Archives: Quiz

The following questions are based on the following data for a monopolist: The profit-maximizing price is a. above $5. b. $5. c. between $4.50 and $5. d. below $4.50. e. impossible to determine; more information is needed. For a market […]

Balancing the government’s budget every year a. is necessary because all debts eventually come due. b. is a fundamental tenet of Keynesian economics. c. is sensible for the same reasons as is balancing the family budget. d. makes it difficult […]

People who always choose not to participate in fair games are called a. risk takers. b. risk averse. c. risk neutral. d. broke. Suppose that the two persons in an exchange economy (A and B) have utility functions given by […]

A natural monopoly a. is a monopoly in the production of raw materials. b. occurs when one firm can supply the entire market more cheaply than can a number of firms. c. is one result of a patent. d. necessarily […]

Continue to suppose as in the previous question that the utility function for each of the firm’s 5 workers is where l is hours worked and w is the wage. Suppose now that the firm can only monitor the total […]

In an exchange economy A‘s utility is given byUA = x + yand B‘s byUB = min[x, 2y].The initial endowment for A is x = 10 y = 8 and for B, x = 8 y = 4. To reach […]

Which of the following “externalities” does not distort the allocation of resources? I. An individual’s unwillingness to cut his or her own lawn in an otherwise immaculately kept neighborhood. II. Smoke produced by a new firm in an area which […]

The input demand functions that can be derived from cost functions are referred to as “contingent” demand functions because the functions: a. assume input costs are constant. b. express input demand as a function of output. c. depend on the […]

If the demand curve a firm faces shifts to the right, usually a. it would be impossible to tell whether the marginal revenue curve shifts. b. the marginal revenue curve would shift to the left. c. the marginal revenue curve […]

Externalities between two firms can be “internalized” if: I. The two firms merge. II. Bargaining costs are zero. III. The externalities affect each firm equally. IV. Marginal costs for both firms are constant. Which statement(s) correctly complete the sentence? a. […]

An individual has a utility function for tennis rackets (x) and tennis balls (y) of the form U(x, y) = min (3x, y). His or her expenditure function is given by a. . b. . c. . d. . A […]

For the Cobb-Douglas utility function with two goods, the sum of the own price elasticities of demand must be a. 0. b. -1. c. -2 d. any number between 0 and -4. Two goods are Hicksian (net) substitutes if a […]

Which of the following benefits of diversification explains the idea that combining unrelated businesses can allow firms to finance projects through cross-subsidization when they previously were unable to finance the same projects externally? a) Use of internal capital markets b) […]

Which of the following terms best describes how a firm uses a division of labor to organize tasks, specify how its staff performs tasks, and facilitate internal and external information flows? a) Organizational structure b) Formal and informal firm arrangements […]

Which of the following terms best describes the situation when sources of competitive advantage in an industry are being created and eroded at an increasingly rapid rate? a) Leveraging resourcesb) Strategic intent c) Strategic stretch d) Hypercompetition e) Global dominance […]

What economics game theory concept is demonstrated by the Erie Canal public works project? a) Nash equilibrium b) Lock-in c) Backwards induction d) Fair division e) Prisoner’s dilemma What term best refers to a wage payment made to an agent […]

Which of the following is not an impediment to imitation? a) Legal restrictions b) Superior access to inputs or customers c) Scale diseconomies d) Market size economies e) Intangible barriers: casual ambiguity, dependence on historical circumstances, and social complexity Which […]

Which of the following statements is true about a tough commitment? a) It is good for competitors b) It is bad for competitors c) In Cournot competition, elimination of production facilities is an example of a tough commitment d) In […]

Which of the following best describes marginal cost? a) The per-unit-of-output cost for a product b) The incremental cost of producing one more unit of output. c) A cost invariant to the firm’s output d) The sum of all costs […]

The movement of inputs and outputs through a production process is known as which of the following? a) Coordination b) Input-output c) Integration d) Throughput e) Systemology What institution within a firm must fail on some level for managers to […]

Cooperative pricing is helped by which of the following situations? a) Price following b) Advance announcement of price changes c) Price leadership d) Most favored customer clauses e) Uniform delivered prices Select the letter corresponding to the best answer. For […]

Which of the following terms describes the situation created by a large dominant firm where smaller firms can find buyers as long as they sustain a lower price? a) Price umbrella b) Price leading c) Predatory pricing d) Premium pricing […]

If a firm is producing as efficiently as it knows how, then how will the total cost function slope? a) Upward b) Downward c) No Slope d) Downward until an output threshold value, then upward e) Upward until an output […]

Which of the following commitment strategies involves soft commitment postures, strategic complements for the stage 2 tactical variables, a refrain commitment action and an acceptance of the status quo out of fear thus waiting to follow the leader? a) Top […]

