Econ. Final 11-18?

When the ATC curve is decreasing, we know that the MC curve is ______1_______ , and when the ATC curve is increasing, we know that MC is _____2_____. Below or above the ATC Curve

1. Below the ATC Curve 2. Above the ATC Curve

A perfectly competitive firm will choose to shut down when the _____(1)_____ intersects the marginal cost curve below the _______(2)______ . 1. price (marginal revenue) or average total cost 2. average variable cost curve or total cost curve

1. price (marginal revenue) 2. average variable cost curve

Which of the following explains a dominant strategy equilibrium? A. A game in which all the players do not want to change their choice, regardless of the action of the other player. B. A game in which each player makes the best choice, given the choice of the other player. C. A game in which one player is able to dominate the actions of another player. D. A game exists in which all the players change their choices, given the choice of the other player.

A. A game in which all the players do not want to change their choice, regardless of the action of the other player.

For a firm, constant returns to scale occur when the ____(1)_____ for the firm _____(2)_____ as the quantity produced increases. 1. A. ATC B. AFC C. MC 2. A. does not change B. decreases C. rises

A. ATC A. does not change

Which of the following common features do monopolistically competitive markets and monopolies share? A. Firms face downward-sloping demand curves. B. Consumers with market power set prices. C. Producers with no market power set their own prices. D. Barriers restrict new firms from entering.

A. Firms face downward-sloping demand curves.

Why is electricity generation better off as a natural monopoly? A. Industries like experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity. electricity generation B. It experiences constant returns to scale since it is sanctioned by the government, allowing a single provider to charge a lower price. C. It experiences diseconomies of scale since the marginal cost curve is upward-sloping, indicating that normal market forces break down and only one firm can profitably produce. D. It experiences constant returns to scale since marginal costs are constant, allowing any number of providers to produce an efficient amount.

A. Industries like experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity.

A Beautiful Mind, a movie about John Nash, fails to properly demonstrate a Nash equilibrium. It attempts to do so in a bar scene where men at a bar (Nash and his friends) plan to ask women to dance. There is one beautiful woman that the men consider the most attractive, as well as several other women. Nash assumes less attractive women will only accept an offer to dance if the man extending the offer has not first been rejected by the beautiful woman. In the movie, Nash proposes that all the men agree not to ask the beautiful woman in the first place. 1. Given this information, which of the following is true of Nash's proposal? A. It will not result in a Nash equilibrium because each man will choose to deviate from the plan. B. It will not result in a Nash equilibrium because each man will be better off asking the beautiful woman to dance. C. It will result in a Nash equilibrium because each man will choose not to deviate from the plan. D. It will result in a Nash equilibrium because each man will ask the beautiful woman to dance. The movie initially shows all the men asking the beautiful woman to dance. 2. Given this information, will this situation result in a Nash equilibrium? A. No, because most of the men will not get rejected by the beautiful woman. B. Yes, because each man would be better off by asking the beautiful woman to dance. C. Yes, because each man would not be better off by asking another woman to dance. D. No, because most of the men will get rejected by the beautiful woman. Assume that the beautiful woman will accept only one dance proposal and only one man asks the beautiful woman to dance. Given this information, which of the following statements is true? A. There will be no Nash equilibrium because if two men ask the beautiful woman to dance, both of them might end up dancing with her. B. There will be a Nash equilibrium because only one man will ask the beautiful woman to dance and the rest of the men will ask the other women. C. There will be a Nash equilibrium because each man will be better off asking the beautiful woman to dance. D. There will be no Nash equilibrium because most of the men would be rejected by the beautiful woman.

A. It will not result in a Nash equilibrium because each man will choose to deviate from the plan. D. No, because most of the men will get rejected by the beautiful woman. B. There will be a Nash equilibrium because only one man will ask the beautiful woman to dance and the rest of the men will ask the other women.

How would the introduction of legal or technical barriers to entry affect the long-run equilibrium in a perfectly competitive market? A. It would reduce any downward pressure on prices from entry and allow economic profits in the long run. B. It would make all firms in the market less competitive, since any artificial barrier hurts the market overall. C. It would create downward pressure on prices, causing firms to exit the market. D. There would be no effect on the market, since there are no barriers to entry in perfectly competitive markets.

