HUB cLHRASA+-BERALHEB ES RAM AM: BRRGSAR EH M8]? Bae AP Ae 8 aE WHHAS RAL BIT RTA BIR 1 Multiple Choice (Questions 1 32, 3 points for each question:4 points for question 33) The long-run average cost curve slopes upward if there are A. some factors without diminishing marginal retums, B. diseconomies of scope in the management of multiplant operations. C. economies of seale. D. diseconomies of seale. E. no factors without diminishing marginal returns, Whenever average profit is less than marginal profit, A. average profit declines with increases in output. B. marginal profit decreases with increases in output. C. marginal profit increases with increases in output. D. average profit is maximized. E. average profit increases with increases in output For a producer of joint products X and ¥ with total costs C, and C;, an isocost eurve A. isolates Cx and Cy separately. B. shows points where C. = Cy. C. shows points where cost curves are tangent. D. shows points where C / Cy is constant. E. shows points where C+ C, is constant. IfY = 3X/(3X + X?), then dY/dX is A. [G + 2X)3X +3GX + XYJGX +X’ B. (3 + 2X)3N/(GX +3 C38 +X) D. [(3 + 2X) - 3X + XJGX +P E, (3 +2X)3X/3X+3 If Gulfstream and Bombardier, both producers of upscale jet airplanes, were to collude rather than compete, consumers could expect A. higher prices and lower quantites offered for sale. B. lower prices and lower quantites offered for sale. C. higher prices and higher quantites offered for sale. D. each firm to cheat on the cartel agreement. E. one firm to emerge as the price leader in the oligopoly. A manufacturer of stylish infant clothes, popularly known as grandma-bait, has found that the demand for its produet is given by Q= 100P"5A°, where P is price and A is advertising expenditures. If marginal cost is $5, the profit maximizing price is A. $10.00. B. $15.00. C. $20.00, D. $25.00. E. $6.25.AUB be weASAT— SF Ra TREE RRR RA RRA Sw 4.3 PPE + (RS 8 BE WHHAS RAL BIO RTA RIG 7. My Big Banana (MBB) has a monopoly in Middletown, United States, on chocolate-sprinkled ‘monster banana splits. The demand for this delicacy is given by Q = 80 - P. MB's costs are given by TC =40 + 2Q + 2Q’. Its maximum monopoly profits are A. $267. B. $467. ©. $627. D. $672 E. $674. 8. Capland and Touqueville are the only countries that produce and purchase hats. The Touqueville flenr exchanges for three Capland droles. The demand for and supply of hats (expressed in local currencies) are as given in the table below. Demand Suppl Capland Qc=600-6P — Qc=-20 + P (Pexpressed in droles) Touqueville Qr=130-2P — Qr=-50 + 2P (P expressed in fleurs) Which country exports hats and how many does it export? A. Touqueville exports 24 hats. B. Capland exports 32 hats. C. Touqueville exports 52 hats D. Capland exports 52 hats. E, Touqueville exports 66 hats. 9. Given the following payoff matrix, what will A's profits be? B's Strategies A's Strategies Enter Don't Enter Raise price (Agets 1B gets 10) (A gets 4. B gets 5) Lower price (Agets2.B gets6) (A gets 3. B gets 4) Al B.2 C3 D.4 E, Unknown until B's action is observedAUB be weASAT— SF Ra TREE RRR RA RRA Sw 4.3 PPE + (RS 8 BBE WHHAES RAL HB IO RTA RSH 10. Pungent Pig Farm wants to minimize the cost of feeding its stock. It has determined that to raise a Piglet to be an adult pig requires 100,000 calories and 2,000 units of dietary fiber. Pigs are fed comm and cats. Each unit of corn contains 200 calories and 1 unit of dietary fiber and costs 2¢. Each unit of oats contains 100 calories and 3 units of dietary fiber and costs 1.5¢, What is the minimum cost of raising a piglet to full pighood? A. $40.00 B. $18.00 C. $13.67 D. $13.00 E. $15.00 11. Ifa firm uses optimal transfer pricing between production division A and marketing division B, and competitive external market for the output of division A exists, then production division A will surely A. make positive economic profits B. make normal economie profits. C. sell at marginal costs. D, sell at the extemal price. E, sell at less than the external price. 12. The law of diminishing marginal returns states that A. the marginal product of labor declines as all inputs are increased. B. production functions exhibit decreasing retums to scale. C. the marginal product of labor retums as more capital is used. D. the marginal product of a factor eventually diminishes as more of the input is used, holding other inputs fixed. E. the marginal product of a factor always diminishes as more of the input is used, holding other inputs fixed. 13. If Harry Doubleday's price elasticity of demand is 2 and its profit maximizing price is $6, then A. average cost is $3.00. B. average cost is $0.33. C. marginal cost is $3.00. D. marginal cost is $0.33. E. average cost is $5.67 14, Harold is indifferent between $2,500 for sure and a bet with a 60 percent chance of $2,400 and a 40 percent chance of $2,600. Harold is A. tisk averse. B. risk loving C. risk neutral, D. a profit maximizer: E. irrational,AUB be weASAT— SF Ra TREE RRR RA RRA Sw 48) PPE + (98 8 BBE WHHAS RAL BIO RTRORAR 15. The principal-agent model of economics concentrates on A. the threat from foreign competition B. the need to manage inventory more effectively. C. double-entry bookkeeping. D. the potential costs of separation of ownership and control E. the time value of money. 16. Radio City promises if you can find a lower advertised price for anything you bought at Radio City, anywhere in town within 30 days, it will retum the difference plus 20 percent. A sophisticated game theoretic analysis suggests Radio City may be A. losing money in the long mn. B, colluding with other stores C. using a commitment to threaten competitors, D. preempting competitors. E. using price leadership. 