If a producer offers a price that is in excess of a consumers valuation of the good, the
consumer:
A. must buy the good at that price.
B. will refuse to purchase the good.
C. must revalue the good.
Which of the following is the primary disadvantage of producing inputs within a firm?
A. Increases in transaction costs
B. Loss of specialization
C. Reductions in opportunism
D. Mitigation of hold-up problems
An industry is comprised of 10 firms, each with an equal market share. What is the
four-firm concentration ratio of this industry?
A. 0.2
B. 0.4
C. 0.6
D. 0.8
Which of the following mergers is an example of vertical integration?
A. Bethlehem Steel purchases U.S. Steel.
B. IBM purchases a California computer chip company.
C. AT&T purchases MCI.
D. GM purchases Ford.
If a firm is operating on the production function, then workers:
A. must be putting forth maximal effort.
B. may not be putting forth maximal effort.
C. are usually putting forth average effort.
D. are usually putting forth minimal effort.
Collusion is:
A. legal in the United States.
B. not possible when firms interact repeatedly forever.
C. more likely in industries with a large number of firms.
D. None of the answers is correct.
Suppose that a monopolistically competitive market is at the long-run equilibrium.
Based on this information, which of the following conclusions is NOT true?
A. P > MC.
B. Deadweight loss is zero.
C. P = ATC > minimum of ATC.
D. Firms profits are zero.
Producer-producer rivalry functions:
A. only when multiple sellers for a product compete in the market.
B. only when single sellers for a product compete in the market.
C. regardless of the number of sellers.
D. even when customers are not scarce.
If a consumer is given a $10 gift certificate good for items in store X, and all items in
store X are inferior goods, then the consumer desires to consume:
A. more goods in store X.
B. fewer goods in store X.
C. the same amount of goods in store X.
D. None of the statements is correct.
Suppose X and Y are complements and demand for X is
. Then we know
A. H > 0.
B. X > 0.
C. Y < 0.
D. M < 0.
Consider a two-good world, with commodities X and Y. Which of the following
statements is correct?
A. Both X and Y must be normal goods.
B. If good X is a normal good, good Y must be an inferior good.
C. If good X is an inferior good, good Y must be a normal good.
D. Both good X and good Y can be inferior goods.
The production function for a competitive firm is Q = K.5L.5. The firm sells its output at
a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit and costs
$2. The maximum profits are:
A. 3
B. 10
C. 15
D. None of the answers are correct.
A finitely repeated game differs from an infinitely repeated game in that:
A. The former needs a lower interest rate to support collusion than the latter needs.
B. There is an end-of-period problem for the former.
C. A collusive outcome can usually be sustained in the former but not the latter.
D. All of the statements associated with this question are correct.
Which of the following industries is best characterized as monopolistically
competitive?
A. Cereal
B. Crude oil
C. Wheat
D. Local electricity service
Refer to the normal-form game of advertising shown below.
Suppose there is a 20 percent chance that the advertising game depicted in Figure 10-17
will end next period. What is the present value to firm B of cheating on the collusive
strategy {do not advertise, do not advertise}?
A. $0
B. $10
C. $125
D. $175
You are the manager of a firm that sells its product in a competitive market at a price of
$60. Your firms cost function is C = 50 + 3Q2. Your firms maximum profits are:
A. 250
B. 400
C. 450
D. 500