Quiz

Changes in the price of good A leads to:

Selected Answer:a change in the quantity demanded of good A.

Correct Answer:a change in the quantity demanded of good A.

Question 21 out of 1 points

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

Selected Answer:consumer surplus.

Correct Answer:consumer surplus.


If the price of good X decreases, what will happen to the budget line?

Selected Answer:It will become flatter.

Correct Answer:It will become flatter.


Suppose earnings are given by E = $60 + $7(24 L), where E is earnings and L is the hours of leisure. What is the price to the worker of consuming an additional hour of leisure?

Selected Answer:$7.

Correct Answer:$7.


In the long-run, perfectly competitive firms produce a level of output such that:

Selected Answer:both a and b.

Correct Answer:both a and b.


You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q2. The profit-maximizing output for your firm is

Selected Answer:5.

Correct Answer:5.


A downward sloping, linear demand function exhibits:

Selected Answer:more elastic demand as output increases.

Correct Answer:less elastic demand as output increases.



Selected Answer:10.

Correct Answer:10.


In a competitive industry with identical firms, long run equilibrium is characterized by

Selected Answer:All of the above.

Correct Answer:All of the above.


You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q2. Your firm's maximum profits are

Selected Answer:85.

Correct Answer:85.


When marginal cost curve is below an average cost curve, average cost is

Selected Answer:declining with output.

Correct Answer:declining with output.


You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL= 4, and MPK= 40:

Selected Answer:the firm should use more K and less L to cost minimize.

Correct Answer:the firm should use more K and less L to cost minimize.


When the own price elasticity of good X is -3.5 then total revenue can be increased by

Selected Answer:decreasing the price.

Correct Answer:decreasing the price.


If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross price-elasticity of apple sauce and pork chops at a pork chop price of $6?

Selected Answer:-.1.17.

Correct Answer:-.1.17.

The demand for good X is estimated to be Qxd= 10,000 - 4PX+ 5PY+ 2M + AX,where PXis the price of X, PYis the price of good Y, M is income and AXis the amount of advertising on X. Suppose the present price of good X is $50, PY= $100, M = $25,000, and AX= 1,000 units. What is the own-price elasticity of demand for good X?

Selected Answer:-0.003.

Correct Answer:-0.003.


The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded?

Selected Answer:It will increase 6%.

Correct Answer:It will increase 6%.


The difference between a price increase and a decrease in income is that

Selected Answer:A decrease in income does not affect the slope of the budget line while an increase in price does change the slope.

Correct Answer:A decrease in income does not affect the slope of the budget line while an increase in price does change the slope.


If you are in the business of selling chicken and the price of selling chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?

Selected Answer:increase the inventory.

Correct Answer:increase the inventory.


In a competitive industry with identical firms, long run equilibrium is characterized by





Selected Answer:10

Correct Answer:10


Let the demand function for a product be Q = 100 - 2P. The inverse demand function of this demand function is:

Selected Answer:P = 50 - 0.5Q.

Correct Answer:P = 50 - 0.5Q.


You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 50 + 3Q2. Your firm's maximum profits are

Selected Answer:250.

Correct Answer:250.


A perfectly competitive firm faces:

Selected Answer:a perfectly elastic demand function.

Correct Answer:a perfectly elastic demand function.



Selected Answer:10.

Correct Answer:10.


Suppose the cost function is C(Q) = 50 + Q - 10Q2+ 2Q3. What are the fixed costs?

Selected Answer:$50.

Correct Answer:$50.


For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is

Selected Answer:14.

Correct Answer:14.


The supply function for good X is given byQxs= 1,000 + PX- 5 PY- 2PW, where PXis the price of X, PYis the price of good Y and PWis the price of input W. If the price of input W increases by $10, then the supply of good X

Selected Answer:none of the above.

Correct Answer:none of the above.


An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline, would shift the supply curve

Selected Answer:up by $1.00.

Correct Answer:up by $1.00.

