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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 2
1 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.

Question 3
1 out of 1 points

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.

Question 4
1 out of 1 points

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.

Question 5
1 out of 1 points

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.

Question 6
1 out of 1 points

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.

Question 7
0 out of 1 points

A downward sloping, linear demand function exhibits:


Selected Answer:

more elastic demand as output increases.


Correct Answer:

less elastic demand as output increases.

Question 8
1 out of 1 points

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.
The profit-maximizing output for your firm is
Selected Answer:

10.
Correct Answer:

10.

Question 9
1 out of 1 points

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.

Question 10
1 out of 1 points

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.

Question 11
1 out of 1 points

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


cost is
Selected Answer:

declining with output.


Correct Answer:

declining with output.

Question 12
1 out of 1 points

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.

Question 13
1 out of 1 points

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.

Question 14
1 out of 1 points

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 Q xd = 10,000 - 4PX + 5PY +


2M + AX, where PX is the price of X, PY is the price of good Y, M is
income and AX is 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.

Question 2
1 out of 1 points

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%.

Question 3
1 out of 1 points

The difference between a price increase and a decrease in income


is that
Selected
Answer:

Correct
Answer:

A decrease in income does not affect the slope of the


budget line while an increase in price does change the
slope.
A decrease in income does not affect the slope of the
budget line while an increase in price does change the
slope.
Question 4
1 out of 1 points

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.

Question 5

1 out of 1 points

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.

Question 6
1 out of 1 points

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 = 33 + 3Q2.
The profit-maximizing output for your firm is
Selected Answer:

10
Correct Answer:

10

Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

A perfectly competitive firm faces:


Selected Answer:

a perfectly elastic demand function.


Correct Answer:

a perfectly elastic demand function.

Question 10
1 out of 1 points

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.
The profit-maximizing output for your firm is
Selected Answer:

10.
Correct Answer:

10.

Question 11
1 out of 1 points

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

the fixed costs?


Selected Answer:

$50.
Correct Answer:

$50.

Question 12
1 out of 1 points

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.

Question 13
1 out of 1 points

The supply function for good X is given by Q x s = 1,000 + PX - 5 PY 2PW , where PX is the price of X, PY is the price of good Y and PW is
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.

Question 14

1 out of 1 points

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 by Q x s = 1,000 + PX - 5 PY 2PW , where PX is the price of X, PY is the price of good Y and PW is the
price of input W. If PX = 100, PY = 150 PW = 50, then the supply curve is
Selected Answer:

= 150 + Px.

= 150 + Px.

Correct Answer:

Question 2
1 out of 1 points

Suppose market demand and supply are given by Q d = 100 - 2P


and Q S = 5 + 3P. The equilibrium price is:
Selected Answer:

$19.
Correct Answer:

$19.

Question 3
0 out of 1 points

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.
Question 4
1 out of 1 points

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)?
Selected Answer:

$50.
Correct Answer:

$50.

Question 5
0 out of 1 points

Firms have market power in:


Selected Answer:

monopolistic markets.
Correct Answer:

both b and c.

Question 6
0 out of 1 points

Which of the following features is common to both perfectly


competitive markets and monopolistically competitive markets?
Selected Answer:

Long run economic profits are zero.


Correct Answer:

both b and c.

Question 7
1 out of 1 points

A monopoly has two production plants with cost functions C1 = 50 +

0.1 Q12 and 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).

Question 8
1 out of 1 points

Which of the following is not a 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.

Question 9
1 out of 1 points

You are the manager of a monopoly that faces a demand curve


described by P = 85 - 5Q. Your costs are C = 20 + 5Q. The profitmaximizing output for your firm is
Selected Answer:

8.
Correct Answer:

8.

Question 10
1 out of 1 points

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 = 33 + 3Q2.
The profit-maximizing output for your firm is
Selected Answer:

10
Correct Answer:

10

Question 11
1 out of 1 points

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.

Question 12
1 out of 1 points

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.

Question 2
1 out of 1 points

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?
Selected Answer:

$40.
Correct Answer:

$40.

Question 3
1 out of 1 points

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.

Question 4
1 out of 1 points

Suppose market demand and supply are given by Q d = 100 - 2P


and Q S = 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.

Question 5
1 out of 1 points

Changes in the price of an input cause:


Selected Answer:

Slope changes in the isocost line.


Correct Answer:

Slope changes in the isocost line.

Question 6
1 out of 1 points

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.

Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

You are the manager of a monopoly that faces a demand curve


described by P = 63 - 5Q. Your costs are C = 10 + 3Q. The profitmaximizing price is
Selected Answer:

33.
Correct Answer:

33.

Question 9
1 out of 1 points

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
Selected Answer:

$110.
Correct Answer:

$110.

Question 10
1 out of 1 points

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)?
Selected Answer:

$50.

Correct Answer:

$50.

Question 11
1 out of 1 points

What contributes to the existence of multiproduct firms?


Selected Answer:

both b and c.
Correct Answer:

both b and c.

Question 12
1 out of 1 points

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:

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.
In a finitely repeated game with a certain end period,
collusion is unlikely because effective punishments cannot
be used during any time period.
Question 2
1 out of 1 points

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.

Question 3
1 out of 1 points

Collusion is:
Selected Answer:

none of the above.

Correct Answer:

none of the above.

Question 4
1 out of 1 points

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.

Question 5
1 out of 1 points

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.

Question 6
1 out of 1 points

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

Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

You are the manager of a monopoly that faces a demand curve

described by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profitmaximizing output for your firm is
Selected Answer:

5.
Correct Answer:

5.

