Econ 303 Practice Exams
The Prisoners' Dilemma is a particular type of game in which negotiation and enforcement of binding contracts is not possible, and such games are known as: A) cooperative games. B) noncooperative games. C) collusive games. D) Cournot games.
B) noncooperative games.
A doctor charges two different prices for medical services, and the price level depends on the patients' income such that wealthy patients are charged more than poorer ones. This pricing scheme represents a form of A) third-degree price discrimination. B) pricing at each consumer's reservation price. C) second-degree price discrimination. D) first-degree price discrimination.
A) third-degree price discrimination.
If the quantity of good A (QA) is plotted along the horizontal axis, the quantity of good B (QB) is plotted along the vertical axis, the price of good A is PA, the price of good B is PB and the consumer's income is I, then the slope of the consumer's budget constraint is ________. A. -Pa/-Pb B. -Pb/-Pa C. I/Pa or I/Pb D. -Qb/Qa
A. -Pa/-Pb
Use the following two statements to answer this question: I. Production functions describe what is technically feasible when the firm operates efficiently. II. The production function shows the least cost method of producing a given level of output. A) Both I and II are true. B) Both I and II are false. C) I is true, and II is false. D) I is false, and II is true.
A) Both I and II are true.
Which of the following statements represents a key point about strategic decision making? A) It is essential to understand your opponent's point of view and to deduce his or her likely responses to your actions. B) Strategy is less important in nonconstant sum games than in constant sum games. C) Optimal strategies in cooperative games always lead to economically efficient outcomes. D) The payoffs in cooperative games will always be higher than in noncooperative games.
A) It is essential to understand your opponent's point of view and to deduce his or her likely responses to your actions.
Gary Franklin is a movie critic. He invented the Franklin Scale with which he rates movies from 1 to 10 (10 being best). When asked about his scale, Mr. Franklin explained "that it is a subjective measure of movie quality. A movie with a ranking of 10 is not necessarily 10 times better than a movie with a ranking of 1, but it is better. A movie with a ranking of 5 is better than a movie with a ranking of 1, but is not as good a movie with a ranking of 10. That's all it really tells you." Based on Mr. Franklin's description, his scale is: A) ordinal but not cardinal. B) cardinal but not ordinal. C) an objective standard to judge movies. D) neither cardinal nor ordinal
A) Ordinal but not Cardinal
Which of the following markets is most likely to be oligopolistic? A) The market for aluminum B) The market for corn C) The market for colas D) The market for ground coffees
A) The market for aluminum
Under a Cournot duopoly, the collusion curve represents: A) all possible allocations of the pure monopoly quantity among the two firms in the duopoly. B) all possible allocations of the pure monopoly quantity that would be possible if the two firms in the duopoly did not cooperate. C) all optimal price-quantity outcomes for a cartel rather than a Cournot duopoly. D) the potential profits to be earned by firms in a collusive cartel.
A) all possible allocations of the pure monopoly quantity among the two firms in the duopoly.
he most important factor in determining the long-run profit potential in monopolistic competition is A) free entry and exit. B) the elasticity of the market demand curve. C) the reaction of rival firms to a change in price. D) the elasticity of the firm's demand curve.
A) free entry and exit.
It can be rational to play tit-for-tat in a repeated Prisoners' Dilemma game A) if the game is played an infinite number of times, or if it is uncertain how many times it will be played. B) at no time; tit-for-tat is an irrational strategy in this situation. C) only if the game is played an infinite number of times. D) only if the game is played a finite number of times, and that number is known by all the players in advance. E) for n-1 of the n periods it will be played, if n is known in advance.
A) if the game is played an infinite number of times, or if it is uncertain how many times it will be played.
A construction company builds roads with machinery (capital, K) and labor (L). If we plot the isoquants for the production function so that labor is on the horizontal axis, then a point on the isoquant with a small MRTS (in absolute value) is associated with high ________ use and low ________ use. A) labor, capital B) concrete, gravel C) capital, labor D) none of the above
A) labor, capital
The maximum price that a consumer is willing to pay for each unit bought is the ________ price. A) reservation B) choke C) auction D) market
A) reservation
The manager of a firm is attempting to practice third degree price discrimination. She has equated the marginal revenue in each of her markets. By doing this her A) revenues are maximized given her level of output. B) costs are minimized given her level of output. C) profits are maximized. D) all of the above
A) revenues are maximized given her level of output.
