the market rate of substitution between
leisure and income?
A. $5
B. $8
C. $10
D. None of the statements is correct.
Which of the following is NOT a feature of Sweezy oligopoly?
A. There are few firms in the market serving many consumers.
B. The firms produce homogeneous products.
C. Each firm believes that rivals will cut their prices in response to a price reduction,
but will not raise their prices in response to a price increase.
D. Barriers to entry exist.
A risk-neutral monopoly must set output before it knows the market price. There is a 50
percent chance the firms 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. What is the expression
for the expected marginal revenue function?
A. E(MR) = 30 – 2Q
B. E(MR) = 40 – 2Q
C. E(MR) = 50 – 2Q
D. E(MR) = 60 – 2Q
An unregulated monopolist will likely:
A. charge a price below MR.
B. charge a price above MC.
C. charge a price equal to MR.
D. charge a price below MR and above MC.
A recent survey of new graduates in High Tech Cauldron Coalescence (HTCC) revealed
that every graduate had at least two job offers and the average offer was $100,000 per
year. With the release of this information, what do you expect to see happen to the
number of HTCC majors? What do you expect to happen to salaries in the HTCC field
in 10 years? Why?
You are the owner-operator of the Better Gas Station in a small southeastern town. Over
the past 20 years, you and your rival have successfully kept prices at a very high level.
You recently learned that your competitor is retiring and closing his station in two
weeks. What should you do today? Why?
Joe consumes 10 units of food and 12 units of clothing. If food is an inferior good, will
Joe be indifferent between receiving a $12 gift certificate at a clothing store and
receiving $12 in cash? Explain and show graphically.
What is the primary facet of monopolistic competition that does not allow for the
presence of long-run profits? If firms are making short-run profits in a monopolistically
competitive industry, what will eventually occur that will cause long-run economic
profits to be zero?
What real-world evidence would lead you to believe that firms were acting as Cournot
oligopolists? Stackelberg oligopolists? Bertrand oligopolists?
An industry produces 10,000 units of output at a price of $100. At the equilibrium price
and quantity, the market elasticity of demand is -0.75. Does this industry consist of a
profit-maximizing monopolist? Explain.