As additional consumers obtain the benefits of a pure public good, such as national
defense, the benefits to the existing consumers will:
A. decrease.
B. increase.
C. stay the same.
D. increase in the short run, but decrease in the long run.
Suppose you produce wooden desks, and government legislation protecting the spotted
owl has made it more expensive for you to purchase wood. What do you expect to
happen to the equilibrium price and quantity of wooden desks?
A. Price and quantity will increase.
B. Price will increase but quantity will decrease.
C. Price and quantity will decrease.
D. Price will decrease but quantity will increase.
Marginal net benefits in the table:
A. initially increase, reach a maximum, and then decrease.
B. initially decrease, reach a minimum, and then increase.
C. remain relatively stable over different values for the control variable.
D. decrease at a constant rate.
Conglomerate integration:
A. reduces the transaction costs of acquiring inputs.
B. improves cash flow by exploiting the cyclical nature of different product lines.
C. exploits economies of scope by merging the production of similar products.
D. All of the statements are correct.
A potential entrant knows that it faces a (inverse) residual demand curve given by P =
50 – 4Q. While the entrant does not know the inverse market demand, it does know that
the incumbent committed to producing 150 units. Using this information, which of the
following equations best summarizes the inverse market demand curve?
A. P = 200 – 4Q
B. P = 200 – Q
C. P = 150 – 4Q
D. None of the statements are correct.
If the interest rate is 7 percent, $500 received at the end of nine years is worth how
much today?
A. 500/(0.07)9
B. 500/(1 + .07)9
C. 500/(1 + 7)9
D. 500
An industry consists of three firms with equal annual sales. What is the industrys C4?
A. 0.58
B. 0.75
C. 1.00
D. There is not sufficient information to compute the industry C4.
Given that the income of franchise restaurant managers is directly tied to profits and the
income of the manager of the company-owned restaurant is paid a flat fee, we might
expect profits to be:
A. higher in company-owned restaurants.
B. lower in company-owned restaurants.
C. equal in both types of restaurants.
D. None of the statements are correct.
Which of the following payment plans does NOT give an incentive to a manager to stop
shirking?
A. Flat salary with additional pay based on profits of the firm
B. Pay schedule based solely on profits earned by the firm
C. Flat salary regardless of firm profits
D. None of the statements is correct.
For the cost function C(Q) = 500 + 12Q + 4Q2 + Q3, what is the marginal cost of
producing the eighth unit of output?
A. $184
B. $268
C. $524
D. $852
Which of the following pricing policies enhances profits by creating brand-loyal
consumers?
A. Frequent flyer programs
B. Beat-or-pay strategies
C. Trigger strategies
D. Frequent flyer programs and beat-or-pay strategies
To engage in first-degree price discrimination, a firm must:
A. be able to set P > MC.
B. know each consumers maximum willingness to pay.
C. prevent low-value consumers from reselling to high-value consumers.
D. All of the answers are correct.
Suppose compensation is given by W = 512,000 + 217 + 10.08S, where W
= total compensation of the CEO, = company profits (in millions) = $200,
and S = sales (in millions) = $400. How much will this CEO be compensated?
A. $812,431
B. $43,400
C. $559,432
D. $512,000
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 andcorresponding payoffs are summarized in the following table.
Which project has the greatest variance?
A. A
B. B
C. C
D. D
Both firms in a Cournot duopoly would enjoy higher profits if:
A. the firms simultaneously reduced output below the Nash equilibrium level.
B. each firm simultaneously increased output above the Nash equilibrium level.
C. one firm reduced output below the Cournot Nash equilibrium level, while the other
firm continued to produce its Cournot Nash equilibrium output.
D. the firms simultaneously reduced output below the Nash equilibrium level and one
firm reduced output below the Cournot Nash equilibrium level, while the other firm
continued to produce its Cournot Nash equilibrium output.