If indifference curves cross, then: A) the assumption of transitivity is violated. B) the assumption of a diminishing marginal rate of substitution is violated. C) consumers minimize their satisfaction. D) the assumption of completeness is violated.
A) the assumption of transitivity is violated.
The term prisoners' dilemma refers to a game in which A) the payoff from playing the dominant strategy is not the highest payoff possible. B) there are no Nash equilibria. C) there are no dominant strategies. D) the payoff from playing the dominant strategy is the same for each player.
A) the payoff from playing the dominant strategy is not the highest payoff possible.
In the game in Scenario 13.5, A) there are two equilibria: either can expand in the West, and the other expands in the South. B) there is one equilibrium: for both to expand South. C) there is one equilibrium: for both to expand West. D) there is only a mixed strategies equilibrium. E) all four outcomes are equilibria.
A) there are two equilibria: either can expand in the West, and the other expands in the South.
With regard to preventing entry, if identical firms act simultaneously, A) they cannot credibly threaten each other. B) only one firm will enter the market. C) they will all incur losses. D) none of them will enter the market.
A) they cannot credibly threaten each other.
Johnny's Shop-and-Pay is a regional grocery chain, and their marketing manager is trying to determine the profit-maximizing coupon program for the store's laundry detergent brand. Coupon users at the store have an elasticity of demand for this product that equals -3, and the elasticity of demand for non-users of the coupon for the store brand equals -1.5. If the full retail (undiscounted) price of the detergent is $10 per box, what is the optimal discount to provide for coupon users? A) 25% off B) 50% off C) The optimal strategy is to charge the same price to both groups D) 75% off
B) 50% off
Which would not increase the productivity of labor? A) An increase in the quality of capital. B) An increase in the number of participants in the labor force. C) Human-capital investment. D) Management training.
B) An increase in the number of participants in the labor force.
This market situation is much like a pure monopoly except that its member firms tend to cheat on agreed upon price and output strategies. What is it? A) Market sharing monopoly B) Cartel C) Natural monopoly D) Duopoly
B) Cartel
With increasing returns to scale, isoquants for unit increases in output become A) Farther and farther apart B) Closer and closer together C) The same distance' D) None of the Above
B) Closer and closer together
Which of the following statements is NOT true? A) The expected revenue generated by a private-value auction increases with the number of bidders. B) Collusion at an auction is not possible because the bidders cannot communicate. C) The expected revenue generated by an open auction will tend to increase as you provide more information to the bidders about the other bids. D) The winner's curse is more likely to arise in sealed-bid auctions than in English auctions.
B) Collusion at an auction is not possible because the bidders cannot communicate.
What characteristic of monopolistic competition may help to offset the inefficiency of this market structure? A) Free entry and exit imply that firms produce at minimum long-run average cost. B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products. C) Consumers may feel better about the inefficiency if they know that firms earn zero profits. D) Consumers may prefer this outcome to monopoly or monopsony.
B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products.
Why does cooperative behavior break down in games with finite endpoints? A) Finite games have the same outcomes as one-period games, and cooperation is not possible in one-period games. B) Each player has an incentive to deviate from a cooperative strategy during the last period. C) A Nash equilibrium in pure strategies is not possible in finite repeated games. D) A Nash equilibrium is only possible in mixed strategies in finite repeated games, but all of the probabilities assigned to particular strategies approach zero as the number of finite game periods becomes large. Thus, we cannot evaluate the expected payoffs in these games.
B) Each player has an incentive to deviate from a cooperative strategy during the last period.
Use the following statements to answer this question: I. A player must have at least one dominant strategy in a game. II. If neither player in a game has a dominant strategy in a game, then there is no equilibrium outcome for the game. A) I and II are true B) I and II are false C) I is true and II is false D) I is false and II is true
B) I and II are false
Which of the following statements is true about a consumer's optimal decision when indifference curves are concave? A) No goods are consumed. B) Only one of the goods is consumed. C) Both goods are consumed. D) It occurs at the point of tangency with the budget line.