A. It would reduce any downward pressure on prices from entry and allow economic profits in the long run.

In a competitive market, a supply curve shows all the price and quantity combinations at which firms will produce. Does a monopoly face a similar supply curve? A. No, a monopoly is a price-maker and its production decisions are determined by its downward-sloping demand curve. B. No, a monopoly has a vertical supply curve that is located where marginal revenue equals marginal cost. C. No, a monopoly has a horizontal supply curve that is located where marginal revenue equals marginal cost. D. Yes, since monopolies and competitive firms base production on a given market price that they cannot control.

A. No, a monopoly is a price-maker and its production decisions are determined by its downward-sloping demand curve.

Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market? A. No, because firms restrict output to raise price. B. No, because firms produce where price is equal to marginal cost. C. Yes, because production occurs at the minimum average total cost. D. No, because firms produce where marginal cost equals marginal revenue.

A. No, because firms restrict output to raise price.

What must you, as the consultant, construct for Chevron before you can determine if there is a dominant strategy equilibrium? A. Payoff matrix. B. Extensive-form game tree. C. Table with numerical probabilities. D. Three-by-three table.

A. Payoff matrix.

Which of the following statements is false in the case of the tragedy of commons? A. The dominant strategy equilibrium makes the players better off than if they both had simultaneously chosen the other strategy. B. A mutually beneficial outcome may not emerge in such a game. C. It results in negative externality. D. The players choose dominant strategy equilibrium and not the mutually beneficial outcome.

A. The dominant strategy equilibrium makes the players better off than if they both had simultaneously chosen the other strategy.

Which of the following must exist for a firm to engage in price discrimination? A. The firm must be able to identify and separate its buyers into different classes, and the low − price buyers cannot resell the product to the high − price buyers. B. The firm must have no more than one class of buyer. C. The firm must be a natural monopoly. D. The firm must face an inelastic demand. E. The firm must be able to realize economies of scale.

A. The firm must be able to identify and separate its buyers into different classes, and the low − price buyers cannot resell the product to the high − price buyers.

Town B is considering imposing a $1 tax on each hamburger sold; the tax is to be paid by the hamburger stands in the town. Assuming that the market for hamburgers is perfectly competitive, which of the following are true? (Check all that apply.) A. The tax would shift a hamburger stand's marginal cost curve. B. The tax would shift a hamburger stand's short-run average fixed cost curve. C. The tax would shift a hamburger stand's short-run average variable cost curve. D. It would change a hamburger stand's short-run profit-maximizing choice of the number of hamburgers to produce.

A. The tax would shift a hamburger stand's marginal cost curve. C. The tax would shift a hamburger stand's short-run average variable cost curve. D. It would change a hamburger stand's short-run profit-maximizing choice of the number of hamburgers to produce.

Which of the following are properties of a monopoly? (Check all that apply.) A. There are high barriers to entry. B. There are a few close substitutes for the goods and services produced. C. Price-maker. D. Price-taker. E. There is only one seller.

A. There are high barriers to entry. C. Price-maker. E. There is only one seller.

How is a monopolistically competitive market similar to a perfectly competitive market? A. There are no restrictions on the entry of new firms. B. Both have homogeneous products with no close substitutes. C. Producers with market power set their own prices. D. Both have differentiated products with close substitutes.

A. There are no restrictions on the entry of new firms.

The prisoners' dilemma is ____________ with a ____________ equilibrium that is not the best outcome for both players. A. a simultaneous move game; dominant strategy. B. an extensive-form game; submissive strategy. C. a simultaneous move game; submissive strategy. D. an extensive-form game; dominant strategy.

A. a simultaneous move game; dominant strategy.

In the model of an oligopoly with identical (homogeneous) products, the price is likely to be ___________. A. equal to marginal cost. B. equal to variable costs. C. less than minimum average cost. D. greater than marginal revenue.

A. equal to marginal cost.

Consider an experiment on soliciting donations for a children's hospital. Experimenters put flyers on doors saying that solicitors would be coming to their house at a particular time. Fewer people opened the door when they knew that a solicitor would be coming, but those who did gave more money, on average, than others who did not know. From the results of this experiment, you can infer that people give due to ____________. A. impure altruism, because of social pressures. B. impure altruism, because fairness is important. C. pure altruism, because people are rational. D. pure altruism, because there is a return to giving

A. impure altruism, because of social pressures.

When a firm is able to engage in perfect price discrimination, its marginal revenue curve A. is the same as its demand curve. B. is the same as its supply curve. C. lies above its demand curve. D. lies below its demand curve. E. is undefined because it does not exist

A. is the same as its demand curve.

The equilibrium price is the ___________. A. long-run average total cost of the last entrant into the market. B. long-run average total cost of the first entrant into the market. C. minimum of the average variable cost of the smallest firm in the market. D. average marginal cost of the firms.

