Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 –
2Q. The cost function for each firm is C(Q) = 4Q. The equilibrium output of each firm
is:
A. 8
B. 16
C. 32
D. 36
Sydney Roofers Incorporated recently purchased 100 pounds of standard roofing nails
from Lowes, a nationwide hardware and building supplies store. This transaction most
likely involves:
A. spot exchange.
B. vertical integration.
C. contract.
D. contract or vertical integration.
Which of the following industries is best characterized as monopolistically
competitive?
A. Toothpaste
B. Crude oil
C. Agriculture
D. Local telephone service
What price should a firm charge for a package of two shirts given a marginal cost of $2
and an inverse demand function P = 6 – 2Q by the representative consumer?
A. $2
B. $6
C. $8
D. $10
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A. P > min ATC.
B. P < AVC.
C. MR = MC = min ATC.
D. MR < P.
Estimates suggest that the North American Free Trade Agreement (NAFTA) will
ultimately result in tariff cuts averaging 38 percent globally. Assuming these estimates
are correct, would you expect the price of the average imported goods to fall by 38
percent? Explain.
Suppose you are an analyst for the Coca-Cola Company. An individual’s inverse
demand for Coca-Cola is estimated to be P = 98 – 4Q (in cents). If Coca-Cola is
produced according to the cost function C(Q) = 1,000 + 2Q (in cents), compute the
surplus consumers receive when Coca-Cola charges the optimal block price.
A. $0
B. $11.52
C. $1,152
D. $576
Which market structure has the most market power?
A. Monopolistic competition
B. Perfect competition
C. Monopoly
D. Oligopoly
Which of the following is NOT an incentive scheme to ensure that workers do a good
job?
A. Paying waitresses low wages, but allowing them to collect tips
B. Profit-sharing plans in large companies
C. Commission pay schedules for salesmen
D. Straight hourly wages for dock workers
Which of the following is/are NOT price-setting oligopoly models?
A. Stackelberg.
B. Cournot.
C. Bertrand.
D. Stackelberg and Cournot
For a steel factory, a decrease in the cost of electricity to the plant will cause the supply
curve to:
A. become flatter.
B. shift to the left.
C. shift to the right.
D. become parallel to the price axis.
Which of the following is NOT an example of raising rivals’ fixed costs?
A. Existing doctors in a particular medical field lobby to require new doctors to acquire
new licenses.
B. Yellow Cab Company lobbying New York City government officials for an
ordinance that would require all taxi cab drivers to pay for a medallion, giving them the
right to drive a cab in New York City.
C. Federal Express lobbying the U.S. Department of Transportation to increase annual
terminal fees.
D. The New York Port Authority lobbying to increase the tolls on New York City’s
George Washington Bridge.
If consumers expect future prices to be higher
A. they substitute current purchases for future purchases of perishable products.
B. stockpiling will happen when products are durable in nature.
C. the position of the demand will not change.
D. the demand for automobiles today will not change.
The absolute value of the slope of the indifference curve is called the:
A. marginal revenue.
B. average rate of substitution.
C. marginal rate of substitution.
D. marginal cost.