B) Only one of the goods is consumed.
The authors cited statistical evidence that the price elasticity of demand for Royal Crown cola is -2.4, and the price elasticity of demand for Coke is roughly -5.5. Which firm likely has stronger brand loyalty among customers that provides greater potential for monopoly power in the cola market? A) Coke B) Royal Crown C) Both firms should have identical monopoly power D) We do not have enough information to answer this question
B) Royal Crown
The oligopoly model that is most appropriate when one large firm usually takes the lead in setting price is the ________ model. A) game theory B) Stackelberg C) prisoner's dilemma D) Cournot
B) Stackelberg
Which is true of output-choice models of oligopoly behavior? A) Both the Stackelberg and Cournot models can be constructed as sequential games B) The Stackelberg, but not the Cournot, model can be constructed as a sequential game. C) There is no relationship between any output-choice model and sequential games. D) Neither the Cournot nor the Stackelberg model can be constructed as a sequential game, but other output-choice models can be. E) The Cournot, but not the Stackelberg, model can be constructed as a sequential game.
B) The Stackelberg, but not the Cournot, model can be constructed as a sequential game.
If only one firm operates in a market, and a potential entrant is blockaded from entering the market, then the incumbent firm must A) be pricing where price equals marginal cost. B) be a natural monopoly. C) be the Stackelberg leader. D) have acted to prevent entry.
B) be a natural monopoly.
Third-degree price discrimination involves A) the use of increasing block rate pricing. B) charging different prices to different groups based upon differences in elasticity of demand. C) charging each consumer the same two part tariff. D) charging lower prices the greater the quantity purchased.
B) charging different prices to different groups based upon differences in elasticity of demand.
Excess capacity in monopolistically competitive industries results because in equilibrium A) each firm's output rate is too great to minimize average cost. B) each firm's output rate is too small to minimize average cost. C) firms make positive economic profit. D) price equals marginal cost.
B) each firm's output rate is too small to minimize average cost.
Monopolistically competitive firms have monopoly power because they A) have freedom of entry. B) face downward sloping demand curves. C) are great in number. D) are free to advertise.
B) face downward sloping demand curves.
The function which shows combinations of inputs that yield the same output is called a(n) A) production function. B) isoquant curve. C) production possibilities frontier. D) isocost curve.
B) isoquant curve.
A firm has two customers and creates a two-part tariff with a usage fee (P) that exceeds the marginal cost of production and leaves each customer with positive consumer surplus such that CS2 > CS1 > 0. If the firm sets the entry fee equal to CS2, then the number of customers that actually buy the product is equal to: A) two. B) one. C) zero. D) We don't have enough information to answer this question.
B) one.
The maximum price that a consumer is willing to pay for a good is called: A) the first-degree price. B) the reservation price. C) the block price. D) the choke price.
B) the reservation price.
The law of diminishing returns assumes that A) additional inputs are added in smaller and smaller increments. B) there is at least one fixed input. C) all inputs are held constant. D) all inputs are changed by the same percentage.
B) there is at least one fixed input.
Some grocery stores are now offering customers coupons which entitle them to a discount on certain items on their next visit when they go through the check-out line. This practice is an example of: A) intertemporal price discrimination. B) third-degree price discrimination. C) a two-part tariff. D) bundling. E) none of the above
B) third-degree price discrimination.
You are playing a game in which a dollar bill is auctioned. The highest bidder receives the dollar in return for the amount bid. However, the second-highest bidder must pay the amount that he or she bids, and gets nothing in return. The optimal strategy is: A) to bid the smallest allowable increment below $1. B) to bid nothing. C) to bid $0.99. D) to bid more than a dollar.
B) to bid nothing.