A. long-run average total cost of the last entrant into the market.

An information cascade is when we ___________. A. make choices based on the decisions of others. B. conform our decisions to the behavior of others. C. influence others with our opinions or ideologies. D. sacrifice to promote equality.

A. make choices based on the decisions of others.

Suppose you are an "all-knowing" government planner. Your goal is to regulate a monopolist's price and quantity in order to maximize social welfare but still allow the monopolist to produce. To accomplish your goal, you would have the monopoly produce where ____________. (Assume costs are such that the firm would not incur a loss) A. marginal cost equals demand, and you would price the good at marginal cost. B. demand is highest, and you would price the good at zero. C. marginal cost equals marginal revenue, and you would price the good at demand. D. marginal cost equals marginal revenue, and you would price the good at marginal cost.

A. marginal cost equals demand, and you would price the good at marginal cost.

Suppose you and your friends decide to go to the beach during spring break. You need to fly from Kansas City to Miami but only one airline provides the service. This market is best characterized as ___________. A. monopoly. B. perfect competition. C. oligopoly. D. monopolistic competition.

A. monopoly.

All firms in a perfectly competitive market are said to be __________. A. price takers. B. price neutral. C. profitable in the long run. D. price leaders.

A. price takers.

The last firm to enter earns ___________. A. zero economic profits. B. the greatest economic profits. C. positive economic profits. D. average economic profits.

A. zero economic profits.

Identify the key assumption(s) made about a Nash equilibrium. (Check all that apply.) A. Some players will occasionally behave illogically. B. All players understand the game and the payoffs associated with each strategy. C. Some players are smarter than others. D. All players understand that other players understand the game.

B. All players understand the game and the payoffs associated with each strategy. D. All players understand that other players understand the game.

Calling long distance is often more expensive on weekdays between 8 am and 5 pm than in the evening hours. Why is this the case? A. Increasingly, businesses who must call suppliers or customers during business hours resort to the internet, thereby reducing demand for long-distance calls. To make for this fall in demand, telephone companies slap on higher rates. B. Businesses who must call suppliers or customers during business hours have few alternatives and therefore have an inelastic demand during the workday compared to after-work hours. C. Telephone companies hope to discourage customers from calling long distance during the day to keep their labor costs down. D. The cost of making long-distance connections is higher during the day than in the evenings.

B. Businesses who must call suppliers or customers during business hours have few alternatives and therefore have an inelastic demand during the workday compared to after-work hours.

Both competitive firms and monopolies produce at the level where marginal cost equals marginal revenue. Then, other things remaining the same, why is price lower in a competitive market than in a monopoly? A. The government puts a cap on how much a competitive firm can charge, while a monopolist can charge any price it chooses. B. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue. C. A competitive market sets its price where marginal cost equals demand, while a monopolist sets its price where marginal cost equals marginal revenue. D. Competitive markets face perfectly inelastic demand and marginal revenue, while monopolies face perfectly elastic demand and marginal revenue.

B. Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-sloping demand and marginal revenue.

Suppose the government grants an individual or company the exclusive right to intellectual property. In this case, the government is granting a ____________. A. Patent B. Copyright

B. Copyright

Which of the following is not one of the three conditions that characterizes a perfectly competitive market? A. There are no barriers to entry or exit in the market. B. Firms have pricing power and can set their prices freely. C. Buyers are price takers and cannot influence the price charged. D. Sellers in the market produce identical goods.

B. Firms have pricing power and can set their prices freely.

Suppose you were playing rock-paper-scissors as an extensive from game; first you choose rock, or paper, or scissors, and then your opponent makes a choice. Is there a first-mover advantage in this game? A. Yes, first mover wins in this game. B. No, if you show your move first you will lose every time. C. Yes, first mover has an advantage by getting to pick their first choice. D. No, first mover must play a dominant strategy which is good for mixed strategy games.

B. No, if you show your move first you will lose every time.

Janet knows a lot of people who do not like Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that Unilever, the company that manufactures Marmite®, cannot possibly have any monopoly power. Do you agree with this analysis? A. Yes, if a good is not widely liked by consumers, the producer does not have a monopoly in that good. B. No, monopoly power is based on whether a good has any close substitutes, not whether your friends like the product. C. No, producing Marmite® requires low fixed costs, so it is likely a regulated natural monopoly that has market power. D. Yes, since other yeast spreads must be preferred to Marmite®, it cannot have a monopoly.

