Relationship-specific investments include:
A. site specificity.
B. dedicated assets.
C. human capital.
D. All of the statements associated with this question are correct.
Which of the following is NOT a type of specialized investment?
A. Site specificity
B. Physical-asset specificity
C. Human capital
D. All of the statements associated with this question are types of specialized
investments.
Spot exchange typically involves:
A. no transaction costs.
B. some transaction costs.
C. extremely high transaction costs.
D. long-term contracts.
Suppose the w = $20 and r = $30. The isocost line for a firm in this industry is:
A. C = 20K + 30L.
B. K = 0.033C – 0.66L.
C. 1.5L + K = 0.5C.
D. Depends entirely on the functional form of the production function.
Suppose each of the 50 states had only one gasoline station, and all stations were the
same size. The four-firm concentration ratio, based on national data, would be:
A. 0.08
B. 0.16
C. 0.32
D. 1.0
Suppose that consumers’ preferences are well behaved in that properties 4-1 to 4-4 are
satisfied. Furthermore, assume that both X and Y are normal goods and that the price of
good Y decreases. Then, which of the following effects is known with certainty?
A. The income and substitution effects reinforce one another, leading to an overall
increase in the consumption of good X.
B. The income and substitution effects reinforce one another, leading to an overall
decrease in the consumption of good X.
C. The income and substitution effects will have competing effects, leading to an
indeterminate impact on the consumption of good X.
D. The income and substitution effects will reinforce one another, leading to an overall
increase in the consumption of good Y.
A perfectly competitive firm faces a:
A. perfectly elastic demand function.
B. perfectly inelastic demand function.
C. demand function with unitary elasticity.
D. None of the answers is correct.
Firm managers should use inputs at levels where the:
A. Marginal benefit equals marginal cost.
B. Price equals marginal product.
C. Value marginal product of labor equals wage.
D. Marginal benefit equals marginal cost and value marginal product of labor equals
wage.
If a firm offers to pay a worker $10 for each hour of leisure the worker gives up, then
the opportunities confronting the worker will be given by the:
A. convex curve from the origin.
B. concave curve from the origin.
C. straight line with a negative slope.
D. straight line with a positive slope.
Smyth Industries operated as a monopolist for the past several years, earning annual
profits amounting to $50 million, which it could have maintained if Jones Incorporated
did not enter the market. The result of this increased competition is lower prices and
lower profits; Smyth Industries now earns $10 million annually. The managers of
Smyth Industries are trying to devise a plan to drive Jones Incorporated out of the
market so Smyth can regain its monopoly position (and profit). One of Smyth’s
managers suggests pricing its product 50 percent below marginal cost for exactly one
year. The estimated impact of such a move is a loss of $1 billion. Ignoring antitrust
concerns, compute the present value of Smyth Industries’ profits if it remains a
duopolist in this market when the interest rate is 5 percent.
A. $100 million
B. $200 million
C. $210 million
D. $1.05 billion
The marginal rate of technical substitution:
A. determines the rate at which a producer can substitute between two inputs in order to
increase one additional unit of output.
B. is the absolute value of the slope of the isoquant.
C. is the absolute value of marginal revenue.
D. is constant along the isoquant curve.
In the text, we showed that the multiproduct cost function exhibits cost
complementarity whenever and economies of scope whenever
a. Can cost complementarity exist without economies of scope?
b. Can there be economies of scope when cost complementarities exist?
Refer to the payoff matrix below.
The dominant strategy of Player 1 is:
A. S1.
B. S2.
C. S1 and S2.
D. A dominant strategy does not exist.