In the ________, each firm treats the output of its competitor as fixed and then decides how much to produce. A) model of monopolistic competition B) kinked-demand model C) Cournot model D) Stackelberg model E) none of the above
C) Cournot model
Which of the following is NOT a condition for third degree price discrimination? A) Separate markets B) Monopoly power C) Economies of scale D) Different own price elasticities of demand
C) Economies of scale
Which of the following equations based on capital (K) and labor (L) inputs does not represent a plausible production function? A) F(K,L) = 9KL B) F(K,L) = 10(KL)0.3 C) F(K,L) = K + L - 2 D) F(K,L) = 6K
C) F(K,L) = K + L - 2
Why do firms tend to experience decreasing returns to scale at high levels of output? A) Government tax policy tends to discourage large-scale production operations. B) Firms face fewer problems with inventory management and marketing as output reaches very high levels. C) Firms face more problems with coordinating tasks and communications among managers and workers at very high levels of output. D) Firms tend to use more capital and less labor at higher levels of output.
C) Firms face more problems with coordinating tasks and communications among managers and workers at very high levels of output.
What is one difference between the Cournot and Stackelberg models? A) In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first. B) Profits are zero in Cournot and positive in Stackelberg. C) In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first. D) In Cournot, a firm has the opportunity to react to its rival.
C) In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first.
If Px = Py, then when the consumer maximizes utility, A) MU(X) may equal MU(Y), but it is not necessarily so. B) X must equal Y. C) MU(X) must equal MU(Y). D) X and Y must be substitutes.
C) MU(X) must equal MU(Y).
What is the key characteristic of profit maximizing price discrimination that distinguishes intertemporal price discrimination from peak-load pricing? A) Peak-load pricing does not require MC = MR. B) Marginal revenue may be different across different groups of buyers under intertemporal price discrimination. C) Marginal costs are independent across time periods under peak-load pricing. D) Marginal revenue must be constant under both pricing schemes
C) Marginal costs are independent across time periods under peak-load pricing.
For many firms, capital is the production input that is typically fixed in the short run. Which of the following firms would face the longest time required to adjust its capital inputs? A) Flat-screen TV manufacturer B) Firm that makes DVD players. C) Nuclear power plant D) Computer chip fabricator
C) Nuclear power plant
Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct? A) The Japanese firm will sell more steel abroad than they will sell in Japan. B) The Japanese firm will sell more steel in Japan than they will sell abroad. C) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users. D) The Japanese firm will sell steel at a higher price abroad than they will charge domestic users. E) Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.
C) The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
Why are many oligopolistic market outcomes conveniently described by a Prisoners' Dilemma? A) The outcome of a Prisoners' Dilemma is always efficient. B) The firms can always achieve the outcome that maximizes joint outcomes. C) The firms could do better than the Nash equilibrium if they collude. D) The outcome of a Prisoners' Dilemma is always identical to the perfectly competitive outcome.
C) The firms could do better than the Nash equilibrium if they collude.
For a market with a linear demand curve and constant marginal cost of production, why are the reaction functions for the Cournot duopoly sellers also straight lines? A) Marginal revenue is always linear when marginal costs are constant. B) Cournot thought the lines would be straight, but this was proven wrong by other economists. C) We know that the marginal revenue curves for linear demand curves are also straight lines. D) The reaction functions do not have to be straight lines, and they are only drawn this way in the book to keep the figures simple.
C) We know that the marginal revenue curves for linear demand curves are also straight lines.
Your economics professor has decided that your class will not be graded on a curve but on an absolute scale. Therefore, it is possible for every student in the class to get an "A." Your grade will not depend in any way on your classmates' performance. Based on this information, you decide that you should study economics three hours each day, regardless of what your classmates do. In the language of game theory, your decision to study three hours each day is: A) a maximin strategy. B) a Prisoner's dilemma. C) a dominant strategy. D) a minimax strategy.
C) a dominant strategy.
The short run is: A) all factors of production are fixed. B) at least one factor of production can be varied. C) at least one factor of production is fixed. D) all factors of production can be varied
C) at least one factor of production is fixed
The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then A) firm A will not enter. B) firm A will enter and firm B will not. C) both firms will enter. D) firm B's entry is blockaded.
C) both firms will enter.