B. No, monopoly power is based on whether a good has any close substitutes, not whether your friends like the product.

Which of the following is not one of the sources of natural market power? A. Network externalities. B. Production of a luxury good. C. Controlling a key resource. D. The presence of economies of scale.

B. Production of a luxury good.

Consider two producers, Ashley and Ron, who produce luxury soaps at a cost to the environment by releasing the polluted water in the town canal. They use the same canal water for production. The profit of each producer is affected by the decision of another producer. When both Ashley and Ron choose not to pollute the canal, they earn a profit of $3.75 per bar. When both of them choose to pollute the canal, they earn a profit of $3.60 per bar. When one of them chooses to pollute the canal and the other chooses not to pollute the canal, the one who pollutes earns a profit worth $4 per bar and the one who does not pollute earns a profit worth $3.50 per bar. Which of the following is true in the above case? A. The Nash equilibrium makes both of the producers better off than if they both had simultaneously chosen the other strategy. B. The dominant strategy equilibrium and Nash equilibrium make both of the producers worse off than if they both had simultaneously chosen the other strategy. C. The dominant strategy equilibrium makes Ashley better off and Ron worse off than if they both had simultaneously chosen the other strategy. D. There is a dominant strategy equilibrium that makes both of the producers worse off than they would have been at Nash equilibrium.

B. The dominant strategy equilibrium and Nash equilibrium make both of the producers worse off than if they both had simultaneously chosen the other strategy.

What happens in a monopolistically competitive market when new firms enter the market? A. Firms have more market power. B. The existing firm's demand curve shifts in and becomes flatter. C. The existing firm's demand curve shifts out and becomes steeper. D. Consumers become less sensitive to price.

B. The existing firm's demand curve shifts in and becomes flatter.

What is backward induction? A. It involves choosing one particular action for a situation. B. The procedure of solving an extensive-form game by first considering the last mover's decision. C. The methodology supporting an extensive-form representation of a game. D. The theory that represents extensive-form games when the Nash equilibrium specifies the order of play.

B. The procedure of solving an extensive-form game by first considering the last mover's decision.

Town A is considering imposing a lump-sum tax of $300 on each hamburger stand in the town. Assuming that the market for hamburgers is perfectly competitive, which of the following would occur? A. It would change a hamburger stand's short-run profit-maximizing choice of the number of hamburgers to produce. B. The tax would shift a hamburger stand's short-run average fixed cost curve. C. The tax would shift a hamburger stand's short-run average variable cost curve. D. The tax would shift a hamburger stand's marginal cost curve.

B. The tax would shift a hamburger stand's short-run average fixed cost curve.

Which of the following best describes network externalities? A. They are the benefits received by other firms from the actions taken by a monopolist. B. They occur when a product's value increases as more consumers begin to use it. C. They occur when a firm hires an outside company to help lower its costs. D. They are the benefits to a firm from increasing its online presence.

B. They occur when a product's value increases as more consumers begin to use it.

The long-run average total cost curve is __________ and is found by using the ___________. A. upward-sloping; minimum point across all possible ATC curves for a given quantity. B. U-shaped; minimum point across all possible ATC curves for a given quantity. C. U-shaped; maximum points along the MC curve at various marginal revenues. D. upward-sloping; maximum points along the MC curve at various marginal revenues.

B. U-shaped; minimum point across all possible ATC curves for a given quantity.

Two firms are thinking of entering a new market. If one enters it will be successful but if a second enters both will suffer very large losses. Is there a first-mover advantage in this game? A. No. The firm that goes first can enter and the firm that goes second will have no incentive to enter. B. Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter. C. Yes. The firm that goes first can choose not to enter and therefore incur large loses. D. No. The firm that goes first can choose not to enter and the firm that goes second will therefore incur large loses.

B. Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter.

Most movie theatres charge different prices to different groups of customers for movie admission but not on movie popcorn. Which of the following is a reason for this? A. because the demand for popcorn is very high relative to the demand for movie admissions B. because it is easier to limit resale in movie admissions but not in popcorn C. because the markup on movie popcorn is very high and movie theatres do not want to forgo this source of revenue D. because the cost of operating a concession stand in a movie theatre is very high compared to the cost of showing a movie

B. because it is easier to limit resale in movie admissions but not in popcorn

With price discrimination, a monopoly A. can charge a single price to all customers. B. converts consumer surplus into economic profit. C. produces less output than if it does not price discriminate. D. converts consumer surplus into deadweight loss. E. converts producer surplus into economic profit.