17. The demand for answering machines is Q = 1,000 - 150P + 251. Assume that per capital disposable income I is $200. At a price P of $10, the price elasticity of demand is A.3.0. B.3.33, ©.133. D.0.33. E. 1.0. 18. The demand for a product is more elastic the A. mote broadly defined the product. B. longer the time period covered. C. higher the average income of consumers D. larger the share of a consumer's income the item represents. E, larger the number of firms in the market 19, Economies of scope exist when it is cheaper to produce A. with a large fixed plant and equipment. B. at increasing rates of output. C. given quantities of two different products together than to produce the same quantities separately. D. given quantities of two different products separately than to produce the same quantities together E. using more than one technique.AUB be weASAT— SF Ra TREE RRR RA RRA Sw 4.3 PPE: (98 8 WHHAS RAL BIO RTA RSH 20. Ifa resource is not fully utilized, A. its slack variable value will be zero B. its slack variable value will be negative. C. its slack variable value will be positive. D. its constraint will be binding. E. it will not be worth anything. 21. The marginal cost of manufacturing a famous family sedan is subject to a leaming curve described by log C = 5 - log Q, where C is the current period's marginal cost in thousands of dollars and Q is the accumulated past production in millions of ears. How much past output must be accumulated before marginal cost falls 10 percent fom its level when 10 million cars had been produced? A. 11.1 million B. 14.1 million 15.1 million D. 19.1 million E. 20.1 million 22. Donald Trumpet is indifferent between rates of return satisfying R=.10+.010 (ois the standard} deviation), Donald is risk A. averse and profit maximizing B. averse and not profit maximizing C. loving and profit maximizing. D. loving and not profit maximizing. E. neutral. 23. A budget constraint A. must be convex to the origin if consumers prefer more to less. B. will be upward sloping if consumers consider one good a "bad C. must be downward sloping if both goods have positive prices. D. will be concave to the origin if the consumer's budget is fixed. E. will always have slope equal to -1 24, An increase in fleet sales of new cars to rental car companies that then resell the cars after onl miles will A. likely cause the equilibrium price of new cars to fall B. likely cause the equilibrium price of new ears to rise. C. inerease the demand for cars in new-car show rooms. D. increase the demand for Japanese imports. E. none of the above.AUB be weASAT— SF Ra TREE RRR RA RRA Sw 4.3 PPE: (98 8 WHHAS RAL BIO RTA ROR 25. It costs $1 to go to the market to buy produce for your restaurant. If it costs $.20 to store a head of lettuce, how many times a week should you go to the market if you sell 40 heads a week? A. Twice B. 4 times C. Once D.3 times E. 20 times 26. The plot of a variable that grows by a constant percentage amount each period against time is A. a concave curve. B. a linear curve C. an exponential curve. D. a logarithmic curve BE. aand b. 27. The OPEC oil cartel lost its market power and world oil prices fell in the 1980s because A, OPEC expanded its membership to include all intemational producers of oil. B, world consumers boycotted OPEC oil C. a limit pricing strategy was pursued by some members of the cartel, D, members began to cheat on cartel agreements, E. the United States refused to buy oil from OPEC. 28. The slope coefficient estimate b from a regression of profits on sales of a number of firms in the coal industry is 0.075. How should you interpret this coefficient? A. Average profit in the coal industry is 7.5 percent. B. Ifa firm in the coal industry were to increase its sales by $1, its profits would rise on average by $0.075. C. If a firm has 1 more dollar in sales than another firm in the coal industry, it will have 7.5 more cents in profit on average. D. Average profit in the coal industry is .75 percent. E. Ifa firm in the coal industry were to increase its sales by SI, its profits would rise on average by $0.0075. 29. A consumer's budget constraint changes slope whenever A. the consumer buys a different combination of goods. B. relative prices change. C. the consumer's income increases. D. an indifference curve is tangent to it, E. absolute prices changeAUB be weASAT— SF Ra TREE RRR RA RRA Sw 4.3 PPE: (98 8 WHHAS RAL BIO RTARTA 30. You only have 12 ovens in which to bake over 200 specialty pastries. Subject to the oven constraint, you determine the profit maximizing quantities of each pastry to produce and find that the Lagrangian multiplier is equal to 0. From this you conclude that you A. should be producing fewer types of pastry. B. should be producing more types of pastry. C. should purchase additional ovens D. are effectively unconstrained with 12 ovens. E, should purchase 2 more ovens. 31. In capital asset pricing the investor is paid a premium for buying a particular stock on the basis of the A. unsystematic risk of a stock B. nondiversifiable risk of a stock. C. total risk of a stock. D. risk-free rate of return. E. long-term risk of a stock. 32. Housing starts follow the regular pattern: Quousce sars = 100 - 20 + 40B + 20C, where Queosiag sans is the number of starts, and A, B, and C are dummy variables for the first, second, and third quarters of the year respectively. By what percentage amount are housing starts in the first quarter less than the average of the other three quarters? A. 20 percent B. 30 percent C. 33.3 percent D. 40 percent E. 50 percent 33. Lf output is produced according to Q = (KL)**, then this production process exhibits A. increasing returms to seale. B. decreasing retums to scale. C. first increasing and then decreasing retums to scale. D. constant returns to scale. E, first decreasing and then increasing returns to scale.