If she spends her entire budget, Heidi can afford 39 peaches and 12 pears. She
can also just afford 24 peaches and 17 pears. The price of peaches is 9 cents.
What is the price of pears in cents?
12 cents
37 cents
27 cents
3 cents
None of the above.
If there are only two goods, if more of good 1 is always preferred to less, and if
less of good 2 is always preferred to more, then indifference curves
slope downward.
slope upward.
may cross.
could take the form of ellipses.
None of the above.
Ollie has a utility functionU(x, y) = (x + 2)( y + 3) . The price of x is $1 and the
price of y is $1. When he maximizes his utility subject to his budget constraint,
he consumes positive amounts of both goods. Ollie consumes
exactly as many units of x as of y.
1 more unit of x than he consumes of y.
1 more unit of y than he consumes of x.
2 more units of x than he consumes of y.
None of the above.
Angela consumes only two goods, x and y. Her income doubles and the prices
of the two goods remain unchanged. Assuming that she is a utility maximizer
and likes both goods,
she will consume more of both goods.
the ratio of her consumption of x to y remains constant.
her utility doubles.
if her preferences are convex, she must consume more x.
None of the above.
If there are two goods and if income doubles and the price of good 1 doubles
while the price of good 2 stays constant, a consumer's demand for good
1 will increase only if it is a Giffen good for her.
2 will decrease only if it is a Giffen good for her.
2 will increase only if it is an inferior good for her.
2 will decrease only if it is an inferior good for her.
None of the above.
upward sloping.
downward sloping.
vertical.
upward sloping for incomes between $20 and $40 and downward sloping
between $40 and $60.
downward sloping for incomes between $20 and $40 and upward sloping
between $40 and $60.
Which of the following utility functions represent preferences of a consumer
who does not have homothetic preferences?
U(x, y) = xy .
U(x, y) = x + 2y .
U(x, y) = min{x, y} .
When prices are ($2, $4), Ms. Consumer chooses the bundle (7, 9), and when
prices are ($15, $3), she chooses the bundle (10, 3). Is her behavior consistent
with the weak axiom of revealed preference?
Yes
No
We would have to observe a third choice to be able to say.
We can't tell because we are not told her income in the two cases.
None of the above.
Walt considers x and y to be perfect substitutes. They originally cost $10 and
$9 respectively. His income is $720. One day the price of x drops to $8.
The income effect increases the quantity of y by 90.
The substitution effect increases the quantity of y by 80.
The substitution effect increases the quantity of x by 90
The income effect increases the quantity of x by 80.
None of the above.
If the marginal cost of brewing beer is 40 cents and the profit-maximizing price
is 90 cents, then the price elasticity of demand is
− 0.66 .
−1.8 .
− 2 .
− 2.33 .
− 3 .
For any value of a if b <1
For any values of a and b if ab <1
For any values of a and b if a > b
For any value of b if a <1
None of the above.
We can't tell without knowing the price of the output.
The following relationship must hold between the average total cost (ATC)
curve and the marginal cost curve (MC):
If MC is rising, ATC must be rising.
If MC is rising, ATC must be greater than MC.
If MC is rising, ATC must be less than MC.
If ATC is rising, MC must be greater than ATC.
If ATC is rising, MC must be less than ATC.
In an oligopoly with two firms, one firm's share of the market is 70 percent.
The Herfindahl-Hirschman Index is________ .
0.7
100
5,800
4,900
2,100
Under perfect competition, the Lerner index is equal to
0.
Between 0 and 1.
∞.
1.
None of the above.
The line which traces out the point where the household maximized utility for a
given level of income across various ratios of prices is known as the
Offer curve.
Contract curve.
Pareto optimum curve.
Welfare curve.
Demand curve.
At the point where the price that consumers are willing to pay for additional
units is equal to the price they actually pay for the commodity
Marginal consumer surplus is positive.
Total consumer surplus is equal to zero.
Marginal consumer surplus is equal to zero.
Marginal consumer surplus is negative.
Total consumer surplus is equal to marginal consumer surplus.
Which of the following statements regarding a monopolist's profits is NOT true?
In the short run, the monopolist may earn a pure above normal profit.
In the long run, the monopolist may earn zero pure profit.
In the long run, entry into the market will drive monopolist's profits to
normal levels.
In the short run, entry barriers prevent competition from driving prices
down.
None of the above.
A firm sells an identical product to two groups of consumers, children (c) and
adults (a). The firm decides to pursue a third degree price discrimination
strategy and maximize profits. Which of the following is necessary for profit
maximization?
Second degree price discrimination differs from third degree price
discrimination in which of the following ways
It promotes a more efficient allocation of resources and third degree does not.
In second degree price discrimination, price differs across the commodity
unit and not across consumers.
In third degree price discrimination, all consumers have the same elasticity
of demand.
Second degree price discrimination is also called perfect price discrimination
and third degree is not.
None of the above.
The Prisoners' Dilemma game illustrates
Where cooperation can improve the welfare of all players.
Rational self-interest behavior not resulting in a social optimum.
The dominant strategy of both players is not the preferred outcome.
All of the above.
None of the above.
Consider the following game where two companies are deciding about whether
to charge a high or low price. The outcomes are represented as (Alpha, Beta). If
this game is repeated over an infinite or uncertain horizon, the most likely
observed behavior will be that
Both firms charge a low price.
Only Alpha charges a low price.
Only Beta charges a low price.
Both firms charge a high price.
None of the above.
If both firms behave as leader firms, then
Cournot equilibrium results.
Stackelberg equilibrium results.
Stackelberg disequilbrium results.
Bertrand equilibrium results.
Sub-game perfect equilibrium results.
Suppose that spring water has zero marginal cost and that market demand is
Q =12 − P .
What is the profit maximizing price in a monopoly market?
12
4
6
8
10
Suppose that spring water has zero marginal cost and that market demand is
Q =12 − P .
What will be the price of the industry is a Cournot market?
12
4
6
8
10
Which of the following statements regarding the lemons problem is true?
Symmetric information prevents buyers from distinguishing reliable cars
from lemons.
The market is unable to price discriminate across quality differences.
The supple curves for lemons and reliable cars are the same.
Both (A) and (B) are correct.
Both (A) and (C) are correct.
Consider a market in which high quality and low quality used cars are sold.
Buyers do not know the quality of the car prior to the purchase but the sellers
do. Compared to a situation where the quality is known to both the buyers and
sellers, this situation would
Make no difference.
Increase the percentage of high quality cars sold.
Increase the percentage of low quality cars sold.
Cause the average price to rise.
None of the above.
The “free-rider problem” of public goods refers to an individual
Refusing to pay taxes.
Receiving the benefits of a non-rival commodity without paying for them.
Overusing collective goods.
All of the above.
None of the above.
In a dominant-firm oligopoly,_______ the quantity which makes marginal
revenue equal to marginal cost, and_______ the remaining quantity demanded.
smaller firms produce; the dominant firm produces
the monopoly firm produces; the monopolistic competitive firms produce
the monopolistic competitive firm produces; the smaller firms produce
the dominant firm produces; the smaller firms produce
the monopoly firm produces; the dominant firm produces
For the Policy I, what is the size of the domestic producer surplus and the
consumer surplus?
(450, 2450)
(200, 3200)
(1250, 1250)
(450, 1250)
(200, 2450)
What is the size of the dead-weight loss of the Policy III?
0
100
350
700
950
What is the welfare-maximizing policy?
Policy Ⅰ.
Policy Ⅱ.
Policy Ⅲ.
Policy Ⅰ and Policy Ⅱ.
None of the above.
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