B. converts consumer surplus into economic profit.

A firm that can effectively price discriminate will charge a higher price to A. customers who have the more elastic demand for the product. B. customers who have the more inelastic demand for the product. C. buyers who are members of the smallest market segment. D. buyers who belong to the largest market segment.

B. customers who have the more inelastic demand for the product.

When developing a dominant strategy in a simultaneous-move game, a player: A. devises the same best response to a possible response of the other player. B. devises the same best response to every possible strategy of the other player. C. devises multiple strategies for the best response of the other player. D. devises multiple strategies for every possible strategy of the other player.

B. devises the same best response to every possible strategy of the other player.

How are the products sold by a monopolistically competitive firm different from the products sold in a competitive market? Unlike products sold in a competitive market, the products sold in a monopolistically competitive market are ___________. A. homogeneous. B. differentiated. C. perfect substitutes. D. expensive.

B. differentiated.

After you examine the payoffs, you discern that BP's best response is to always bid low. This is an example of: A. prisoners' dilemma B. dominant strategy C. Nash equilibrium

B. dominant strategy

Given the long-run adjustment process that takes place after a supply or demand shock, we know that the industry supply curve must be __________. A. vertical, since the demand curve will continue to shift until all firms in the market earn profits. B. horizontal, since the supply curve shifts until price is back to its original level and profits are back to zero. C. downward-sloping, since the supply curve will shift downward until all firms are incurring losses. D. upward-sloping, since it is simply the sum of the short-run supply curves for each individual firm.

B. horizontal, since the supply curve shifts until price is back to its original level and profits are back to zero.

To construct the supply curve in a market with many firms with different cost structures, the ___________. A. minimums of the firms' marginal cost curves are linked together. B. individual supply curves for each firm are added together. C. individual average variable cost curves are added together. D. minimums of the firms' long-run average total cost curves are linked together.

B. individual supply curves for each firm are added together.

If firms in a perfectly competitive market are earning profits or incurring losses in the short run, then in the long run these profits or losses will either cause new firms to enter or existing firms to leave the market. This will result in a shift in the ______(1)_____ until profits are ____(2)____ . 1. A. firm's average cost curve B. industry supply curve C. industry demand curve 2. A. zero B. positive for all firms C. negative for all firms

B. industry supply curve A. zero

There was a sharp increase in the number of long-term unemployed following the recession that began in December 2007. Rand Ghayad did the following study to better understand long-term unemployment. He sent out 3,600 fake resumes in response to 600 job openings. He varied the length of time his fake applicants had been out of work, how often they had switched jobs, and their work experience. He found that the longer the "applicants" were out of work, the less likely they were to be offered an interview. The idea of an information cascade could be used to explain the results of this study because some employers _________. A. maximize their own utility without considering the well-being of others. B. make hiring decisions based on the decisions of others. C. attempt to influence others with their own private information. D. consider only their own applicant evaluations without consulting others.

B. make hiring decisions based on the decisions of others.

With perfect price discrimination, a monopoly can extract the ________ price each customer is willing to pay and thereby obtain the entire ________ surplus. A. minimum; producer B. maximum; consumer C. maximum; producer D. minimum; consumer E. None of the above answers are correct

B. maximum; consumer

Market power relates to the ability of sellers to affect __________, and arises because of ____________. A. prices; competition from foreign firms. B. prices; barriers to entry. C. consumer preferences; the invisible hand. D. consumer preferences; increased ability of monopolies to advertise.

B. prices; barriers to entry.

An example of an information cascade is ____________. A. a new business opening. B. restaurants that suddenly become popular. C. saving money for the future. D. employers hiring those unemployed.

B. restaurants that suddenly become popular.

A dominant strategy equilibrium is ____________. A. the payoffs for each action that a player can take. B. the combination of strategies where each strategy is a dominant strategy. C. the best response to every possible strategy of the other player. D. when players pick their actions at the same time.

B. the combination of strategies where each strategy is a dominant strategy.

In the context of this chapter, having a preference for fairness means ____________. A. conforming to the decisions of others. B. the willingness to sacrifice to help those treated differently. C. when people make the same decisions as others. D. a desire to help oneself feel good.

B. the willingness to sacrifice to help those treated differently.

In recent years, some online firms have offered different consumers different prices for the same good. These firms use the consumer's IP address to find what city they are in and then charge a higher price to people in wealthier cities. This type of pricing behavior is ____________. A. first-degree price discrimination. B. third-degree price discrimination. C. location discrimination. D. second-degree price discrimination.

