01:220:102 Study Guide - Quiz Guide: Long Term Ecological Research Network, Oligopoly, Rationality

125 views29 pages

turquoisegnu128

15 Oct 2018

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

chrisfive2005 and 37653 others unlocked

01:220:102 Full Course Notes

Verified Note

57 documents

Document Summary

94 multiple choice questions: customer is required to buy one product only if the customer also buys a second product. Supply inelastic (e. g. skilled workers: maximizing utility, increasing cost industry, normal good, inferior good, follows the same rules as budget constraint graph, except with different variables. Firm must produce at least normal profit for the owner to stay in business. = (change in total utility / change in q: marginal utility (mu, diminishing marginal utility, constant cost industry, maximin solution, new firms enter the industry in response to increase in profits, entry, exit. C merger: long run, legal, technological or market forces that discourage and prevent potential competitors from entering a market, maximizing utility, income effect, marginal utility (mu, barriers of entry, firm cannot change usage of fixed inputs. Free entry and exit in the market - implies perfectly elastic demand (hypothetical extreme --> closest e. g. agricultural market)

Related Questions

Please circle the right answer. (two points each)

1. If the price of gasoline is $2.0, and the price elasticity of demand is 0.5, how much will a 10 % reduction in the quantity placed on the market increase the price?

a.There will be 22% increase in the price

b.There will be 5% increase in the price

c.There will be 10 % increase in price

d.There will be 20% increase in price

e. None of the above

2.The consumer's budget line

a. indicates the options from which the consumer can choose

b. identifies the optimal basket for the consumer.

c. identifies the tastes of the consumer

d. ranks the baskets of goods in the order the consumer prefers them

e. shows that the consumer prefers more better than less

3. In the long run, a profit-maximizing firm will choose to exit a market when
a. fixed costs exceed sunk costs.
b. average fixed cost is rising.
c. revenue from production is less than total costs.
d. marginal cost exceeds marginal revenue at the current level of production.

4. When a perfectly competitive firm makes a decision to shut down, it is most likely that
a. price is below the minimum of average variable cost.
b. fixed costs exceed variable costs.
c. average fixed costs are rising.
d. marginal cost is above average variable cost.

5. Which of the following will always cause the demand curve for a product to shift to the right?

a. an increase in income whether the good is a compliment or substitute

b. an increase in the price of the compliment

c. an increase in the price of a substitute

d. an increase in technology

e. a decrease in the price of the good

6. Consumers understandably like lower prices, but they should understand there is a great difference between a lower price produced by the government price ceiling and a lower price that comes about through normal market channels, one benefits the consumer, the other may not.

a. This statement is not true, Consumers are benefited when the government lowers the price and the consumers are benefited when businesses lower the price.

b. This is because when the government forces prices down, there is a shortage and reduction in total surplus. Lower prices through markets don't create shortage but they do benefit consumers.

c. this is because the government forces prices down, there is a surplus and reduction in total surplus. Lower prices through markets don't create surpluses but they do benefit consumers

d. This is because when markets force the prices down, there is a shortage and reduction in total surplus. Lower prices through government actions don't create shortages but they do benefit consumers

e. None of the above

7. How does an increase in the price of a variable input affect the AC and the MC curves?

a. MC shifts to the right and AC increases.

b. MC shifts to the left and AC increases

c. MC shifts to the right and AC does not change

d. MC does not change but AC increases

e. none of the above

8. Which of the following is a characteristic of a perfectly competitive market?
a. Firms are price setters.
b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.

9. In a perfectly competitive market, the process of entry or exit ends when
a. firms are operating with excess capacity.
b. firms are making zero economic profit.
c. firms experience decreasing marginal revenue.
d. price is equal to marginal cost.

10. The relative price of two goods is shown by:

a. the slope of an indifference curve

b. the slope of the budget line

c. the diminishing marginal rate of substitution

d. the slope of the income-consumption curve

e. none of the above

11. When firms have an incentive to exit a competitive market, their exit will

a. drive down market prices.
b. drive down the profits of existing firms in the market.
c. decrease the number of goods supplied in the market.
d. All of the above are correct.

12. If a perfectly competitive firm currently produces where the price is greater than the marginal cost, it

a. will increase its profits by producing more.
b. will increase its profits by producing less.
c. is making positive economic profits.
d. is making negative economic profits.

13. Does a consumer well being vary along a demand curve?

a. Yes. When price increases, consumers move to a lower indifference curve.

b. Yes. When price increases, consumers move to a higher indifference curve.

c. No. When price increases, consumers stay on the same indifference curve.

d. No. When price increases, the higher price has no effect on budget constraints or indifference curves.

e. None of the above

14. If a competitive firm sets its output such that marginal revenue, marginal cost, and average total cost are equal, economic profit must be:

a. Negative

b. positive

c. Zero

d. Indeterminate from the given information

15. Which of the following is a characteristic of a perfectly competitive market?

a. Firms are price setters.

b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.

tanchinchilla75

Question 1

Which compensation method helps to explain the large difference between the salaries of top-level managers and mid-level managers in a firm?

	A.	Tournaments
	B.	New blood
	C.	Piece rate
	D.	Backloaded compensation

3 points

Question 2

Please consider the information provided under Question 19 in Chapter 3 (page 54). Based on the stated information, the optimal number of bees kept if the externality is ignored by Yung is 5,000. Is the socially optimal number of bees higher or lower than 5,000?

	A.	We do not have enough information to answer this question
	B.	Same
	C.	Lower
	D.	Higher

3 points

Question 3

Which of the following factors contribute to the existence of firms?