Season ticket holders for the St. Louis Rams received a surprise when they read the applications forms to renew their season tickets. In order to get their season ticket to the Rams' home games, they also had to buy tickets to the preseason games. Many season ticket holders grumbled about this practice as an underhanded way for the St. Louis Rams to get more money from its season ticket holders. This practice is an example of: A) intertemporal price discrimination. B) peak-load pricing. C) bundling. D) Both A and B are correct.
C) bundling.
Which of the following is a dynamic game? A) rock-paper-scissors (Roshambo) B) flipping pennies C) chess D) None of the above.
C) chess
For a two-part tariff imposed on two consumers, the entry fee is based on the: A) simple average of the consumer surplus for the two buyers. B) consumer surplus of the customer with higher willingness-to-pay. C) consumer surplus of the customer with lower willingness-to-pay. D) none of the above
C) consumer surplus of the customer with lower willingness-to-pay.
For a perfect first-degree price discriminator, incremental revenue is A) greater than price if the demand curve is downward sloping. B) the same as the marginal revenue curve if the firm is a non-discriminating monopolist. C) equal to the price paid for each unit of output. D) less than the marginal revenue for a non-discriminating monopolist.
C) equal to the price paid for each unit of output.
Under perfect price discrimination, consumer surplus A) is greater than zero. B) is maximized. C) equals zero. D) is less than zero.
C) equals zero.
A firm is charging a different price for each unit purchased by a consumer. This is called A) second-degree price discrimination. B) third-degree price discrimination. C) first-degree price discrimination. D) fifth-degree price discrimination. E) fourth-degree price discrimination.
C) first-degree price discrimination.
Zoe is an executive at Dell Computer Company who is in charge of designing the next version of laptop computers. She will consider such features as screen size, weight, processor speed, and CD and DVD drives. Given the fact that it is costly to include more features in new products, why might Zoe be interested in data on how much consumers paid for a range of laptops with different attributes? A) in order to set an optimal price for the laptops. B) in order to determine the best features to include. C) in order to estimate willingness to trade off one feature for another. D) in order to estimate willingness to pay for each feature.
C) in order to estimate willingness to trade off one feature for another.
A production function assumes a given A) amount of capital and labor. B) amount of output. C) technology. D) set of input prices.
C) technology.
In a certain textile firm, labor is the only short term variable input. The manager notices that the marginal product of labor is the same for each unit of labor, which implies that A) the average product of labor is always less than the marginal product of labor B) the average product of labor is always greater that the marginal product of labor C) the average product of labor is always equal to the marginal product of labor D) there is no unambiguous relationship between labor's marginal and average products.
C) the average product of labor is always equal to the marginal product of labor
One of the factors contributing to the fact that labor productivity is higher in the U.S. than in the People's Republic of China is A) the higher capital/labor ratio in China. B) China's smaller stock of fossil fuels. C) the higher capital/labor ratio in the U.S. D) China's larger stock of capital.
C) the higher capital/labor ratio in the U.S.
An incumbent's threat to retaliate after a potential competitor enters the market will be taken seriously by potential competitors if A) the potential entrant's profit exceeds the incumbent's if the threat is carried out. B) the incumbent earns greater profit carrying out the threat than by accommodating entry. C) the incumbent can still earn a profit after carrying out the threat. D) the potential entrant cannot earn a profit if the threat is carried out.
C) the incumbent can still earn a profit after carrying out the threat.
The Cournot equilibrium can be found by treating ________ as a pair of simultaneous equations and by finding the combination of Q1 and Q2 that satisfy both equations. A) the contract curve and the market demand curve B) the market supply curve and the market demand curve C) the reaction curves for firms 1 and 2 D) the firm's supply curve and the firm's demand curve E) the contract curve and the market supply curve
C) the reaction curves for firms 1 and 2
Jane is attempting to maximize utility by selecting a market basket of goods. For each of the goods in the market basket the marginal utility per dollar spent is equal. There are some goods which are affordable but do not appear in the Jane's market basket. If Jane has maximized utility, the marginal utility per dollar spent on each of the goods that does not appear in the market basket is: A) too high. B) zero. C) too low. D) infinite.
C) too low.
