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 Stackelberg leader’s marginal revenue function is:
A. MR(QL) = 50 – 2QL + c1/2.
B. MR(QL) = 50 – 2QL + c2/2.
C. MR(QF) = 100 – 2QF + c1/2.
D. MR(QF) = 100 – QF + c2/2.
For the cost function C(Q) = 50 + 4Q + 2Q2, the total variable cost of producing 7 units
of output is:
A. 32
B. 102
C. 126
D. None of the answers are correct.
Suppose that Verizon Wireless has hired you as a consultant to determine what price it
should set for calling services. Suppose that an individual’s inverse demand for wireless
services in the greater Boston area is estimated to be P = 100 – 33Q and the marginal
cost of providing wireless services to the area is $1 per minute. What is the optimal
two-part price that you would suggest to Verizon?
A. Charge a fixed fee = $95.5 and a usage fee of $1 per minute.
B. Charge a fixed fee = $3 and a usage fee of $0.33 per minute.
C. Charge a fixed fee = $148.50 and a usage fee of $1 per minute.
D. Charge a fixed fee = $3 and a usage fee of $3 per minute.
Which of the following is a true statement about the process of cross-subsidization,
given that a firm is selling two products?
A. The two products cannot have interdependent demand functions.
B. The firm will sell both of its products at prices set above costs.
C. The firm needs cost complementarities in the production of the two goods.
D. The firm will sell both of its products at prices set above costs and the firm needs
cost complementarities in the production of the two goods.
Total costs in the table are:
A. decreasing at a constant rate.
B. decreasing at a decreasing rate.
C. increasing at a constant rate.
D. increasing at an increasing rate.
The feasible means of converting raw inputs such as steel, labor, and machinery into an
output are summarized by:
A. Land.
B. Production.
C. Capital.
D. Technology.
Which of the following is NOT an example of a network?
A. Airlines
B. Trucking
C. Telecommunications
D. None of the statements are correct.
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.
Which of the following pairs of strategies constitutes a Nash equilibrium?
A. Manager monitors and worker works.
B. Manager does not monitor and worker works.
C. Manager monitors and worker shirks.
D. None of the answers is correct.
The Cournot theory of oligopoly is based on the assumption that each firm believes that
rivals will:
A. keep their output constant if it changes its output.
B. increase their output whenever it increases its output.
C. decrease their output whenever it increases its output.
D. randomly change output whenever it changes its output.
A network linking eight users is typically:
A. less likely to exhibit bottlenecks than a network linking two users.
B. more than four times as valuable as a network linking two users.
C. four times as valuable as a network linking two users.
D. less than four times as valuable as a network linking two users.
Given that income is $750 and PX = $32 and PY = $8, what is the market rate of
substitution between goods X and Y?
A. -0.75
B. -3
C. -4
D. -25
If an increase in the price of good X leads to an increase in the consumption of good Y,
then goods X and Y are called:
A. substitutes.
B. complements.
C. normal goods.
D. inferior goods.
An industry is comprised of 20 firms, each with an equal market share. What is the
four-firm concentration ratio of this industry?
A. 0.2
B. 0.4
C. 0.6
D. 0.8
A firm might choose to produce its own inputs if:
A. specialized investment is not important.
B. long-term contracts are costly to write.
C. the exchange environment is not complex.
D. spot markets for the input exist.
When a manager enters the workplace from time to time to monitor workers, he is
using:
A. a profit-sharing plan.
B. spot checks.
C. a revenue-sharing plan.
D. a piece-rate payment plan.
An excise tariff is:
A. a fixed fee that an importing firm must pay the domestic government in order to
have the legal right to sell the product in the domestic market.
B. the fee an importing firm must pay to the domestic government on each unit it brings
into the domestic market.
C. a restriction limiting the quantity of imported goods that can legally enter a domestic
market.
D. None of the statements are correct.
A monopoly produces widgets at a marginal cost of $10 per unit and zero fixed costs. It
faces an inverse demand function given by P = 50 – Q. The demand elasticity of a
widget at the monopoly price and quantity is:
A. -1.5
B. -2
C. -2.5
D. 2
What is the marginal cost associated with producing three units of the control variable,
Q (identify point E in the table)?
A. 50
B. 100
C. 200
D. 300