Tuesday, February 3, 2015 9:14:48 PM EST

The supply function for good X is given byQxs= 1,000 + PX- 5 PY- 2PW, where PXis the price of X, PYis the price of good Y and PWis the price of input W. If PX= 100, PY= 150 PW= 50, then the supply curve is

Selected Answer:Qxs= 150 + Px.

Correct Answer:Qxs= 150 + Px.


Suppose market demand and supply are given by Qd= 100 - 2P and QS= 5 + 3P. The equilibrium price is:


Correct Answer:$19.


Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

Selected Answer:The marginal product per dollar spent on all inputs are equal.

Correct Answer:a and b.


Suppose that initially the price is $50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently and some firms leave the industry and the industry returns back to a long run equilibrium. What will be the new equilibrium price, assuming a constant cost industry (horizontal long run supply curve)?


Correct Answer:$50.


Firms have market power in:

Selected Answer:monopolistic markets.

Correct Answer:both b and c.


Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

Selected Answer:Long run economic profits are zero.



A monopoly has two production plants with cost functions C1= 50 + 0.1 Q12and C2= 30 + 0.05 Q22. The demand it faces is Q = 500 - 10 P. What is the condition for profit maximization?

Selected Answer:MC1(Q1) = MC2(Q2) = MR(Q1+ Q2).

Correct Answer:MC1(Q1) = MC2(Q2) = MR(Q1+ Q2).


Which of the following isnota basic feature of a monopolistically competitive industry?

Selected Answer:Each firm owns a patent on its product.

Correct Answer:Each firm owns a patent on its product.


You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profit-maximizing output for your firm is

Selected Answer:8.

Correct Answer:8.



Selected Answer:10

Correct Answer:10


What is the horizontal intercept of the budget line, given that M = $1,000, PX= $50, and PY= $40?

Selected Answer:20.0.

Correct Answer:20.0.


The demand for which of the following commodities is likely to be more inelastic?

Selected Answer:Beverages.

Correct Answer:Beverages.

1 out of 1 points

We would expect the demand for jeans to be:

Selected Answer:more elastic than the demand for clothing.

Correct Answer:more elastic than the demand for clothing.


You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q2. What level of profits will you make in the short-run?


Correct Answer:$40.


In a competitive market, the market demand is Qd= 70 - 3P and the market supply is Qs= 6P. A price ceiling of $4 will result in

Selected Answer:A shortage of 34 units.

Correct Answer:A shortage of 34 units.


Suppose market demand and supply are given by Qd= 100 - 2P and QS= 5 + 3P. If a price ceiling of $15 is imposed,

Selected Answer:there will be a shortage of 20 units.

Correct Answer:there will be a shortage of 20 units.


Changes in the price of an input cause:

Selected Answer:Slope changes in the isocost line.

Correct Answer:Slope changes in the isocost line.


The marginal rate of substitution (MRS) determines the rate at which a consumer is willing to substitute between two goods in order to achieve

Selected Answer:the same level of satisfaction.

Correct Answer:the same level of satisfaction.


Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market."

Selected Answer:The statement is incorrect.

Correct Answer:The statement is incorrect.


You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profit-maximizing price is

Selected Answer:33.

Correct Answer:33.


You are the manager of a monopoly that faces an inverse demand curve described by P = 200 - 15Q. Your costs are C = 15 + 20Q. The profit-maximizing price is


Correct Answer:$110.


Suppose that initially the price is $50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently and some firms leave the industry and the industry returns back to a long run equilibrium. What will be the new equilibrium price, assuming a constant cost industry (horizontal long run supply curve)?


Correct Answer:$50.


What contributes to the existence of multiproduct firms?

Selected Answer:both b and c.



A firm has a total cost function of C(Q) = 75 + 25Q1/2. The firm experiences

Selected Answer:economies of scale.

Correct Answer:economies of scale.

Which of the following is true?

Selected Answer:In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period.

Correct Answer:In a finitely repeated game with a certain end period, collusion is unlikely because effective punishments cannot be used during any time period.


If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertise, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non advertising firm will earn $5 million. If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever) then a Nash equilibrium is

Selected Answer:for each firm to never advertise.