A monopolistically competitive firm in long-run equilibrium: A) will make negative profit. B) will make positive profit. C) will make zero profit. D) Any of the above are possible.
C) will make zero profit.
Although firms earn zero profits in the long run, why is the outcome from monopolistic competition considered to be inefficient? A) Quantity is lower than the perfectly competitive outcome. B) Price exceeds marginal cost. C) Goods are not identical. D) A and B are correct. E) B and C are correct.
D) A and B are correct.
The individual with the highest valuation of the good will win in which of the following auctions? A) Dutch Auction B) Sealed Bid Auction C) English Auction D) All of the above.
D) All of the above.
Cartels can more easily detect cheating by cartel members if the products sold by each member are largely homogeneous. As product quality varies, the observed prices charged by cartel members may be due to differences in the products, or they may be due to cheating. Which of the following goods would more difficult to monitor for potential cheating? A) Aluminum ingots B) Industrial concrete C) Steel beams D) Luxury yachts
D) Luxury yachts
Which of the following statements is NOT compatible with explanations for why peak-load pricing is more profitable than charging a single price? A) Marginal revenue changes a lot across different time periods. B) Marginal cost of production is much higher under peak demand. C) Consumer willingness to pay for the product varies a lot across different time periods. D) Marginal revenue must be the same across different time periods.
D) Marginal revenue must be the same across different time periods.
Many mining and mineral extraction processes tend to exhibit increasing returns to scale. Suppose copper mines have increasing returns, and the existing copper mines reduce their capital and labor inputs by 25 percent in response to a global recession. What is the expected impact on copper output? A) Output decreases by less than 25 percent B) Output decreases by exactly 25 percent C) Output increases by less than 25 percent D) Output decreases by more than 25 percent
D) Output decreases by more than 25 percent
Under perfect price discrimination, marginal profit at each level of output equal A) P - AC. B) 0. C) P - AR. D) P - MC.
D) P - MC.
Which of the following is true for both perfectly competitive and monopolistically competitive firms in the long run? A) P > MR. B) P = MC. C) MC = ATC. D) Profit equals zero.
D) Profit equals zero.
What is the dominant strategy for bidders in an English oral auction? A) Keep bidding until all other bidders quit, regardless of your reservation price. B) Bid until the previous bid price equals the reservation price of the last bidder. C) Bid until the first-price and second-price bids are equal. D) Stop bidding once the price exceeds your reservation price.
D) Stop bidding once the price exceeds your reservation price.
Some popular reality television programs follow people who buy the contents of abandoned storage lockers at public auctions. In most cases, several storeage lockers are sold in sequence during a particular auction. Occassionally, one of the buyers will purposefully bid much more than the expected value of a particular storage locker in order to intimidate the other bidders. What is a plausible explanation for these excessive bids? A) The bidder is trying to establish a first-mover advantage, but only if they occur during the first auction of the day. B) The excessive bids may be rational if they occur during the last auction of the day. C) The excessive bids represent a form of tacit collusion among the buyers. D) The buyer is trying to establish a reputation that may affect the outcome of later auctions.
D) The buyer is trying to establish a reputation that may affect the outcome of later auctions.
An increase in income, holding prices constant, can be represented as: A) an outward shift in the budget line with its slope becoming flatter. B) a change in the slope of the budget line. C) a parallel inward shift in the budget line. D) a parallel outward shift in the budget line.
D) a parallel outward shift in the budget line.
Which of the following can be thought of as a barrier to entry? A) strategic actions by incumbent firms. B) patents. C) scale economies. D) all of the above
D) all of the above
Which of the following strategies are used by business firms to capture consumer surplus? A) price discrimination. B) bundling. C) two-part tariffs. D) all of the above.
D) all of the above.
The fact that Alice spends no money on travel: A) implies that she does not derive any satisfaction from travel. B) implies that she is at a corner solution. C) implies that her MRS does not equal the price ratio. D) any of the above are possible
D) any of the above are possible
Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other. The consumer will: A) rank the market basket more highly before the change. B) rank the market basket just as desirable as before. C) rank the market basket more highly after the change. D) any one of the above statements may be true.
D) any one of the above statements may be true.
