An isoquant defines the combination of inputs that yield the producer:
A. higher levels of output than the desired level of output.
B. lower levels of output than the desired level of output.
C. the same level of output.
D. None of the statements is correct.
Suppose the inverse market demand is given by P = 150 – 2Q. If the incumbent
continues to produce 10 units of output, which of the following equations best
summarizes the potential entrant’s residual demand curve?
A. P = 130 – 2Q
B. P = 150 – 4Q
C. P = 75 – 0.5Q
D. P = 130 – Q
Chris raises cows and produces cheese and milk because he enjoys:
A. economies of scale.
B. economies of scope.
C. cost complementarity.
D. None of the answers is correct.
In a monopoly where the marginal revenue and price are, respectively, given by $3 and
$6, the price elasticity of demand is:
A. -0.5
B. -1
C. -1.5
D. -2
What is implied when the total cost of producing Q1 and Q2 together is less than the
total cost of producing Q1 and Q2 separately?
A. Economies of scale
B. Diminishing average fixed costs
C. Cost complementarity
D. Economies of scope
If money income doubles and the prices of all goods triples, then the:
A. budget line remains unchanged.
B. consumer is worse off due to inflation.
C. consumer will buy more of normal goods.
D. budget line will shift out.
A local video store estimates its average customer’s demand per year is Q = 20 – 4P, and
it knows the marginal cost of each rental is $1.00. How much should the store charge
for an annual membership in order to extract the entire consumer surplus via an optimal
two-part pricing strategy?
A. $20
B. $32
C. $40
D. $64
Consider a Stackelberg duopoly with the following inverse demand function: P = 100 –
2Q1 – 2Q2. The firms’ marginal costs are identical and are given by MCi = 2. Based on
this information, the consumer surplus in this market is:
A. $36.75.
B. $73.50.
C. $1,352.40.
D. $2,704.80.
Which of the following is true of a perfectly contestable market?
A. P = MC
B. P > MC
C. P < ATC
D. P > MC and P < ATC
The principal’s goals are NOT in line with the goals of:
A. any other principal.
B. the agents.
C. the firms.
D. the consumers.
Larger firms can produce a product at lower average cost than small firms when:
A. economies of scope exist.
B. diseconomies of scale exist.
C. economies of scale exist.
D. cost complementarities exist.
The income effect isolates the change in the consumption of a good caused by the
change in:
A. “real” income.
B. the relative prices of two goods.
C. consumer preferences.
D. None of the statements is correct.
The marginal benefit in the table is:
A. increasing at a constant rate.
B. decreasing at a constant rate.
C. increasing at a decreasing rate.
D. decreasing at an increasing rate.
A monopoly produces X at a marginal cost of $80 per unit and charges a price of $100
per unit. Determine the elasticity of demand at the profit-maximizing price of $100.
A. -5
B. -0.2
C. -0.8
D. There is insufficient information to determine the monopoly’s price elasticity of
demand.
Which of the following is NOT a condition for a firm to engage in price discrimination?
A. Consumers are partitioned into two or more types, with one type having a more
elastic demand than the other.
B. The firm has a means of identifying consumer types.
C. The consumers are sincere in revealing their true natures.
D. There is no resale market for the good.
The idea of charging two different groups of consumers two different prices is practiced
in:
A. price discrimination.
B. two-part pricing.
C. price matching.
D. None of the statements is correct.
Refer to the following game.
What are the Nash equilibrium strategies for firm A and firm B, respectively, in a
one-shot game?
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)
Average fixed cost:
A. initially declines, reaches a minimum, and then begins to increase as output
increases.
B. increases continuously as output increases.
C. declines continuously as output is expanded. D. keeps constant as output is
expanded.