Correct Answer:for each firm to never advertise.


Collusion is:




The substitution affect isolates the change in the consumption of a good caused by:

Selected Answer:the change in the market rate of substitution.

Correct Answer:the change in the market rate of substitution.


Which of the following is not a means of acquiring product and process innovations?

Selected Answer:Mass production of the existing product.

Correct Answer:Mass production of the existing product.


Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 80 - 4Q. The cost function for each firm is C(Q) = 8Q. The price charged in this market will be

Selected Answer:$32

Correct Answer:$32


Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output. Given that firm two commits to this collusive output, it pays firm one to

Selected Answer:cheat by producing a higher level of output.

Correct Answer:cheat by producing a higher level of output.


In the long-run, perfectly competitive firms produce a level of output such that:

Selected Answer:both a and b.



You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is

Selected Answer:5.

Correct Answer:5.


For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:

Selected Answer:shift to the right.

Correct Answer:shift to the right.


The demand for good X is given by lnQxd= 120 - 0.9 lnPx+ 1.5 lnPy- 0.7 lnM. Which of the following statements is correct?

Selected Answer:X has constant income elasticity.

Correct Answer:X has constant income elasticity

A price decrease causes a consumer's "real" income to:

Selected Answer:decrease.

Correct Answer:increase.


A monopolist claims his profit-maximizing markup factor is 10. What is the price elasticity of demand for the firm's product?




A firm with market power has an individual consumer demand of Q = 20 - 4P and costs of C = 4Q. What is the optimal price to charge for the optimal package size?


Correct Answer:$18.


After half-time, spectators are allowed to enter for free. This is an example of:

Selected Answer:peak-load pricing.

Correct Answer:all of the above.


The minimum wage

Selected Answer:is an example of floor price.

Correct Answer:is an example of floor price.


Which of the following isnota feature of Sweezy oligopoly?

Selected Answer:The firms produce differentiated products.

Correct Answer:Free entry and exit occurs in the market.



Selected Answer:5.

Correct Answer:5.


Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should

Selected Answer:use more labor and less capital.

Correct Answer:use more labor and less capital.


Differentiated goods are a feature of:

Selected Answer:a monopolistically competitive market.

Correct Answer:a monopolistically competitive market.


The price elasticity of demand is -2.0 for a certain firm's product. If the firm raises price, the firm manager can expect total revenue to

Selected Answer:increase.

Correct Answer:decrease.


Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $3 million in profits. If neither of you advertise, you will each earn $7 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $10 million and the non advertising firm will earn $1 million. If you and your rival plan to be in business for 15 years, then the Nash equilibrium is for

Selected Answer:neither firm to advertise in early years, but to advertise in later years.

Correct Answer:you and your rival to advertise every year.

A downward sloping, linear demand function exhibits:

Selected Answer:less elastic demand as output increases.

Correct Answer:less elastic demand as output increases.


What contributes to the existence of multiproduct firms?

Selected Answer:both b and c.



When analyzing the behavior of oligopolists, which of the following is crucial for the success of game theoretic analysis?

Selected Answer:Make sure the problem you are considering is of a one-shot or repeated nature, and you model it accordingly because the order in which players make decisions is important.

Correct Answer:Make sure the problem you are considering is of a one-shot or repeated nature, and you model it accordingly because the order in which players make decisions is important.


You are the manager of a supermarket, and know that the income elasticity of peanut butter is exactly -0.7. Due to the recession, you expect incomes to drop by 15% next year. How should you adjust your purchase of peanut butter?

Selected Answer:buy 10.5% more peanut butter.

Correct Answer:buy 10.5% more peanut butter.


The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views

Selected Answer:both profits and outputs to be "goods".

Correct Answer:both profits and outputs to be "goods".


To circumvent the problem of double marginalization:

Selected Answer:transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division.

Correct Answer:transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division.


Firms will often implement randomized pricing in an attempt to reduce

Selected Answer:both customer and competitor information about price.

Correct Answer:both customer and competitor information about price.