When firms encounter problems that differ according to their difficulty and frequency it is known as: a) A problem set b) Knowledge hierarchy c) Agency collection d) Organizational collection e) None of the above Which of the following terms involves […]

Which of the following best describes a focus strategy? a) When a firm either offer a narrow set of varieties, serve a narrow set of customers, or do both b) When a firm sells products manufactured with raw materials from […]

What is the gaizhi process? a) Valuing assets according to their earnings b) A state-owned enterprise and private enterprise entering a joint venture c) An increase of profitability prior to sale d) Acquisition of large firms by private organizations e) […]

Money market mutual funds are ______ the M1 measure of money and ______ the M2 measure of money. A. included in; excluded from B. included in; included in C. excluded from; excluded from D. excluded from; included in The Smart […]

According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to ______ in inflation. A. a less than proportional increase B. a less than proportional decreases C. the same percentage increase […]

During the 1960s and 1970s, the U.S. trade balance was close to zero, but during the 1980s, the trade deficit ballooned to unprecedented levels due to: A. an inability of U.S. companies to compete in the international market. B. a […]

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), the demand: A. becomes more price elastic. B. increases. C. decreases. D. becomes less price elastic. A crowded […]

The difference between the price of electronic equipment in a retail store and on the Internet reflects in part A. the extent to which middlemen drive the price up for extra profit. B. the lack of competition between brick and […]

For a given inflation rate, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the ______ shifts _____. A. aggregate demand curve; right B. aggregate demand curve; left C. aggregate supply […]

An example of a government policy to increase physical capital formation is: A. the construction of an interstate highway system. B. government support for basic research. C. maintaining a well-functioning legal system. D. the provision of publicly-funded education. You expect […]

The following table provides information about production at the XYZ-TV Company. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $60,000? A. 0 B. 4 C. 5 D. More than 5 One […]

The growth of lawsuits seeking compensation from firms when a worker is injured should serve to A. reduce the firm’s incentive to improve safety. B. increase the worker’s incentive to get injured. C. increase the firms’ incentive to improve safety. […]

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, the mpc equals 0.9, and potential output (Y*) equals 9,000, then taxes must be increased by approximately ______ to eliminate any output gap. A. 90 B. 100 C. 111 […]

Two types of existing houses are for sale: ones with a cracked foundation and ones without. In all other respects, they are identical. Houses without cracked foundations are worth $200,000 while those with cracked foundations are worth $200,000 minus the […]

If firms sell more output than expected, planned investment: A. is greater than actual investment. B. is less than actual investment. C. equals actual investment. D. equals zero. Assume that Dusty has $30 in income, the price of a loaf […]

The price of a gallon of gasoline was $0.35 in 1972 when the CPI equaled 0.418. The cost of a gallon of gasoline was $2.25 in 2005 when the CPI equaled 1.68. The real cost of a gallon of gasoline […]

Bob’s Barber Shop cut 3,000 heads of hair in 2009 and 3,100 in 2010. The price of a haircut was $7 in 2009 and $8 in 2010. If 2009 is the base year, what was Bob’s contribution to nominal GDP […]

If the real interest rate is 3% and the inflation rate is 7%, then the nominal interest rate equals: A. 3%. B. 4%. C. 7%. D. 10% This graph shows the cost functions of Moe’s mushroom gathering business, which is […]

In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y – 20,000r, the interest rate is currently 5 percent (0.05). If potential output equals 11,750, the central bank must ______ the interest rate to close […]

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is: A. $20. B. $24. C. $22. D. $480. […]

From the individual’s standpoint, participating in a positional arms race is a _________. From society’s point of view, it is __________. A. dominant strategy; efficient B. tit-for-tat strategy; efficient C. dominant strategy; inefficient D. tit-for-tat strategy; inefficient Assume that all […]

A police department is trying to allocate crime control resources between murder and burglary. Detectives cost $40,000 each. Suppose that she marginal benefit of one less murder is $20,000 while the marginal benefit of one less burglary is $1,000. The […]

Okun’s law expresses the relationship between: A. unemployment and inflation. B. frictional unemployment and structural unemployment. C. money and velocity. D. cyclical unemployment and the output gap. Suppose males place less importance on the social approval of their job and […]

Policymakers’ use of stabilization policy to eliminate output gaps is more appropriate when an economy self corrects very ______ and when the output gap is very ____. A. rapidly; large B. rapidly; small C. slowly; small D. slowly; large A […]

Two firms can choose from five different technologies to reduce their pollution: A, B, C, D and E. The amount of pollution emitted by each technology and the cost of the technologies are shown in the table. Both firms have […]

The long-run average annual growth of real GDP per person is the United States is approximately ______ percent. A. one B. two C. five D. seven Refer to the figure above. If the market is unregulated, the value of producer […]