ECON 2030 Chapter : March 12 ECON
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1).
A consumer spends more time searching for a good when her reservation price is:
increased.
reduced.
fixed.
None of the statements is correct.
2).
In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices.
Which of the following are Nash equilibrium payoffs in the one-shot game?
(0, 0)
(5, -5)
(-5, 5)
(10, 10)
3).
A risk-neutral individual would:
prefer $5 with certainty to a risky prospect with the expected value of $5.
prefer a risky prospect with an expected value of $5 to a certain amount of $5.
be indifferent between a risky prospect with an expect value of $5 to a certain amount of $5.
prefer a risky prospect with the expected value of $0.50 to $5 with certainty.
4).
Snowpeak Ski Resort offers a price for a lift ticket that is barely over its marginal cost, but the high equipment rental fee keeps generating big profits. Which pricing strategy is the management using?
Price discrimination
Two-part pricing
Commodity bundling
Cross-subsidization
5).
The short run is defined as the time frame:
in which there are no fixed factors of production.
in which there are fixed factors of production.
less than one year.
less than three years.
6).
Fixed costs exist only in:
the long run.
capital-intensive markets.
the short run.
labor-intensive markets.
7).
Top of Form
Non-fed ground beef is an inferior good. In economic booms, grocery managers should:
increase their orders of non-fed ground beef.
reduce their orders of non-fed ground beef.
not change their orders of non-fed ground beef.
neither increase, reduce, nor maintain their current orders for non-fed ground beef.
Bottom of Form
8).
Which of the following pricing strategies is NOT used in markets with special cost and demand structures?
Peak-load pricing
Cross-subsidization
Transfer pricing
Low-price guarantees
9).
A perfectly competitive firm faces a:
perfectly elastic demand function.
perfectly inelastic demand function.
demand function with unitary elasticity.
None of the answers is correct.
10).
The special demand structure that induces a firm to use a cross-subsidization strategy is:
perfect substitution among products.
imperfect substitution among products.
independent demand for products.
interdependent demand for products.
11).
Which of the following factors reduces the need for government involvement in the marketplace?
The presence of externalities
The incentive to rent-seek
The need for public goods
Incomplete information
12).
Which of the following statements is true?
A mineral rights auction is not the same as a common-value auction.
An auctioneer is always indifferent between different kinds of auctions.
The Dutch and first-price, sealed-bid auctions are strategically equivalent.
An English auction always yields lower expected revenues than a second-price, sealed-bid auction.
13).
Which of the following is true concerning negative externalities?
Firms tend to produce more than the efficient level of output.
Society gains because firms do not pay the external costs of production.
Perfect competition is better than monopoly from the viewpoint of society even in the presence of negative externalities.
With negative externalities, a monopoly will always produce an output level less than is socially efficient.
14).
Which of the following is true under monopoly?
P > ATC
P > MC
P = MR
P = ATC
15).
Differentiated goods are NOT a feature of a:
perfectly competitive market.
monopolistically competitive market.
monopolistic market.
perfectly competitive market and monopolistic market.
16).
Producer surplus is measured as the area
below the demand curve and above the market price.
above the demand curve and below the market price.
above the supply curve and below the market price.
below the supply curve and above the market price.
17).
Jaynet spends $25,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm â one offer was for $105,000 per year, and the other was for $85,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 30 paintings per year at a price of $9,000 each:
a. What are her accounting profits?
$
b. What are her economic profits?
$
18).
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1âs elasticity of demand is -2, while group 2âs is -4. Your marginal cost of producing the product is $40.
a. Determine your optimal markups and prices under third-degree price discrimination.
Instruction: Round your answers to two decimal places.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.
At least one group has elasticity of demand less than one in absolute value. | |
There are two different groups with different (and identifiable) elasticities of demand. | |
We are able to prevent resale between the groups. | |
At least one group has elasticity of demand greater than 1 in absolute value. |
19).
You are the manager of a firm that receives revenues of $60,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between productY and X is -1.4.
How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 2 percent?
Instructions: Round your answer to the nearest dollar. Include a minus (-) sign if applicable.
$
I have the following questions for my Managerial Economics course.
1. A principal-agent problems occur when managerial decisions are not consistent with the firm's shareholders' interests. A) TrueB) False 2. A firm making more than a normal profit may still be experiencing an economic loss. A) TrueB) False 3. An inferior good is a good whose demand decreases as its prices decreases. A) TrueB) False 4. Assuming that crude oil is an input to automobile tires as well as to gasoline, a reduction in the tariff on imported crude oil would likely result in an increase in the number of tires sold but tire prices may increase or decrease. A) TrueB) False 5. Other things remaining unchanged, advertisement would likely make demand for a good more price elastic. A) TrueB) False 6. The cross price elasticity demand for a good with respect to the price of a complementary good is negative. A) TrueB) False 7. When the marginal product of labor is smaller than its average product, marginal cost will be smaller than average variable cost. A) TrueB) False 8. With capital measured along the vertical axis and labor along the horizontal axis the slope of an isoquant is equal to the ratio between the price of capital over the price of labor. A) TrueB) False 9. If the ratio between the price of labor and the price of capital (w/r) is smaller than the ration between the marginal product of labor and the marginal product of capital, the firm should hire more capital. A) TrueB) False 10. Normally the ratio between the price of a variable input and the marginal product of that input is equal to marginal cost. A) TrueB) False 11. When labor is a variable input the product of wage and marginal product of labor is equal to the profit-maximizing price. A) TrueB) False 12. If the price falls below the average total cost the firm may not shut down in the short run. A) TrueB) False 13. When a perfectly competitive firm is producing at its profit maximizing level of output, its MR is equal to price and its MC while it may or may not be making an economic profit. A) TrueB) False 14. The price a profit maximizing monopoly charges is always greater than its marginal cost as well as it MR while it may not be greater than its ATC. A) TrueB) False 15. As new firms enter a monopolistically competitive market, the demand faced by each competing firm becomes more inelastic. A) TrueB) False 16. The long-run equilibrium of a monopoly is characterized by its price being equal to its MR but always greater than its ATC. A) TrueB) False 17. A monopolistically competitive firm sets its price equal to its MR, while keeping it above MC. A) TrueB) False 18. We say that the long-run equilibrium of a monopolistically competitive firm reflects excess capacity because its MC is not equal to its ATC. A) TrueB) False 19. In a duopoly with a zero marginal cost, according to the Cournot model, at equilibrium the sum of the two firms' output would be more than 50 percent of the market demand at a zero price. A) TrueB) False 20. In the kinked demand curve model it is assumed that the demand faced by an oligopoly is less elastic when it lowers the price but more elastic when it raises the price. A) TrueB) False 21. A distinguishing characteristic of monopolistically competitive market is price discrimination. A) TrueB) False 22. The general explanation for the relative price stability in an oligopolistic market is the existence of some degree of decision interdependency among the firms in the market. A) TrueB) False |