The domestic demand and supply for sugar are Qd = 700 – 2P and QSD = 100 + 4P. The
foreign supply is QSF = 150 + 3P. Suppose an import quota of 100 is imposed in the
domestic market. How many units of sugar will domestic producers supply after the
quota is imposed?
A. 500
B. 350
C. 560
D. 640
Both firms in a Cournot duopoly would experience lower profits if:
A. there was an increase in marginal production costs.
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. there was an increase in marginal production costs and one firm reduced output
below the Cournot Nash equilibrium level, while the other firm continued to produce its
Cournot Nash equilibrium output.
According to the table below, what is the total cost of producing 125 units of output?
A. 1,000
B. 2,050
C. 1,400
D. 2,400
Suppose Philips and Toshiba are the first companies to introduce digital versatile disk
(DVD) machines to the market. Studies by the firms suggest that consumers who
purchase consumer electronics are very brand-loyal. To capture future loyalties, each
firm will attempt to maximize its initial market share, for one time only, by setting
prices. An economist has estimated the initial market share of each firm under different
pricing scenarios. Her results are captured in the following payoff matrix:
a. Given this scenario, if you were in charge of pricing at Philips, what price would you
charge? Explain.
b. What market share would you anticipate as a result of your pricing strategy? Explain.
Suppose total benefits and total costs are given by B(Y) = 150Y – 10Y2 and C(Y) =
5Y2. Then marginal costs are:
A. 2.5Y.
B. 25Y.
C. 5Y.
D. 10Y.
Four firms control the market for a particular good, resulting in an HHI of 6,650. Total
industry sales are $1,750, and it is known that one firm has sales of $1,400 and another
sales of $175. If each of the remaining two firms has the same sales, then we can
conclude that the remaining two firms each have a market share of:
A. 0.05.
B. 0.20.
C. $90.
D. $200.
Suppose that you are a manager. You are considering whether or not to monitor
employees with the payoffs in the normal-form game shown below.
Management and a labor union are bargaining over how much of a $50 surplus to give
to the union. The $50 is divisible up to one cent. The players have one shot to reach an
agreement. Management has the ability to announce what it wants first, and then the
labor union can accept or reject the offer. Both players get zero if the total amounts
asked for exceed $50. If you were the labor union, which type of “rules of play” would
you prefer to divide the $50 surplus?
A. One-shot, simultaneous-move game
B. One-shot, sequential-move game with management as the first mover
C. One-shot, sequential-move game with labor union as the first mover
D. One-shot, simultaneous-move game and one-shot, sequential-move game with
management as the first mover
Given that income is $200 and the price of good Y is $40, what is the vertical intercept
of the budget line?
A. 8,000
B. 20
C. 1/5
D. 5
The seller side of the market is known as the:
A. income side.
B. demand side.
C. supply side.
D. seller side.
Which of the following measures market power?
A. Lerner index.
B. Herfindahl-Hirschman index.
C. Rothchild index.
D. Lerner index and Rothchild index.
Suppose option A has a higher expected value than option B. Which of the following
statements is, in general, true?
A. A risk-averse person prefers option B to option A.
B. A risk-neutral person is indifferent between options A and B.
C. A risk-averse person prefers option A to option B.
D. Insufficient information to determine.
You are the manager of a firm that sells its product in a competitive market with market
(inverse) demand given by P = 50 – 0.5Q. The market equilibrium price is $50. Your
firm’s cost function is C = 40 + 5Q2. Your firm’s marginal revenue is:
A. $50.
B. MR(Q) = 10Q.
C. MR(Q) = 50 – Q.
D. There is insufficient information to determine the firm’s marginal revenue.