When an effective price ceiling is in place
A. every consumer is better off.
B. every consumer is worse off.
C. some consumers are better off and others are worse off.
D. on average the net change in consumer surplus is zero.
John is a seller in an independent private-values auction environment where bidders are
risk neutral. Which auction yields John the greatest expected revenue?
A. English
B. First price
C. Second price
D. All of the choices are revenue equivalent.
Which of the following statements is incorrect?
A. As the population rises, the market demand curve shifts to the right.
B. As a greater fraction of the population becomes elderly, the demand for medical
services will tend to increase.
C. Changes in the composition of the population affect the demand for a product.
D. None of the statements associated with this question are incorrect.
Which of the following is an example of a network?
A. Wireless telephone service
B. Railroads
C. Internet
D. All of the examples associated with this question are networks.
The price-cost squeeze is:
A. a tactic used by a vertically integrated firm to raise rivals costs of inputs, while
maintaining final product prices.
B. a strategy whereby a firm temporarily prices below its marginal costs to drive
competitors out of the market.
C. a strategy whereby an incumbent maintains a price below the monopoly price in
order to prevent entry.
D. the act of charging a low price initially upon entering a market to gain market share.
A firm manager with vertical indifference curves (output on the horizontal axis, profit
on the vertical axis) views:
A. only profits to be “goods.”
B. only output to be “goods.”
C. both profits and outputs to be “goods.”
D. None of the statements is correct.
The average consumer at a firm with market power has an inverse demand function of P
= 10 – Q. The firms cost function is C = 2Q. If the firm engages in two-part pricing,
what is the optimal fixed fee to charge each consumer?
A. $2
B. $32
C. $64
D. None of the answers are correct.
Which of the following is true?
A. In a one-shot game, a collusive strategy always represents a Nash equilibrium.
B. A perfect equilibrium occurs when each player is doing the best he can regardless of
what the other player is doing.
C. Each Nash equilibrium is a perfect equilibrium.
D. Every perfect equilibrium is a Nash equilibrium.
The special demand structure that induces a firm to use a cross-subsidization strategy is:
A. perfect substitution among products.
B. imperfect substitution among products.
C. independent demand for products.
D. interdependent demand for products.
Which of the following is true concerning negative externalities?
A. Firms tend to produce more than the efficient level of output.
B. Society gains because firms do not pay the external costs of production.
C. Perfect competition is better than monopoly from the viewpoint of society even in
the presence of negative externalities.
D. With negative externalities, a monopoly will always produce an output level less
than is socially efficient.
Which of the following is(are) basic feature(s) of a perfectly competitive industry?
A. Buyers and sellers have perfect information.
B. There are no transaction costs.
C. There is free entry and exit in the market.
D. All of the statements associated with this question are correct.
How does a decrease in the price of good X affect the market rate of substitution
between goods X and Y?
A. It increases.
B. It decreases.
C. It remains unchanged.
D. Indeterminable without more information.
When there are economies of scope between two products which are separately
produced by two firms, merging into a single firm can:
A. accomplish an increase in sales.
B. accomplish a reduction in costs.
C. lead to an increase in cost.
D. lead to a reduction in sales.
The figure below presents information for a one-shot game.
What are secure strategies for firm A and firm B respectively?
A. (low price, high price)
B. (high price, low price)
C. (high price, high price)
D. (low price, low price)
Variable factors of production are the inputs that a manager:
A. may adjust in order to alter sales.
B. may adjust in order to alter production.
C. cannot adjust in the short run.
D. cannot adjust in the long run.
If money income triples and the price of all goods doubles, then the:
A. budget line remains unchanged.
B. consumer is worse off due to inflation.
C. consumer will buy more of normal goods.
D. budget line will shift in.