Archives: Quiz

Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are: A. convex to the origin. B. concave to the origin. C. L-shaped. D. linear. The manager institutes an incentive structure to ensure: A. workers are […]

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 […]

Rent seeking: A. results in less market share for the rent seekers. B. involves lobbyists influencing government policies to benefit their interests. C. results in more negative externalities. D. None of the statements are correct. For a wood furniture manufacturer, […]

The Leontief production function: A. implies inputs are used in variable proportions. B. implies inputs are used in fixed proportions. C. is Q = max{bK, cL}. D. is Q = aK + bL. Suppose two types of consumers buy suits. […]

You are a hotel manager and you are considering four projects that yield different payoffs, depending upon whether there is an economic boom or a recession. The potential payoffs and corresponding payoffs are summarized in the following table. If a […]

Which of the following is true about where a profit-maximizing monopoly will produce on a linear demand curve when it has positive marginal costs? A. It will produce output on the inelastic portion of the demand curve. B. It will […]

You are the owner of a new network that is superior to an existing two-way network. The network you aim to replace currently has 50 users, each of whom is willing to pay an average of $75,000 for each connection […]

A negative side of long-term contracts is: A. high transaction costs. B. a loss of flexibility. C. the continual need to renegotiate the contract. D. None of the statements is correct. Demand shifters do not include the A. price of […]

The figure below presents information for a one-shot game. What are the Nash equilibrium strategies for firm A and B respectively? A. (low price, high price) B. (high price, low price) C. (high price, high price) D. (low price, low […]

If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertises, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the […]

A firm will have constant profits of $100,000 per year for the next four years, and the interest rate is 6 percent. Assuming these profits are realized at the end of each year, what is the present value of these […]

Under limit pricing, the incumbent will produce: A. more than the monopoly output and charge a price that is greater than the monopoly price. B. less than the monopoly output and charge a price that is greater than the monopoly […]

The domestic demand and supply for sugar are Qd = 60,000 – 400P and QSD = 20,000 + 500P. The foreign supply is QSF = 20,000 + 100P. What is the domestic market price of sugar? A. $15 B. $20 […]

Suppose that production for good X is characterized by the following production function, Q = 4K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $12 and the per-unit wage, […]

The total earnings of a worker are represented by E = 100 + $10(24 – L), where E is earnings and L is the number of hours of leisure. How much will the worker earn if he takes 14 hours […]

As additional consumers obtain the benefits of a pure public good, such as national defense, the benefits to the existing consumers will: A. decrease. B. increase. C. stay the same. D. increase in the short run, but decrease in the […]

The domestic demand and supply for sugar are Qd = 60,000 – 400P and QSD = 20,000 + 500P. The foreign supply is QSF = 20,000 + 100P. Suppose an import quota of 13,000 is imposed in the domestic market. […]

Suppose market demand and supply are given by Qd = 100 – 2P and QS = 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total […]

The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of: A. fixed factors of production. B. variable factors of production. C. all factors of production. D. sunk cost factors […]

The inverse demand curve for a Stackelberg duopoly is P = 10,000 – 6Q. The leaders cost structure is CL(QL) = 15QL. The followers cost structure is CF(QF) = 25QF.a. Determine the reaction function for the follower.b. Determine the equilibrium […]

The industry elasticity of demand for gadgets is -2, while the elasticity of demand for an individual gadget manufacturers product is -2. Based on the Rothschild approach to measuring market power, we conclude that: A. there is little monopoly power […]

Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm As product. If firm A introduces and B clones, then firm A earns […]

In a competitive market, the market demand is Qd = 400 – 5P and the market supply is Q = 10P – 80. The full economic price under a price ceiling of $25 is A. 46 B. 37 C. 32 […]

The production function in the table below exhibits negative marginal returns to capital over what output range? A. Between 0 and 1,524 B. Between 0 and 2,991 C. Between 2,391 and 3,048 D. Between 3,016 and 2,945 Consider a monopoly […]

Refer to the figure below. Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $150. Based on this information, the optimal contract length should be: A. increased by half. B. […]

Suppose a monopoly faces an inverse demand curve of P = 100 – 2Q and has constant marginal cost of 6Q. If the government is considering legislation that would regulate price to the competitive level, what is the maximum amount […]

