Suppose each of the 50 states had only one gasoline station, and all stations were the
same size. The four-firm concentration ratio for the state of New York, based on the
state data, is:
A. 1.0
B. 0.08
C. 0.32
D. 0.16
Management and a labor union are bargaining over how much of a $100 surplus to give
to the union. The $100 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 $100. Which of the following is NOT a Nash equilibrium?
A. Management requests $50 and the labor union accepts $50.
B. Management requests $70 and the labor union accepts $20.
C. Management requests $100 and the labor union accepts $0.
D. Neither management requesting $100 and the labor union accepting $0 nor
management requesting $70 and the labor union accepting $20 are Nash equilibria.
The first-order condition for a monopoly maximizing its profit is:
A. P – (dC(Q)/dQ) = 0.
B. (dR(Q)/dQ) – (dC(Q)/dQ) = 0.
C. (dR(Q)/dQ) – (dC(Q)/dQ) < 0.
D. (d2R(Q)/dQ2) – (d2C(Q)/dQ2) < 0.
Changes in the price of other goods lead to
A. a change in quantity demanded.
B. a change in demand.
C. no change in the demand curve.
D. a movement along the demand curve.
Suppose the demand for good X is given by Qd
x = 10 + axPx + ayPy + aMM. If ay is
positive, then:
A. goods y and x are complements.
B. goods y and x are inferior goods.
C. goods y and x are normal goods.
D. goods y and x are substitutes.
Over the past 20 years, the 12 members of the Organization of Petroleum Exporting
Countries have made repeated attempts to restrict output in order to maintain high crude
oil prices. Between 1990 and 1995, however, crude oil prices dropped by about 20
percent, due in part to increased production from the former Soviet Union, Latin
America, Asia, and the North Sea. In light of these increases in oil production from
non-OPEC countries, what must OPEC do to maintain the price of oil at its desired
level? Do you think this will be easy for OPEC to do? Explain.
If one more user is added to a two-way network, it will generally:
A. benefit the new user more than the existing users.
B. benefit existing users more than the new user.
C. provide equal benefits to existing users and the new user.
D. unable to tell, because this analysis depends on the type of industry.
If firms are in Cournot equilibrium, they could increase profits by:
A. jointly increasing output.
B. jointly reducing output.
C. unilaterally increasing prices.
D. unilaterally reducing prices.
For the cost function C(Q) = 100 + 4Q + 19Q2 + 2Q3, what is the marginal cost of
producing the fourth unit of output?
A. $42
B. $295
C. $252
D. $116
A decrease 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.
Holding the mean constant, the larger the standard deviation, the ____________ the
gamble will be.
A. more risky
B. less risky
C. higher utility
D. None of the statements is correct.
While at a discount shoe store, a customer asked a clerk, “I see that your shoes are buy
one, get one free-limit one free pair per customer. Will you sell me one pair for half
price?” The clerk answered, “I cant do that.” When the customer started to leave the
store, the clerk hastily offered, “However, I am authorized to give you a 40 percent
discount on any pair in the store.” Assuming the consumer has $200 to spend on shoes
(X) or all other goods (Y), and that shoes cost $100 per pair, answer the following
questions:a. Illustrate the consumers opportunity set with the “buy one, get one free”
deal and with a 50 percent discount.b. Why was the 40 percent discount offered only
after the consumer rejected the “buy one, get one free” deal and started to leave the
store?c. Why was the clerk willing to offer a “buy one, get one free” deal, but unwilling
to sell a pair of shoes for half price?
The external marginal cost of producing coal is MCexternal = 8Q while the internal
marginal cost is MC internal = 6Q. The inverse demand for coal is given by P = 180 – 4Q.
What is the socially efficient level of output?
A. 10
B. 20
C. 15
D. 18
If a monopolist claims his profit-maximizing markup factor is 3, what is the
corresponding price elasticity of demand?
A. -1.5.
B. -2.0.
C. -2.5.
D. -3.0.