ECONOMICS301

MULTIPLE CHOICE 1. Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be expressed as . Boors marginal revenue function can be written MRB = 5 - .001(2QB + QC) (and symmetrically for Cudweiser). Boors operates with out of date technology and has constant cost of (MC = AC) $2 per unit where as Cudweiser has constant cost of $1 per unit. Assuming the firms behave as Cournot comp...

MULTIPLE CHOICE 1. Consider a two-good production economy in which both goods are produced with fixed proportions production functions. Then, some efficient allocations will exhibit unemployment of some factor providing a. the firms use the inputs in different proportions. b. the firms exhibit diminishing returns to scale. c. the firms exhibit increasing returns to scale. d. production can never be efficient if there are unemployed inputs. ANS: a 2. Suppose two goods (X and Y ) are bein...

MULTIPLE CHOICE 1. Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound. the cost minimizing combination of beans and water for C = 200 is a. B = 200, W = 2000 b. B = 2000, W = 200 c. B = 100, W = 100 d. B = 200, W = 200 ANS: d 2. Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons an...

MULTIPLE CHOICE 1. With a cubic production with fixed capital Q = A + BL + CL2 + DL3 and a shape shown above, A is a. positive and greater than B. b. positive and less than B. c. zero. d. negative. ANS: c 2. With a cubic production with fixed capital Q = A + BL + CL2 + DL3 and a shape shown above, C is a. positive. b. zero. c. negative and less than D. d. negative and greater than D. ANS: a 1 This study source was downloaded by from CourseH on 03-23-2022 10:19:56 GMT -...

MULTIPLE CHOICE 1. A football team has the chance of scoring the game-winning touchdown on the last play of the game. It can either run or pass. The defense can play for the run or play for the pass. The following normal form lists the payoffs from the game made up by this last play. The payoffs are probabilities of winning the game. Offense Defense Defend Pass Defend Run Pass 0, 1 1, 0 Run 1, 0 0, 1 What is the defense’s dominant strategy? a. Defend the run. b. Defend the pass....

MULTIPLE CHOICE 1. The principal is distinct from the agent in the principal-agent model because a. the principal offers the contract to the agent. b. the principal is fully informed. c. both a and b. d. neither a nor b. ANS: a 2. Which of the following is an application of the adverse selection problem? a. a customer driving more recklessly after buying car insurance. b. a teenager “hanging out” with friends his or her parents do not approve of. c. shareholders offering a high-pow...

MULTIPLE CHOICE 1. In general, microeconomic theory assumes that firms attempt to maximize the difference between a. total revenue and accounting costs. b. price and marginal cost. c. total revenues and economic costs. d. economic costs and average cost. ANS: c 2. A firm’s total revenue is equal to a. total quantity produced times marginal cost. b. total quantity produced times market price. c. marginal revenue times total quantity produced. d. market price divided by total quantit...

MULTIPLE CHOICE 1. Which of the following functional forms for utility suggests the greatest substitution effect when starting at the point where PX = PY a. U = min (X, Y) b. U = X + Y c. U = X1/2Y 1/2 d. U = X1/4Y 3/4 ANS: b 2. With only two goods, if the income effect is in the same direction as the substitution effect then the good is a. normal b. inferior but not Giffen c. Giffen d. There is not enough information to answer. ANS: a 3. With only two goods, if the income effec...

MULTIPLE CHOICE 1. Suppose the market for oranges is perfectly competitive and unregulated. Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges. Suppose QD = 1000 - 100P and QS = -100 + 100P. The market equilibrium quantity is a. 400 b. 450 c. 500 d. 550 ANS: b 2. Suppose the market for oranges is perfectly competitive and unregulated. Suppose also that the chemicals used to keep the oranges insect-free d...

MULTIPLE CHOICE 1. Probability is sometimes defined as a. the expected profit of a fair bet. b. the most likely outcome of a given experiment. c. the outcome that will occur on average for a given experiment. d. the relative frequency with which an event will occur. ANS: d 2. Expected value is defined as a. the profit on a fair bet. b. the most likely outcome of a given experiment. c. the outcome that will occur on average for a given experiment. d. the relative frequency with which a...