Which cost measures the pollution cost to society? A. Internal cost B. External cost C. Social cost D. External cost and social cost Pricing is an aspect of a firms: A. performance. B. structure. C. conduct. D. environment. Answer: C. […]

A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee.a. Are Sues preferences consistent with our assumptions about consumer […]

Which combination of the following properties rules out indifference curves that intersect one another? A. Completeness and diminishing marginal rate of substitution B. Transitivity and more-is-better C. More-is-better and diminishing marginal rate of substitution D. Completeness and more-is-better Which of […]

Suppose market demand and supply are given by Qd = 300 – 4P and QS = -50 + 3P. The equilibrium quantity is: A. 100 B. 80 C. 115 D. 120 You are the manager of a firm that produces […]

The manager of a meat-packing plant can use either butchers (labor) or meat saws (capital) to prepare packages of sirloin steak. Based on estimates provided by an efficiency expert, the firms production function for sirloin steak is given by Q […]

Suppose that there are two types of cars, good and bad. The qualities of cars are not observable but are known to the sellers. Risk-neutral buyers and sellers have their own valuation of these two types of cars as follows: […]

The primary inducement for new firms to enter an industry is: A. increased technology. B. availability of labor. C. low capital costs. D. presence of economic profits. Transaction costs refer to: A. fixed costs of capital. B. variable costs of […]

Suppose a firm has 10 employees, all of whom desire a more pleasant work environment. Accordingly, they are considering removing litter from the grounds of the plant. Each employee has an inverse demand for “clean grounds” of P = 100 […]

Suppose the market for good X has a four-firm concentration ratio of 0.70. Having worked for the four largest firms in the industry, you know the sales for these four firms are given by $2,000,000, $2,250,000, $2,500,000, and $2,750,000. Based […]

If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use: A. less capital and more labor. B. less labor and […]

The winners curse occurs: A. only in English auctions. B. only in second-price, sealed-bid auctions. C. in a common-values auction. D. in a private-values auction. Negotiations between the buyer and seller of a new house are an example of: A. […]

Consider the monopoly in the figure below with price regulated at $2 per unit. In this market, ___________ units will be exchanged. A. 3 B. 4 C. 5 D. 8 Suppose that initially the price is $50 in a perfectly […]

If a producer offers a price that is in excess of a consumers valuation of the good, the consumer: A. must buy the good at that price. B. will refuse to purchase the good. C. must revalue the good. Which […]

In Gelate, Pennsylvania, the market for compact discs has evolved as follows: There are two firms that each use a marquee to post the price they charge for compact discs. Each firm buys CDs from the same supplier at a […]

If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the […]

The opportunity cost of an action is the: A. monetary payment the action required. B. value of the most highly valued alternative action given up. C. cost of all alternative actions that could have been taken. D. None of the […]

Jane pays the market price of $69 for a new pair of running shoes, even though she would be happy to pay a maximum of $100 for the same pair of shoes. This is an example of the concept of […]

Joes search costs are $5 per search. He wants to buy a video player for his wife for Christmas, and the lowest price hes found so far is $300. Joe thinks 80 percent of the stores charge $300 for video […]

Which of the following raises domestic prices only when demand is relatively low? A. Domestic subsidies B. Lump sum tariff C. Excise tariff D. Lump sum tariff and excise tariff There are two existing firms in the market for computer […]

Other things held constant, the lower the price of a good A. the lower the demand. B. the higher the demand. C. the greater the consumer surplus. D. the lower the consumer surplus. If the interest rate is 4 percent, […]

Economic profits are: A. total revenue minus total cost. B. marginal revenue minus marginal cost. C. total revenue minus total opportunity cost. D. total profits of the economy as a whole. Which of the following is a strategy that can […]

As firms increase in size, they tend to experience a: A. decrease in the need for managers. B. decrease in transaction costs. C. loss of opportunity cost. D. None of the answers are correct. Piece rates are typically a solution […]

Suppose the cost function for your firm is: C = 50 + 4Q + 2Q2.a. What is the average fixed cost of producing 5 units of output?b. What is the average variable cost of producing 5 units of output?c. What […]

Which of the following are signals to the owners of scarce resources about the best uses of those resources? A. Profits of businesses B. Government regulations C. Economic indicators D. The accounting cost of those resources Which of the following […]