A local video store estimates their average customer's demand per year is Q = 7 - 2P, and knows the marginal cost of each rental is $0.5. How much should the store charge for an annual membership in order to extract all the consumer surplus via an optimal two-part pricing strategy?

Selected Answer:$9.

Correct Answer:$9.


The value of marginal product of an input is the value of

Selected Answer:the output produced by the last unit of an input.

Correct Answer:the output produced by the last unit of an input.



Selected Answer:All of the above are true.

Correct Answer:All of the above are true.


Suppose the demand for good X is given by Qdx= 20 - 4Px+ 2Py+ M. The price of good X is $5, the price of good Y is $15, and income is $150. Given these prices and income, how much of good X will be purchased?

Selected Answer:180

Correct Answer:180

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

Selected Answer:consumer surplus.

Correct Answer:consumer surplus.


A risk neutral monopoly must set output before it knows for sure the market price. There is a 50% chance the firm's demand curve will be P = 20 - Q and a 50% chance it will be P = 40 - Q. The marginal cost of the firm is MC = Q. What is the expression for the expected marginal revenue function?

Selected Answer:E(MR) = 30 - 2Q.

Correct Answer:E(MR) = 30 - 2Q.


Holding the mean value of a gamble constant, the larger the standard deviation, the

Selected Answer:more risky the gamble will be.

Correct Answer:more risky the gamble will be.


In order to reduce the undesirable effects of moral hazard, an insurance company can

Selected Answer:all of the above.

Correct Answer:all of the above.


A consumer spends less time searching for a good when her reservation price is:

Selected Answer:increased.

Correct Answer:increased.


You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q2. What level of profits will you make in the short-run?


Correct Answer:$40.


A firm manager with vertical indifference curves (output on the horizontal axis, profit on the vertical axis) views

Selected Answer:only output to be "goods".

Correct Answer:only output to be "goods".



Selected Answer:In the short run a monopoly will shutdown if P < AVC.

Correct Answer:In the short run a monopoly will shutdown if P < AVC.


Which of the following isnota feature of Sweezy oligopoly?

Selected Answer:The firms produce homogenous products.

Correct Answer:The firms produce homogenous products.


The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:

Selected Answer:Production function.

Correct Answer:Production function.


If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertise, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1 million. Suppose this game is repeated for a finite number of times, but the players do not know the exact date at which the game will end. The players can earn collusive profits as a Nash equilibrium to the repeated play of the game if the probability the game terminates in any period is

Selected Answer:close to zero.

Correct Answer:close to zero.


In a Cournot oligopoly with N-firms and identical marginal costs, the relationship between the price elasticity of market demand and that of the firm is:

Selected Answer:EM= EF/N.

Correct Answer:EM= EF/N.


Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat, and $50 for pants. Consumers of type B will pay $75 for a coat, and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm charges $100 for a suit (which includes both pants and a coat), the firm will sell a suit to:

Selected Answer:type B consumers.



The demand for which of the following commodities is likely to be more inelastic?

Selected Answer:Beverages.

Correct Answer:Beverages.

During spring break, students have an elasticity of demand for a trip to Cancun, Mexico of -4. How much should an airline charge students for a ticket if the price it charges the general public is $420? Assume the general public has an elasticity of -2.


Correct Answer:$280.


What price should a firm charge for a package of two shirts given a marginal cost of $4 and an inverse demand function P = 8 - 2Q by the representative consumer?


Correct Answer:$12.


Isoquants are normally drawn with a convex shape because:

Selected Answer:Inputs are not perfectly substitutable.

Correct Answer:Inputs are not perfectly substitutable.


Which firm would you expect to make the lowest profits, other things equal:

Selected Answer:Bertrand oligopolist.

Correct Answer:Bertrand oligopolist.


In a competitive market, the market demand is Qd= 70 - 3P and the market supply is Qs= 6P. A price ceiling of $4 will result in

Selected Answer:A shortage of 34 units.

Correct Answer:A shortage of 34 units.


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

Selected Answer:the straight line with a negative slope.

Correct Answer:the straight line with a negative slope.