B. third-degree price discrimination.

Which of the following is not likely covered by a copyright? A. A photograph. B. A work of art. C. A new type of tire. D. A movie script

C. A new type of tire.

What is meant by herding? A. Helping others. B. Sacrificing to promote equality. C. Conforming our decisions to the behavior of others. D. Influencing others with our opinions or ideologies.

C. Conforming our decisions to the behavior of others.

Which of the following is a key difference between perfect competition and monopoly? A. With monopoly, social surplus is always maximized. B. Monopolies produce identical goods, while goods produced by perfectly competitive firms are slightly differentiated. C. In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price. D. In perfect competition, there are high entry barriers, but with monopoly, barriers to entry are low.

C. In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price.

Salmon fishing in Alaska is a seasonal business; May through September is the best time to bait salmon and halibut. Toland Fisheries, a small commercial fishery, recorded its highest ever catch last year. They started this year's fishing season with the same number of workers and equipment. With the new season also starting well, Toland has increased hiring substantially. However, the fishery did not make any additional investment in trawlers and other fishing equipment. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? A. It will change cyclically, meaning that it will cycle up and down as more workers are hired. B. It will be the same as the previous workers hired, meaning each additional worker will have the same marginal product of labor as the previous one hired. C. It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired. D. It will be increasing at an increasing rate, meaning each additional worker will have a higher marginal product of labor than the previous one hired. In the long run, if Toland Fisheries would like to increase the productivity of its workers, it will need to ____________. A. hire more workers. B. charge more for its services. C. charge less for its services. D. increase its amount of capital and equipment.

C. It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired. D. increase its amount of capital and equipment.

Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market? A. Monopolistically competitive market, because demand is greater. B. Monopolistically competitive market, because consumers are less sensitive to price. C. Monopoly, because its demand is more inelastic. D. Monopoly, because it is a price taker.

C. Monopoly, because its demand is more inelastic.

Suppose one firm accounts for 55 percent of the global market share for a product, while 147 other firms account for the remaining 45 percent of the market. With such a large number of buyers and sellers, is this market likely to be competitive? A. Yes, markets are only competitive if there is at least one firm large enough to act as a price setter for all other firms. B. Yes, a competitive market is characterized by having many firms, regardless of size. C. No, even though there are many firms in the market, there is one firm large enough to influence the market price. D. No, even with such a large number of buyers and sellers, there must be barriers to entry for this market to stay competitive.

C. No, even though there are many firms in the market, there is one firm large enough to influence the market price.

Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit? A. Produce until marginal cost is furthest below average total cost. B. Produce up to the point where price equals average total cost. C. Produce until the additional revenue from one extra unit equals the additional cost of each unit. D. All of the above.

C. Produce until the additional revenue from one extra unit equals the additional cost of each unit.

Which of the following equations calculates the profits of a firm? A. Total revenues − Fixed costs B. Total revenues + Total costs C. Total revenues − Total costs D. Total costs − Fixed costs

C. Total revenues − Total costs

Would a profit-maximizing firm continue to operate if the price in the market fell below its average cost of production in the short run? A. Yes, firms should keep producing until price falls below marginal cost. B. Yes, but only if price was below average variable cost. C. Yes, but only if price stayed above average variable cost. D. No, a firm should never produce if its price falls below average total cost.

C. Yes, but only if price stayed above average variable cost.

For a market to be characterized as a monopoly, there must be ___________. A. identical products. B. no barriers to entry. C. a single seller that sets the price of a good. D. all of the above.

C. a single seller that sets the price of a good.

A firm is experiencing economies of scale when its _____(1)______ declines as more output is produced. A. total cost B. marginal cost C. average total cost

C. average total cost

Consider a market where there are many firms with different cost structures. When determining which firms enter the market first, we look at ____________. A. average variable cost. B. fixed costs. C. average total cost. D. marginal cost.

C. average total cost.

A collusive agreement between two firms is likely to break down when ____________. A. the market has substantial long − term value. B. firms value profits less today than in the future. C. detection of cheaters is difficult. D. it is easy to punish cheaters.

C. detection of cheaters is difficult.

The tragedy of the commons can be modeled as a prisoners' dilemma game when the __________. A. Nash equilibrium is greater than the dominant strategy equilibrium. B. Nash equilibrium is equal to the common resource equilibrium. C. dominant strategy equilibrium leads to the destruction of a common resource. D. common resource equilibrium is the dominant strategy for public goods.

