Which of the following is true for a monopoly?
A. A monopoly always makes a positive profit.
B. A price ceiling on a monopoly is always desirable.
C. Price does not equal marginal cost.
D. A price ceiling on a monopoly is always desirable and price does not equal marginal
cost.
Suppose that good X is a substitute for good Y. Then an increase in the price of good Y
leads to
A. an increase in the demand of good X.
B. a decrease in the demand of good X.
C. a decrease in the supply of good X.
D. an increase in the supply of good X.
Consider a market characterized by the following demand and supply conditions: PX =
15 – 2QX and PX = 3 + 2QX. The equilibrium price and quantity are, respectively,
A. $3 and 9 units.
B. $9 and 3 units.
C. $12 and 4 units.
D. $4 and 12 units.
A slight increase in the marginal cost of a firm definitely leads to a reduction in its
output if the firm competes in the:
A. Sweezy fashion.
B. Cournot fashion.
C. Bertrand fashion.
D. Cournot fashion and Bertrand fashion.
If the government regulates a monopolys price below the socially efficient level, then:
A. deadweight loss increases and there is a surplus output.
B. deadweight loss decreases and there is a shortage of output.
C. deadweight loss increases and there is a shortage of output.
D. deadweight loss decreases and there is a surplus of output.
Mitchells money income is $150, the price of X is $2, and the price of Y is $2. Given
these prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this
combination of X and Y bundle J. At bundle J, Mitchells MRS is 2. Given these prices
and income, what is Mitchells equilibrium consumption of X?
A. X < 50
B. X = 50
C. X > 50
D. None of the statements is correct.
Which of the following statements is NOT true in the presence of externalities?
A. Social marginal cost equals the sum of internal and external marginal costs.
B. A competitive industry generally produces more than a monopoly.
C. A competitive industry always produces more than the socially efficient level of
output.
D. A monopoly always produces more than the socially efficient level of output.
The chemical industry has a Lerner index of 0.67. Based on this information, a firm
with marginal cost of $10 should charge a price of:
A. $30.30.
B. $14.93.
C. $6.70.
D. $3.30.
Firms 1 and 2 compete in a Cournot duopoly. If firm 1 adopts a strategy that raises firm
2s marginal cost:
A. firm 2 will increase its output.
B. firm 1 will increase market share.
C. firm 1 will suffer lower profits.
D. All of the statements associated with this question are correct.
All else held constant, as additional firms enter an industry
A. more output is available at each given price.
B. less output is available at each given price.
C. the same output is available at each given price.
D. output could increase or decrease at each given price.
An increase in the marginal benefit arising from a specialized investment will cause the
optimal contract length to:
A. increase.
B. decrease.
C. remain constant.
D. either increase or decrease.
If the interest rate is 5 percent and cash flows are $3,000 at the end of year one and
$5,000 at the end of year two, then the present value of these cash flows is:
A. $7,392.29.
B. $8,400.34.
C. $4,222.50.
D. $400.74.
The isoquants are normally drawn with a convex shape because inputs are:
A. not perfectly substitutable.
B. perfectly substitutable.
C. perfect complements.
D. normal goods.
Suppose total benefits and total costs are given by B(Y) = 150Y – 10Y2 and C(Y) =
5Y2. What level of Y will yield the maximum net benefits?
A. 7
B. 10/9
C. 5
D. 150/20
In the presence of ______, the market mechanism can break down.
A. extensive form games
B. normal form games
C. common knowledge
D. asymmetric information
Given that income is $300, the price of good Y is $15, and the price of good X is $20,
what is the vertical intercept of the budget line?
A. 4,500
B. 300
C. 20
D. 15