Which combination of the following properties rules out indifference curves that
intersect one another?
A. Completeness and diminishing marginal rate of substitution
B. Transitivity and more-is-better
C. More-is-better and diminishing marginal rate of substitution
D. Completeness and more-is-better
Which of the following is a valid critique of the use of game theory in economics?
A. Payoffs to players may be difficult to measure.
B. Players may not have complete information about each others payoffs.
C. Game theory assumes rational players.
D. All of the statements associated with this question are correct.
The most likely effect of reducing performance-based rewards for the CEOs of
corporations would be:
A. an increase in profits.
B. a drop in revenues.
C. a drop in profits.
D. an increase in the value of the corporation.
Suppose earnings are given by E = $60 + $7(24 – L), where E is earnings and L is the
hours of leisure. How much is this person working if her daily earnings are $116?
A. 18 hours
B. 16 hours
C. 12 hours
D. 8 hours
Consider a market for product X where 75 percent of the stores charge $500 and 25
percent charge $450. Compute the expected benefit from an additional search when the
first search results in a price of $500.
A. $37.50
B. $50
C. $12.50
D. $500
Which of the following statements is incorrect?
A. Fixed costs do not vary with output.
B. Sunk costs are those costs that are forever lost after they have been paid.
C. Fixed costs are always greater than sunk costs.
D. Fixed costs could be positive when sunk costs are zero.
Suppose the demand for good X is given by Qd
x = 10 – 2Px + Py + M. The price of good
X is $1, the price of good Y is $10, and income is $100. Given these prices and income,
how much of good X will be purchased?
A. 115
B. 515
C. 1,000
D. None of the statements associated with this question are correct.
What price should a firm charge for a package of five ties given a marginal cost of $5
and an inverse demand function P = 10 – Q by the representative consumer?
A. $12.50
B. $25
C. $37.50
D. $50
Changes in the price of an input cause:
A. isoquants to become steeper.
B. slope changes in the isocost line.
C. parallel shifts of the isocost lines.
D. changes in both the isoquants and isocosts of equal magnitude.
As a general rule of thumb, the U.S. Department of Justice views industries to be highly
concentrated if the Herfindahl index is:
A. above 1,000.
B. below 1,000.
C. above 1,800.
D. below 1,800.
The Clean Air Act and its amendments increase the production costs of the firms in a
covered industry through increased:
A. fixed costs while marginal cost is unchanged.
B. marginal cost while fixed costs remain the same.
C. fixed costs and increased marginal costs.
D. average cost while marginal cost is unchanged.
If you advertise and your rival advertises, you each will earn $5 million in profits. If
neither of you advertises, you will each earn $10 million in profits. However, if one of
you advertises and the other does not, the firm that advertises will earn $15 million and
the non-advertising firm will earn $1 million. Which of the following is true?
A. A secure strategy for firm A is to not advertise.
B. A secure strategy for firm B is to not advertise.
C. Firm A does not have a secure strategy.
D. None of the answers is correct.
In a Cournot oligopoly with N firms and identical marginal costs, the relationship
between the price elasticity of demand for the firm and that of the market is:
A. EF = EM.
B. EF = NEM.
C. EF = EM/N.
D. EF = N/EM.
The profits of the leader in a Stackelberg duopoly:
A. are less than those of the follower.
B. equal those of the follower.
C. are greater than those of the follower.
D. are less than those of a Sweezy oligopolist.
Joe consumes 48 units of food and 12 units of clothing. If food is an inferior good:
A. Joe would strictly prefer receiving a $10 gift certificate at a clothing store to
receiving $10 in cash.
B. Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a
clothing store.
C. Joe would be indifferent between receiving a $10 gift certificate at a clothing store
and receiving $10 in cash.
D. upon receiving a $10 gift certificate at a clothing store, Joe would consume less
clothing and more food.
The external marginal cost of producing coal is MCexternal = 6Q while the internal
marginal cost is MCinternal = 4Q. The inverse demand for coal is given by P = 120 – 2Q.
What is the socially efficient level of output?
A. 10
B. 20
C. 15
D. 8
You are a hotel manager 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 expected value of project A is:
A. $5.
B. $10.
C. $20.
D. None of the answers are correct.
The long run is defined as:
A. the horizon in which the manager can adjust all factors of production.
B. the horizon in which there are only fixed factors of production.
C. the horizon in which there are both fixed and variable factors of production.
D. greater than one year.