Refer to the following payoff matrix:
Suppose the production game depicted in the payoff matrix is a sequential-move game.
Identify the strategy leading to a first-mover advantage for player 2.
A. Player 2 moves first and plays Low Q. Observing player 2’s move, player 1’s best
response is to play Low Q.
B. Player 2 moves first and plays High Q. Observing player 2’s move, player 1’s best
response is to play Low Q.
C. Player 1 moves first and plays Low Q. Observing player 1’s move, player 2’s best
response is to play High Q.
D. Player 2 moves first and plays High Q. Observing player 2’s move, player 1’s best
response is to play High Q.
If the price of good X is $10 and the price of good Y is $5, how much of good X will
the consumer purchase if her income is $15?
A. 0
B. 2
C. 3
D. Cannot tell based on the above information.
What is the marginal revenue of producing the fortieth unit?
A. 4
B. 80
C. 7.75
D. 40
Joe’s search costs are $5 per search. He wants to buy a video player for his wife for
Christmas, and the lowest price he’s found so far is $200. Joe thinks 50 percent of the
stores charge $200 for video players and 50 percent charge $190. Based on this
information:
A. Joe should search again.
B. Joe should stop searching and purchase the video player at $200.
C. Joe is indifferent between searching again and stopping.
D. There is insufficient information to make a determination.
Refer to the following game.
What are the Nash equilibrium strategies for firm A and firm B respectively?
A. (low price, low price)
B. (high price, high price)
C. (low price, high price)
D. (low price, low price) and (high price, high price)
Spot checks work because of:
A. the promise of a reward.
B. a promise of performance-based pay.
C. a potential penalty for shirking.
D. monitoring on a regular basis.
If income increases, then the:
A. budget line rotates counterclockwise.
B. budget line rotates clockwise.
C. budget line shifts to the right.
D. opportunity set contracts.
Which of the following can explain an increase in the demand for housing in retirement
communities?
A. A drop in real estate prices.
B. An increase in the population of the elderly.
C. A drop in the average age of retirees.
D. Mandatory government legislation.
Industry profits are maximized in the figure below:
A. only at point QM
1.
B. only at point QM
2.
C. on the line segment joining points QM
1 and QM
2.
D. at the point where r1 = r2.
The first-order conditions for profit maximization in a perfectly competitive market are:
A. P – (dC(Q)/dQ) = 0.
B. (dR(Q)/dQ) – (d2C(Q)/dQ2) < 0.
C. P – (d2C(Q)/dQ2) = 0.
D. P > (dC(Q)/dQ).
You are a bidder in an independent private values auction. Each bidder perceives that
valuations are evenly distributed between $100 and $1,000. If there is a total of three
bidders and your own valuation of the item is $900, what is your optimal bidding
strategy in:a. A first-price, sealed-bid auction?b. A Dutch auction?c. A second-price,
sealed-bid auction?d. An English auction?
If a shortage exists in a market, the natural tendency is for:
A. demand to increase.
B. price to increase.
C. quantity supplied to decrease.
D. no change in the market.
If an increase in the price of good X leads to a decrease in the consumption of good Y,
then goods X and Y are called
A. substitutes.
B. complements.
C. normal goods.
D. inferior goods.
Consider the market for two goods that are substitutes, such as pens and pencils. If a
technological breakthrough reduced the cost of producing pens:a. What would happen
to the supply of pens?b. What would happen to the price of pens and the quantity
exchanged?c. What effect would this change in the price of pens have on the market for
pencils?
The marginal cost of producing a good to society is the:
A. horizontal sum of the supply curve and the marginal cost of polluting.
B. vertical sum of the demand curve and the marginal cost of polluting.
C. horizontal sum of the demand curve and the marginal cost of polluting.
D. vertical sum of the supply curve and the marginal cost of polluting.
Refer to the figure below. During low-peak times, what price-quantity combination
should the firm charge to maximize profit?
A. P1 and Q1
B. P3 and Q1
C. P1 and Q2
D. P2 and Q1