The domestic demand and supply for sugar are Qd = 60,000 – 400P and QSD = 20,000 +
500P. The foreign supply is QSF = 20,000 + 100P. Suppose an import quota of 13,000 is
imposed in the domestic market. What will be the new market price of sugar?
A. $15
B. $20
C. $30
D. $45
A person who monitors the production process and evaluates the productivity of
workers is:
A. a manager.
B. an employee.
C. a shareholder.
D. a self-proprietor.
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 and corresponding payoffs are summarized in the following table.
Which project yields the greatest return, regardless of whether a boom or a recession
occurs?
A. A
B. B
C. C
D. D
Some individuals choose to undertake risky prospects while others choose safer ones
because they have different:
A. degrees of transitivity.
B. marginal rates of substitution between risk and reward.
C. income elasticities.
D. marginal utilities.
A monopoly has two production plants with cost functions C1 = 50 + 0.1Q1
2 and C2 =
30 + 0.05Q2
2. The demand it faces is Q = 500 – 10P. What is the condition for profit
maximization?
A. MC1(Q1) = MC2(Q2) = P(Q1 + Q2).
B. MC1(Q1) = MC2(Q2) = MR(Q1 + Q2).
C. MC1(Q1 + Q2) = MC2(Q1 + Q2) = P (Q1 + Q2).
D. MC1(Q1 + Q2) = MC2(Q1 + Q2) = MR (Q1 + Q2).
If you advertise and your rival advertises, you each will earn $4 million in profits. If
neither of you advertises, you will each earn $10 million in profits. However, if one of
you advertises and the other does not, the firm that advertises will earn $1 million and
the non-advertising firm will earn $5 million. If you and your rival plan to be in
business for only one year, the Nash equilibrium is:
A. for each firm to advertise.
B. for neither firm to advertise.
C. for your firm to advertise and the other not to advertise.
D. None of the answers is correct.
What is the maximum amount of good Y that can be purchased if X and Y are the only
two goods available for purchase and Px = $10, Py = $15, X = 30, and M = 600?
A. 10
B. 15
C. 20
D. 25
The concentration and HHI reported in the U.S. Bureau of Census must be interpreted
with caution since:
A. they are calculated by excluding foreign imports, hence they bias upward the degree
of concentration.
B. they are based on figures for the entire national market.
C. the definition of product classes used to define an industry affects the results.
D. All of the answers are correct.
The possible goods and services a consumer can afford to consume represents the:
A. consumer behavior.
B. consumer preferences.
C. consumer status.
D. consumer opportunities.
The products in a monopolistically competitive industry are:
A. homogeneous.
B. heterogeneous.
C. competitive.
D. uncompetitive.
Consider 45 risk-neutral bidders who are participating in a second-price, sealed-bid
auction. It is commonly known that bidders have independent private values. Based on
this information, we know the optimal bidding strategy for each bidder is to:
A. bid their own valuation of the item.
B. shade their bid to just below their own valuation.
C. bid according to the following bid function: = v – (v – L)/n.
D. bid one penny above their own valuation to ensure they get the item.
Consider a market characterized by the following demand and supply conditions: PX =
50 – 5QX and PX = 32 + QX. The equilibrium price and quantity are, respectively,
A. $35 and 3 units.
B. $3 and 35 units.
C. $82 and 50 units.
D. $20 and 6 units.
To an economist, maximizing profit is:
A. maximizing the value of the firm.
B. maximizing the current years profits.
C. minimizing the permanent total costs.
D. minimizing the future risks.
The XYZ Company produces output using labor (which it purchases on an as-needed
basis in the market for unskilled workers at a wage of $5 per hour) and one machine
(which it is obligated to lease at a rental rate of $300 per hour). The planning horizon
precludes XYZ from renting or purchasing any additional machines, as the current
machine has a capacity of 80 units of output per hour, which exceeds the projected
demand for the firms product. The firm has no alternative use for the machine it leases,
and the contract precludes it from subleasing it to another party. The company currently
employs one worker who produces 10 units of output per hour. A recent report from the
engineering department reveals that, given the plants current capacity, two workers
could produce 20 units of output per hour, three workers could produce 30 units of
output per hour, and four workers could produce a total of 40 units of output per hour.
a. Complete the following table:
b. Suppose that XYZ can sell up to 40 units of output per hour at a price of $.60 per unit
but cannot even get a penny for units produced in excess of 40 units per hour. How
much output should XYZ produce each hour in order to maximize profits?
c. At what price would XYZ find it profitable to shut down its operation?
A necessary cost-side condition for a firm to implement a cross-subsidization pricing
strategy is:
A. economies of scale.
B. economies of scope.
C. constant marginal cost.
D. limited capacity.
The following depicts a normal-form game of price competition.
Suppose the game is infinitely repeated, and the interest rate is 5 percent. Both firms
agree to charge a high price, provided no player has charged a low price in the past. If
both firms stick to this agreement, then the present value of firm Bs payoffs are:
A. 105
B. 190
C. 210
D. 525