The demand for good X has been estimated to be lnQxd= 100 - 2.5 lnPX+ 4 lnPY+ lnM. The own price elasticity of good X is

Selected Answer:-2.5.

Correct Answer:-2.5.


If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertise, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non advertising firm will earn $5 million.Which of the following is true?

Selected Answer:None of the above are true.

Correct Answer:None of the above are true.


A risk neutral monopoly must set output before it knows for sure the market price. There is a 50% chance the firm's demand curve will be P = 20 - Q and a 50% chance it will be P = 40 - Q. The marginal cost of the firm is MC = Q. The expected profit-maximizing quantity is:

Selected Answer:10.

Correct Answer:10.


You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession. There is a $50% probability of a boom and a 50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes $20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a recession.The variance in the returns of project B is

Selected Answer:225.

Correct Answer:225.


Holding the mean value of a gamble constant, the larger the standard deviation, the

Selected Answer:more risky the gamble will be.

Correct Answer:more risky the gamble will be.


You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession. There is a $50% probability of a boom and a 50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes $20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a recession. Which project has the greatest variance?

Selected Answer:C.

Correct Answer:C.


You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q. Your costs are C = 10 + 3Q. Therevenuemaximizing output is


Correct Answer:6.3.


You are a manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q2. What level of output should you produce in the short-run?

Selected Answer:10.

Correct Answer:10.

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertise, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is

Selected Answer:For each firm to advertise.

Correct Answer:For each firm to advertise.


The concentration and HHI reported in the U.S. Bureau of Census must be interpreted with caution since:




Jane wants to buy a beautiful doll as a gift for her sister's birthday. She knows that the same product is offered in different shops with prices of $120, $100 and $80 with odds of 1/3 of each price. She just stopped at a shop and knows that the price is $100. If the search cost is $8 per time, what should she do?

Selected Answer:Accept the offer in hand.

Correct Answer:Accept the offer in hand.


Suppose compensation is given by W = 450,000 + 220 P + 15S, where W = total compensation of the CEO, P = company profits (in millions) = $300, and S = Sales (in millions) = $500. What percentage of the CEO's total earnings is tied to profits of the firm?

Selected Answer:12.6%

Correct Answer:12.6%


To avoid the problem of double marginalization

Selected Answer:transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division.

Correct Answer:transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division.



Selected Answer:10.

Correct Answer:10.


You are the manager of a firm that produces output in two plants. The demand for your firm's product is P =20-Q, where Q = Q1+ Q2. The marginal cost associated with producing in the two plants are MC1= 2 and MC2= 2Q2. How much output should be produced in plant 1 in order to maximize profits?

Selected Answer:8.

Correct Answer:8.


The external marginal cost of producing coal is MCexternal= 6Q while the internal marginal cost is MCinternal= 4Q. The inverse demand for coal is given by P = 120 - 2Q. What is the socially efficient level of output?

Selected Answer:10.

Correct Answer:10.


The external marginal cost of producing coal is MCexternal= 6Q while the internal marginal cost is MCinternal= 4Q. The inverse demand for coal is given by P = 120 - 2Q. How much output would a monopoly produce?

Selected Answer:15.

Correct Answer:15.


Consumers adjust their purchasing behavior so that:

Selected Answer:the ratio of prices they pay equals their marginal rate of substitution.

Correct Answer:the ratio of prices they pay equals their marginal rate of substitution.


Which would you expect to make the highest profits, other things equal?

Selected Answer:Stackelberg leader.

Correct Answer:Stackelberg leader.


For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MPKis:


Correct Answer:5.2.


For a wood furniture manufacturer, an increase in the cost of lumber will cause the supply curve to:

Selected Answer:shift to the left.

Correct Answer:shift to the left.


If the income elasticity for lobster is .4, a 40% increase in income will lead to a:

Selected Answer:16% increase in demand for lobster.

Correct Answer:16% increase in demand for lobster.

Date post:	28-Sep-2015
Category:	Documents
Upload:	stormy88
View:	189 times
Download:	2 times

Quiz

Documents