Question 10
1 out of 1 points

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.

Question 11
1 out of 1 points

The demand for good X is given by lnQ xd = 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.

Question 2
1 out of 1 points

A monopolist claims his profit-maximizing markup factor is 10.


What is the price elasticity of demand for the firm's product?

Selected Answer:

none of the above.


Correct Answer:

none of the above.

Question 3
1 out of 1 points

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?
Selected Answer:

$18.
Correct Answer:

$18.

Question 4
0 out of 1 points

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.

Question 5
1 out of 1 points

The minimum wage


Selected Answer:

is an example of floor price.


Correct Answer:

is an example of floor price.

Question 6
0 out of 1 points

Which of the following is not a feature of Sweezy oligopoly?


Selected Answer:

The firms produce differentiated products.


Correct Answer:

Free entry and exit occurs in the market.

Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

Differentiated goods are a feature of:


Selected Answer:

a monopolistically competitive market.


Correct Answer:

a monopolistically competitive market.

Question 10
0 out of 1 points

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.

Question 11
0 out of 1 points

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.

Question 2
1 out of 1 points

What contributes to the existence of multiproduct firms?


Selected Answer:

both b and c.
Correct Answer:

both b and c.

Question 3
1 out of 1 points

When analyzing the behavior of oligopolists, which of the following


is crucial for the success of game theoretic analysis?
Selected
Answer:

Correct
Answer:

Make sure the problem you are considering is of a oneshot or repeated nature, and you model it accordingly
because the order in which players make decisions is
important.
Make sure the problem you are considering is of a oneshot or repeated nature, and you model it accordingly
because the order in which players make decisions is
important.
Question 4
1 out of 1 points

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.

Question 5
1 out of 1 points

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".

Question 6
1 out of 1 points

To circumvent the problem of double marginalization:


Selected
Answer:

Correct
Answer:

transfer prices must be set that maximize the overall


value of the firm rather than the profits of the upstream
division.
transfer prices must be set that maximize the overall
value of the firm rather than the profits of the upstream
division.
Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

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.

Question 10
1 out of 1 points

Which of the following is true?


Selected Answer:

All of the above are true.


Correct Answer:

All of the above are true.

Question 11
1 out of 1 points

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.

Question 2
1 out of 1 points

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.

Question 3
1 out of 1 points

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.

Question 4
1 out of 1 points

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.

Question 5
1 out of 1 points

A consumer spends less time searching for a good when her


reservation price is:
Selected Answer:

increased.
Correct Answer:

increased.

Question 6
1 out of 1 points

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?

Selected Answer:

$40.
Correct Answer:

$40.

Question 7
1 out of 1 points

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".

Question 8
1 out of 1 points

Which of the following is true?


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.

Question 9
1 out of 1 points

Which of the following is not a feature of Sweezy oligopoly?


Selected Answer:

The firms produce homogenous products.


Correct Answer:

The firms produce homogenous products.

Question 10
1 out of 1 points

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.

Question 11
1 out of 1 points

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.

Question 12
1 out of 1 points

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.

Question 13
0 out of 1 points

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.
Correct Answer:

both a and b.

Question 14
1 out of 1 points

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.
Selected Answer:

$280.
Correct Answer:

$280.

Question 2
1 out of 1 points

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?
Selected Answer:

$12.
Correct Answer:

$12.

Question 3
1 out of 1 points

Isoquants are normally drawn with a convex shape because:

Selected Answer:

Inputs are not perfectly substitutable.


Correct Answer:

Inputs are not perfectly substitutable.

Question 4
1 out of 1 points

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

Bertrand oligopolist.
Correct Answer:

Bertrand oligopolist.

Question 5
1 out of 1 points

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.

Question 6
1 out of 1 points

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.

Question 7
1 out of 1 points

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

Selected Answer:

-2.5.
Correct Answer:

-2.5.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

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.

Question 10
1 out of 1 points

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.

Question 11
1 out of 1 points

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.

Question 12
1 out of 1 points

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.

Question 13
1 out of 1 points

You are the manager of a monopoly that faces a demand curve


described by P = 63 - 5Q. Your costs are C = 10 + 3Q.
The revenue maximizing output is
Selected Answer:

6.3.

Correct Answer:

6.3.

Question 14
1 out of 1 points

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.

Question 2
1 out of 1 points

The concentration and HHI reported in the U.S. Bureau of Census


must be interpreted with caution since:
Selected Answer:

All of the above.


Correct Answer:

All of the above.

Question 3
1 out of 1 points

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.

Question 4
1 out of 1 points

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%

Question 5
1 out of 1 points

To avoid the problem of double marginalization


Selected
Answer:

Correct
Answer:

transfer prices must be set that maximize the overall


value of the firm rather than the profits of the upstream
division.
transfer prices must be set that maximize the overall
value of the firm rather than the profits of the upstream
division.
Question 6
1 out of 1 points

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.
The profit-maximizing output for your firm is

Selected Answer:

10.
Correct Answer:

10.

Question 7
1 out of 1 points

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.

Question 8
1 out of 1 points

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.

Question 9
1 out of 1 points

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.

Question 10
1 out of 1 points

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.
Question 11
1 out of 1 points

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

Stackelberg leader.
Correct Answer:

Stackelberg leader.

Question 12
1 out of 1 points

For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12,


we know that MPK is:
Selected Answer:

5.2.
Correct Answer:

5.2.

Question 13
1 out of 1 points

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.

Question 14
1 out of 1 points

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.

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