C. dominant strategy equilibrium leads to the destruction of a common resource.

If demand shifts to the left (decreases), the last firm that entered ____________. A. earns negative economic profits and thus undertakes cost-cutting measures to return to profitability. B. is indifferent between producing or exiting the market and so the outcome is indeterminate. C. earns negative economic profits and so exits the market. D. earns positive economic profits, leading to new firms entering the market.

C. earns negative economic profits and so exits the market.

In terms of economic profits, early market entrants earn ____(1)_____ economic profits and the last entrant earns _____(2)_____ economic profits. 1. A. negative B. zero C. positive 2. A. negative B. zero C. positive

C. positive B. zero

A first-mover advantage occurs if __________. A. the first mover to act in a sequential game reaches the dominant strategy equilibrium. B. the first mover to act in a strategic game reaches the dominant strategy equilibrium. C. the first mover to act in a sequential game gets a benefit from doing so. D. the first mover to act in a strategic game reaches the Nash equilibrium.

C. the first mover to act in a sequential game gets a benefit from doing so.

Legal market power is created by ___________, and arises due to ____________. A. market forces; economies of scale. B. foreign competition; copyrights. C. the government; patents. D. advertising; a change in consumer preferences.

C. the government; patents.

A Nash equilibrium is ___________. A. when players pick their actions at the same time. B. when prisoners confess because of unfair sentencing guidelines, which lead to heterogeneous dominant strategies. C. when players choose strategies that are best responses to the strategy of others. D. one best response to every possible strategy of the other player(s).

C. when players choose strategies that are best responses to the strategy of others.

In which of the following ways is a monopoly beneficial to an economy? A. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers. B. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market. C. Monopoly profits give firms more reason to invest in the creation of new products through research and development. D. All of the above

D. All of the above

How is a Nash equilibrium different from a dominant strategy equilibrium? A. For a given game, there can only be one Nash equilibrium but multiple dominant strategy equilibriums. B. Dominant strategy equilibriums are mathematical, while Nash equilibriums are quantitative. C. Nash equilibriums are mathematical, while dominant strategy equilibriums are quantitative. D. For a given game, there can only be one dominant strategy equilibrium but multiple Nash equilibriums.

D. For a given game, there can only be one dominant strategy equilibrium but multiple Nash equilibriums.

Assume that a charity hired you to improve its results on donations. You decide to mail letters asking for donations. You use three different types of letters: Letter A: Control—standard letter asking for money. Letter B: "Once and Done"—standard letter but with a statement at the front noting "Make one gift now and we'll never ask for another donation again!" Letter C: "Soft Once and Done"—an upfront statement of "It only takes one gift to save a child's life forever." The results are as follows: Letter B raises much more money than Letter A. In most cases, it raises at least twice the money. Letter C raises more money than Letter A. Letter B raises about 50 percent more money than Letter C. Of the concepts we have discussed in the chapter (social pressure, altruism, and herding), which do you think is most responsible for the success of Letter B? A. Herding, because its recipients are conforming to expectations. B. Social pressure, because its recipients were the most likely to donate. C. Pure altruism, because its recipients believed their donations did the most good. D. Impure altruism, because its recipients received something in return.

D. Impure altruism, because its recipients received something in return.

Edgar says that a single firm in the wind power industry is unlikely to have a significant degree of monopoly power for an extended period of time. Since the cost of producing an additional unit of wind energy is so low, a large number of firms can enter the market and compete away economic profits. Do you agree with this analysis? A. No, there are no close substitutes for wind power so producers of this good will have monopoly power. B. Yes, since diseconomies of scale are likely present, the firm cannot be a monopoly. C. Yes, if the cost of producing wind energy is low, then firms will enter the market, indicating no barriers to entry, so the firm cannot be a monopoly. D. No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.

D. No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry.

Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination? A. Yes, because the costs of selling insurance to men and women are the same. B. Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men. C. No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination. D. No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women.

D. No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women.

In the long run, which of the following factors of production is fixed for a firm? A. Capital. B. Labor. C. Technology. D. None of the above.

D. None of the above.

Is a player's best response in a game the same as his dominant strategy? A. Yes, if a player has a dominant strategy, then it is his best response, and every best response is always a dominant strategy. B. Yes, if a player's best responses depend on the strategy choices of other players, then a player's best response will be the same as his dominant strategy. C. No, the key concept of game theory is finding a best response in each game, so that each best response leads to a Nash equilibrium. D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

D. Not necessarily. If a player has a dominant strategy, then it is his best response; however, every best response is not always a dominant strategy.

