Rent seeking:
A. results in less market share for the rent seekers.
B. involves lobbyists influencing government policies to benefit their interests.
C. results in more negative externalities.
D. None of the statements are correct.
For a wood furniture manufacturer, an increase in the cost of lumber will cause the
supply curve to:
A. become flatter.
B. become steeper.
C. shift to the left.
D. shift to the right.
Which of the following is NOT a pure public good?
A. Clean air
B. National defense
C. Telephones
D. All of the statements associated with this question are pure public goods.
A firm will maximize the present value of future profits by maximizing current profits
when the:
A. growth rate in profits is constant.
B. growth rate in profits is larger than the interest rate.
C. interest rate is larger than the growth rate in profits and both are constant.
D. growth rate and interest rate are constant and equal.
Suppose that production for good X is characterized by the following production
function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental
rate of capital, r, is $86.80 and the per-unit wage, w, is $20, then the average total cost
of using 25 units of capital and 49 units of labor is:
A. $5.
B. $75.
C. $90.
D. There is insufficient information to determine the average total costs.
“… two prostitutes came to the king (Solomon) and stood before him. One of them said,
My lord, this woman and I live in the same house. I had a baby while she was there
with me. The third day after my child was born, this woman also had a baby. We were
alone; there was no one in the house but the two of us.During the night this womans son
died because she lay on him. So she got up in the middle of the night and took my son
from my side while I your servant was asleep. She put him by her breast and put her
dead son by my breast. The next morning, I got up to nurse my son-and he was dead!
But when I looked at him closely in the morning light, I knew that it wasnt the son I had
borne.The other woman said, No! The living one is my son; the dead one is yours.The
king said, Bring me a sword. So they brought a sword for the king. He then gave an
order: Cut the living child in two and give half to one and half to the other.The woman
whose son was alive was filled with compassion for her son and said to the king,
Please, my lord, give her the living baby. Do not kill him; she is his mother.But the
other said, Neither I nor you shall have him. Cut him in two!Then the king gave his
ruling: Give the living baby to the first woman. Do not kill him; she is his mother.” 1
Kings 3:16-27 (NIV).King Solomons actions in this passage illustrate the concept of:
A. signaling.
B. screening.
C. moral hazard.
D. adverse selection.
If a manager adopted both project A and project B simultaneously, the variance in
returns associated with this joint project would be:
A. 18.75
B. 75
C. 30
D. 500
In a competitive market, the market demand is Qd = 70 – 3P and the market supply is Q
= 6P. A price ceiling of $4 will result in a
A. shortage of 24 units.
B. shortage of 34 units.
C. surplus of 58 units.
D. surplus of 34 units.
Consider a monopolist attempting to engage in limit pricing with total costs C(Q) = 100
+ 2Q. The market (inverse) demand for its product is P = 100 – 2Q. Currently, the
monopolist produces 30 units of output. Assuming the potential entrant has the same
cost structure as the incumbent monopolist, is it profitable for the entrant to produce 10
units of output?
A. Yes, since the market price of $20 is greater than the average total cost of producing
10 units.
B. No, since the market price of $20 is less than the average total cost of producing 10
units.
C. Yes, since the market price of $50 is greater than the average total cost of producing
10 units.
D. No, since the market price of $50 is less than the average total cost of producing 10
units.
R&D is an aspect of a firms:
A. performance.
B. conduct.
C. structure.
D. environment.
Nodes are:
A. examples of positive network externalities.
B. examples of negative network externalities.
C. different points in geographic or economic space linked by a network.
D. None of the statements are correct.
Suppose you are the manager of Alpha Enterprises, a firm that holds a patent that makes
it the exclusive manufacturer of bubble memory chips. Based on the estimates provided
by a consultant, you know that the relevant demand and cost functions for bubble
memory chips are Q = 25 – 0.5P; C = 50 + 2Q.a. What is the firms inverse demand
function?b. What is the firms marginal revenue when producing four units of output?c.
What are the levels of output and price when you are maximizing profits?d. What will
be the level of your profits?
Which of the following is NOT a solution to the manager-worker principal-agent
problem?
A. Sales sharing
B. Piece rates
C. Fixed hourly wages
D. Spot checks
Firm A has a higher marginal cost than firm B. They compete in a homogeneous
product Cournot duopoly. Which of the following results will NOT occur?
A. QA > QB
B. ProfitA < ProfitB
C. Revenue of firm A < Revenue of firm B
D. PriceA = PriceB
You are a hotel manager and you are considering four projects that yield different
payoffs, depending upon whether there is an economic boom or a recession. The
potential payoffs and corresponding payoffs are summarized in the following table.
The variance in the returns of project A is:
A. 900
B. 225
C. 0
D. 1,600
Two firms compete as a Stackelberg duopoly. The inverse market demand they face is P
= 62 – 4.5Q. The cost function for each firm is C(Q) = 8Q. The outputs of the two firms
are:
A. QL = 48; QF = 24.
B. QL = 35; QF = 6.
C. QL = 6; QF = 3.
D. None of the answers is correct.
The inverse demand in a Cournot duopoly is P = a – b(Q1 + Q2), and costs are C1(Q1) =
c1Q1 and C2(Q2) = c2Q2. The government has imposed a per-unit tax of $t on each unit
sold by each firm. The equilibrium output of each firm is the same as a situation where
each firms:
A. demand increases by t.
B. demand decreases by t.
C. marginal cost increases by t.
D. marginal cost decreases by t.
Which of the following statements about a price-matching strategy is incorrect?
A. It may be applied in situations besides Bertrand oligopoly.
B. It requires that the firms can monitor their rivals prices.
C. It reduces the incentive for a rival firm to initiate a price war.
D. It only guarantees to match prices that are advertised publicly.