	A.	All of these factors contribute to firm existence
	B.	Risks associated with specialization
	C.	Incomplete contracts
	D.	Willingness of some people to take on risk in exchange for residual income

3 points

Question 4

Public goods are often subject to free-rider problems because these goods are:

	A.	Non-rival and non-excludable
	B.	Rival and non-excludable
	C.	Non-rival and excludable
	D.	Rival and excludable

3 points

Question 5

Which of the following is the most efficient mechanism for allocating scarce goods?

	A.	Government allocation system
	B.	First-come-first-served system
	C.	Market system
	D.	Random allocation system

3 points

Question 6

Many years ago, most of the major Hollywood movie studios also owned chains of local movie theaters across the US. Today, most of the local movie theaters are owned by other companies. What has happened to the degree of integration in the movie industry over time?

	A.	Less horizontally integrated
	B.	Less vertically integrated
	C.	More horizontally integrated
	D.	More vertically integrated

3 points

Question 7

Your firm produces replacement parts for the nuclear submarines operated by the US Navy. Which one of Porter's Five Forces will be most prominent in determining your strategies and profitability?

	A.	Bargaining Power of Suppliers
	B.	Bargaining Power of Customers
	C.	Threat of New Entrants
	D.	Threat of Substitutes

3 points

Question 8

Which of the following statements is NOT true?

	A.	The market mechanism for allocating resources is most efficient due to the incentives it creates.
	B.	Markets are always the most efficient way to allocate goods, even if the market is not perfectly competitive.
	C.	The random allocation mechanism provides no incentives at all.
	D.	The government allocation mechanism provides no incentive for the economy to grow.

3 points

Question 9

Suppose a firm's cost structure exhibits economies of scope. Which of the following actions is compatible with this cost structure?

Diversify into other product lines

Focus on core competencies and reduce production

Focus on core competencies and maintain constant production

Focus on core competencies and expand production

Question 10

Please refer to Table 8.3 on page 132 in the book. Suppose we change the payoffs in the "low price, low price" cell to 0, 25 from 0, 0. Does this change the Nash equilibrium for the game, and is the game still a Prisoner's Dilemma?

	A.	Equilibrium changes, still a Prisoner's Dilemma
	B.	Equilibrium changes, no longer a Prisoner's Dilemma
	C.	Same equilibrium, no longer a Prisoner's Dilemma
	D.	Same equilibrium, still a Prisoner's Dilemma

3 points

Question 11

Which of the following statements about restricting entry to markets is NOT true?

	A.	Brand identity and logos are expensive to establish, and entrants may find it very expensive to establish comparable position in the market.
	B.	Predatory pricing is illegal but very difficult to prove in court
	C.	Branded products tend to have more elastic demand, which makes it more difficult for entrants to charge high prices and they must stay out of the market.
	D.	A low-quality seller cannot effectively use a warranty program to keep other firms out of its market

3 points

Question 12

Your firm earns $2 million per quarter in total revenue, and your accounting profits are $100,000 per quarter. You do not charge the firm for the use of an old building that you own because it is 50 years old and fully depreciated. However, another firm has offered you $200,000 per quarter to use the facility, and this is the market rental rate for similar facilities. In this case, we know that your:

	A.	Opportunity costs are positive and economic profits are negative
	B.	Opportunity costs and economic profits are positive
	C.	Opportunity costs are negative and economic profits are positive
	D.	Opportunity costs and economic profits are negative

3 points

Question 13

Please refer to Question 13 in Chapter 1 (page 17). What is the marginal cost of reducing global warming by 0.017 degrees?

	A.	MC = 60
	B.	MC = 5
	C.	We do not have enough information to answer this question
	D.	MC = 50

3 points

Question 14

In Chapter 6, Boyes focuses on negative externalities such as the various types of pollution. However, as we discussed during our online session, we can also observe positive externalities in which external benefits are generated for people. Which of the following is NOT an example of a positive externality?

	A.	Workers can help one another to "cover the phones" and make sure that someone is always available to help clients
	B.	Workers can provide ideas to one another about how to solve problems
	C.	All of these cases are examples of positive externalities
	D.	Workers can form carpools and use other means to reduce commuting costs

3 points

Question 15

Common property resources are:

	A.	Non-rival and non-excludable
	B.	Non-rival and excludable
	C.	Rival and non-excludable
	D.	Rival and excludable

3 points

Question 16

The free-rider problem arises in markets for common property resources.

	A.	False
	B.	True

3 points

Question 17

Firms that set their product price below the actual cost of production may be engaging in:

	A.	Predatory pricing
	B.	Monopoly pricing
	C.	Moral hazard
	D.	Dollar-cost averaging

3 points

Question 18

Under a cap-and-trade mechanism to control air pollution, what happens to the price of pollution rights if the supply of righs is reduced (i.e., the supply of rights is reduced)?

Increases

Decreases

No change

Question 19

The key method for a manufacturing firm to avoid hold-up problems is to have another source of inputs.

	A.	False
	B.	True

3 points

Question 20

Your firm sells luxury autos, and you have asked the marketing department to develop and stronger brand identity through a new ad campaign. After the campaign has run for 6 months, you hire an economic consultant to study the impact of the campaign on the demand for your autos. The consultant reports that the demand for your cars is now more elastic than it was 6 months ago. Was the new ad campaign successful?

	A.	Yes
	B.	No

01:220:102 Study Guide - Quiz Guide: Long Term Ecological Research Network, Oligopoly, Rationality

01:220:102 Full Course Notes

Document Summary

Get access

Related Documents

01:220:102 Study Guide - Midterm Guide: Diminishing Returns, Normal Good, Variable Cost

01:220:102 Study Guide - Midterm Guide: Demand Curve, Household Income, Inferior Good

Economics 2150A/B Study Guide - Final Guide: Budget Constraint, Isoquant, Engel Curve

Related Questions