All of the following statements are true about simultaneous-move games except: A. Players know the entire payoff matrix. B. Players know the payoffs for both players. C. Players pick their actions at the same time. D. Players know their opponent's choices.

D. Players know their opponent's choices.

Is it correct to say that people give to charity only out of selflessness and concern for the well-being of others? A. No, because people maximize utility. B. Yes, because giving generates no utility. C. Sometimes, because fairness may be important. D. Sometimes, because there may be a cost to not giving.

D. Sometimes, because there may be a cost to not giving

Let's add a twist to the ultimatum game: there is $10.00 to be split, but if the Responder rejects the offer, then he gets $ 3.00 and the Proposer gets $ 5.00. Assume that $0.01 is the smallest increment of money possible. Using backward induction, which of the following, if true, will lead to the equilibrium? A. The Proposer must offer $2 for the Responder to accept the offer. B. The Proposer must offer $2.01 for the Responder to accept the offer. C. The Proposer must offer $3 for the Responder to accept the offer. D. The Proposer must offer at least $3.01 for the Responder to accept the offer.

D. The Proposer must offer at least $3.01 for the Responder to accept the offer.

Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What elements must be known to set up a simultaneous move game? A. The payoffs, the move order, the players. B. The move order, the players, the strategies. C. Name of third player, the payoffs, the move order. D. The players, the strategies, the payoffs.

D. The players, the strategies, the payoffs.

Why do individuals decide to herd? A. They trust their own instincts. B. They believe others have faulty information. C. They believe others have less information. D. They are afraid of being wrong.

D. They are afraid of being wrong.

For a market to be characterized as an oligopoly, there must be __________. A. few sellers. B. homogeneous or differentiated products. C. a possibility of positive economic profits in the long run. D. all of the above.

D. all of the above.

An example of an oligopoly is the __________. A. patented drug market. B. local water company. C. corn market. D. cell phone market

D. cell phone market

Suppose there are four firms in a market and each of them sells differentiated products. If the four firms engage in a price war, then ____________. A. the firm with the lowest price will acquire the entire market. B. none of the firms will earn economic profits. C. the firms with the most similar products will sell more output. D. each firm's profit will be less than with collusion but not zero

D. each firm's profit will be less than with collusion but not zero

When can backward induction be used to arrive at the equilibrium for a game? In the case of, A. strategic form games. B. complex games. C. zero sum games. D. extensive form games.

D. extensive form games.

Suppose the act of giving is viewed as an economic good. The price of charitable donations can be measured with changes to ____________. A. international exchange rates. B. minimum wage rates. C. government debt limits. D. income tax rates.

D. income tax rates.

Consider a market with many firms that have different cost structures. Unless shutdown or exit is optimal, every firm expands production until ___________. A. marginal revenue is equal to the minimum of short-run average total cost. B. marginal product is maximized. C. marginal cost is minimized. D. marginal revenue, marginal cost, and price are all equal (MR = MC = P).

D. marginal revenue, marginal cost, and price are all equal (MR = MC = P).

Natural market power is created by ___________, and arises due to ____________. A. the government; patents. B. advertising; a change in consumer preferences. C. foreign competition; copyrights. D. market forces; economies of scale.

D. market forces; economies of scale.

An example of an industry or service that is a natural monopoly is ____________. A. landscapers. B. fast − food restaurants. C. tax preparation. D. national defense.

D. national defense.

In a Nash equilibrium: A. both players can change strategy and improve their payoffs. B. player B can change strategy and improve his or her payoff. C. player A can change strategy and improve his or her payoff. D. neither player can change strategy and improve his or her payoff.

D. neither player can change strategy and improve his or her payoff.

Scientists engaged in the debate of the evolutionary logic of revenge find A. selfishness beats altruism within groups and selfish groups beat altruistic groups. B. altruism beats selfishness within groups, but altruistic groups beat selfish groups. C. altruism beats selfishness within groups and selfish groups beat altruistic groups. D. selfishness beats altruism within groups, but altruistic groups beat selfish groups.

D. selfishness beats altruism within groups, but altruistic groups beat selfish groups.

When there is no dominant strategy, a player's optimal strategy ___________ on the choices of the other player.

Depends

As the price of giving increases, the quantity demanded of charitable giving _____________. a. remains unchanged b. decreases c. increases

b. decreases

In a perfectly competitive market, a seller _____1_____ choose to raise the price of its good since all sellers in the market produce ______2_____ , so raising the price would result in _____3______ . 1. can or cannot 2. identical goods or different goods 3. losing all its customers or earning long-run profits

cannot identical goods losing all its customers