A team of researchers has conducted a study of the well being of the citizens of the island nation of Zarasa. Using a scale from 1 (least happy) to 10 (most happy), the researchers find that citizens who earn 100 Zarutas per year have a mean happiness of 2.0, those who earn 200 Zarutas per year have a mean happiness of 6.0, and those who earn 300 Zarutas per year have a mean happiness of 7.0. The researchers should make which of the following conclusions? A) The utility of Zarasians increases with income. B) The marginal utility of Zarasians increases with income. C) The marginal utility of Zarasians decreases with income. D) both A and C
D) both A and C
Figure 13.1 shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. Both firms setting a high price is not a Nash equilibrium because A) setting a high price is the dominant strategy for each firm. B) neither firm can improve its payoff by setting a low price given that the other firm is setting a high price. C) there is no dominant strategy for either firm. D) both firms can improve their payoff by setting a low price given that the other firm is setting a high price.
D) both firms can improve their payoff by setting a low price given that the other firm is setting a high price.
If all producers in a market are cartel members, then the demand curve facing the cartel is A) horizontal. B) identical to the demand curve in the dominant firm model. C) the market demand curve. D) identical to the monopolist's demand curve.
D) identical to the monopolist's demand curve.
A local restaurant offers an "all-you-can-eat" salad bar for $3.49. However, with any sandwich, a customer can add the "all-you-can-eat" salad bar for $1.49. This is an example of A) peak-load pricing. B) a two-part tariff. C) second-degree price discrimination. D) none of the above
D) none of the above
Bindy, an 18-year-old high school graduate, and Luciana, a 40-year-old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of: A) price discrimination. B) bundling. C) two-part tariff. D) none of the above
D) none of the above
In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California who lived near the amusement park were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of: A) two-part tariff. B) tying. C) collusion. D) price discrimination. E) bundling.
D) price discrimination.
An electric power company uses block pricing for electricity sales. Block pricing is an example of A) Block pricing is not a type of price discrimination. B) third-degree price discrimination. C) first-degree price discrimination. D) second-degree price discrimination.
D) second-degree price discrimination.
If a Cournot duopolist announced that it will double its output, the other firm does not view the announcement as credible because A) the other firm's profits will fall if the announcing firm carries out the threat. B) the other firm will double output also. C) the other firm's profits will rise if the announcing firm carries out the threat. D) the announcing firm's profits will fall if it carries out the threat.
D) the announcing firm's profits will fall if it carries out the threat.
A "sequential game" is A) another term for a repeated game. B) another term for a cooperative game. C) the term for a game in which individuals receive their payoffs at different times. D) the term for a game in which individuals do not commit to strategy choices at the same time. E) the term for a game in which each outcome occurs, one after the other, as the game is repeated over time.
D) the term for a game in which individuals do not commit to strategy choices at the same time.
Writing total output as Q, change in output as △Q, total labor employment as L, and change in labor employment as △L, the marginal product of labor can be written algebraically as A) ΔQ · L. B) Q / L. C) ΔL / ΔQ. D) ΔQ / ΔL.
D) ΔQ / ΔL.
Scenario 13.4 Consider the following game: Which of the following is TRUE for the game in Scenario 13.4? A) Vita's dominant strategy is to sponsor the TV show. B) NRG's dominant strategy is to sponsor the TV show. C) NRG's dominant strategy is to sponsor the marathon. D) Vita's dominant strategy is to sponsor the marathon. E) Neither company has a dominant strategy.
E) Neither company has a dominant strategy.
Which of the below outcomes is the result of a Nash equilibrium in pure strategies for the game in Scenario 13.10? A) -5, 5 B) 10, -10 C) 8, -8 D) 0, 0 E) There is no pure strategy equilibrium in this game.
E) There is no pure strategy equilibrium in this game.
The price of on-campus parking from 8:00 AM to 5:00 PM, Monday through Friday, is $3.00. From 5:00 PM to 10:00 PM, Monday through Friday, the price is $1.00. At all other times parking is free. This is an example of A) bundling. B) second-degree price discrimination. C) a two-part tariff. D) tying. E) none of the above.
E) none of the above.
