econ 315 hw questions
Which of the following is true under monopoly? A: Profits are always negative B: P > MC C: P = MR D: MC = P
B
Assume that the price elasticity of demand is −2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to A: decrease B: increase. C: remain constant. D: either increase or remain constant, depending upon the size of the price increase.
A
An electronics company takes over one of its original suppliers in a merger. This is an example of A: vertical integration. B: horizontal integration. C: cointegration. D: conglomerate integration.
A
Southwest Airlines begins a ''Bags Fly Free'' campaign, charging no fees for the first and second checked bags. This situation best represents
producer-producer rivalry
Because of producer-producer rivalry, the price will tend to A: be driven to a lower price. B: rise up to the maximum price the consumers are willing and able to pay. C: be the same as the competitive price. D: be the same as the monopoly price.
A
Both firms in a Cournot duopoly would enjoy higher profits if A: the firms simultaneously reduced output below the Nash equilibrium level. B: each firm simultaneously increased output above the Nash equilibrium level. C: one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output. D: the firms simultaneously reduced output below the Nash equilibrium level and one firm reduced output below the Cournot Nash equilibrium level, while the other firm continued to produce its Cournot Nash equilibrium output.
A
Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is A: for each firm to advertise. B: for neither firm to advertise. C: for your firm to advertise and the other not to advertise. D: for the other firm to advertise and your firm not to advertise.
A
Consider the market for bicycles (a normal good). All else being constant, when price of an input needed to make bicycles decreases, A: the supply curve shifts to the right and more bicycles are available at each given price. B: the supply curve shifts to the left and less bicycles are available at each given price. C: the demand curve shifts to the right and more bicycles are demanded at each given price. D: the demand curve shifts to the left and less bicycles are demanded at each given price.
A
Economies of scale exist whenever A: average total costs decline as output increases. B: average total costs increase as output increases. C: average total costs are stationary as output increases. D: average total costs increase as output increases and average total costs are stationary as output increases.
A
Ford executives announced that the company would extend its most dramatic consumer incentive program in the company's long history—the Ford Drive America Program. The program provides consumers with either cash back or zero percent financing for new Ford vehicles. As the manager of a Ford franchise, how would you expect this program to impact your firm's bottom line? A: Profits likely will increase in the short run but return to normal in the long run as rivals respond with similar plans. B: Profits likely will not change in the short or long run. C: Profits likely will increase in the short run and stay high for the long run regardless of rivals' responses. D: Profits likely will fall in the short run and remain low for the long run.
A
Given a cost function C(Q) = 200 + 14Q + 8Q2, what is the marginal cost function? A: 14 + 16Q B: 14Q + 8Q^2 C: 200 + 8Q^2 D: 14 + 16Q2
A
If the absolute value of the own price elasticity of steak is 0.4, a decrease in price will lead to A: a reduction in total revenue. B: an increase in total revenue. C: no change in total revenue. D: an increase or decrease in total revenue.
A
If the last unit of input increases total product, we know that the marginal product is A: positive. B: negative. C: zero. D: indeterminate.
A
Suppose that the duopolists competing in Cournot fashion agree to produce the collusive output. Given that firm 2 commits to this collusive output, it pays firm 1 to A: cheat by producing a higher level of output. B: cheat by producing a lower level of output. C: cheat by raising prices. D: neither cheat by producing a higher or lower level of output nor cheat by raising prices.
A
Suppose the cost function is C(Q) = 50 + Q − 10Q2 + 2Q3. What is the marginal cost of producing 10 units? A: $401 B: $1,060 C: $560 D: $1,010
A
The Cournot theory of oligopoly assumes rivals will A: keep their output constant. B: increase their output whenever a firm increases its output. C: decrease output whenever a firm increases its output. D: follow the learning curve.
A
The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good. How will the demand for good X change if consumer incomes decrease? A: It will decrease. B: It will stay the same. C: It will increase
A
The absolute value of the slope of the isoquant is the A: marginal rate of technical substitution. B: marginal product of capital. C: marginal rate of substitution. D: value marginal product of labor.
A
The behavior of bidders in an auction is an example of A: Consumer-consumer rivalry. B: consumer-producer rivalry. C: producer-producer rivalry. D: supplier-consumer rivalry.
A
The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production, is defined by the A: long-run average total cost curve. B: short-run average fixed cost curve. C: short-run marginal cost curve. D: long-run marginal cost curve.
A
The production function Q = L^.5*K^.5 is called A: Cobb Douglas. B: Leontief. C: linear. D: multiplicative.
A
The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the A: production function B: technological constraint. C: research and development schedule. D: total product
A
We would expect the demand for jeans to be A: more elastic than the demand for clothing. B: less elastic than the demand for clothing. C: the same as the demand for clothing D: .neither more elastic, less elastic, nor the same elasticity as that of the demand for clothing.
A
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output? A: The marginal product per dollar spent on all inputs is equal. B: The MRTS is equal to the ratio of the quantity of inputs. C: The marginal products of all inputs are equal. D: The marginal product per dollar spent on all inputs is equal and the MRTS is equal to the ratio of the quantity of inputs.
A
Which of the following profit functions exhibits a Cobb-Douglas production function? A: π = P × K^0.75L^0.50 − 20L − 35K. B: π = P × min(2L, 5K) − 20L − 35K. C: π = P × (3K + 4L) − 20L − 35K. D: π = P × (3K^0.5 + 4L^0.5) ^1/0.2 − 20L − 35K.
A
Which of the following sets of economic data is minimizing the cost of producing a given level of output? A: MPL = 20, MPK = 40, w = $16, r = $32. B: MPL = 20, MPK = 40, w = $32, r = $16. C: MPL = 40, MPK = 20, w = $16, r = $32. D: MPL = 40, MPK = 40, w = $16, r = $32.
A
Which of the following would most likely be scrutinized under the FTC and DOJ Horizontal Merger Guidelines? Merger A: Two major players in Internet services and retailing-Amazon.com and eBay-merge. Merger B: Cigarette maker Philip Morris merges with the Molson Coors Brewing Company. Merger C: Lockheed Martin, a large firm that manufactures aircraft, merges with United States Steel. A: Merger A B: Merger B C: Merger C D: None of these mergers would be scrutinized.
A
Which of the following would not shift the demand for good A? A: drop in price of good A B: drop in price of good B C: consumer income D: change in the level of advertising of good A
A
The decline in marginal productivity experienced when input usage increases, holding all other inputs constant, is known as: A: the law of diminishing marginal returns. B: the law of diminishing marginal rate of technical substitution. C: the law of diminishing marginal utility. D: the law of diminishing marginal labor. A property of a production function stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output, is known as: A: the law of diminishing marginal labor. B: the law of diminishing marginal rate of technical substitution. C:the law of diminishing marginal utility. D: the law of diminishing marginal returns.
A B
As a result of increased tensions in the Middle East, oil production is down by 1.21 million barrels per day - a 5 percent reduction in the world's supply of crude oil. Explain the likely impact of this event on the market for gasoline and the market for small cars. The gasoline market will have: A: higher equilibrium prices and lower equilibrium quantity. B: lower equilibrium prices and lower equilibrium quantity. C: higher equilibrium prices and higher equilibrium quantity. D: lower equilibrium prices and higher equilibrium quantity.T he small car market will have: A: lower equilibrium prices and higher equilibrium quantity. B: higher equilibrium prices and lower equilibrium quantity. C: higher equilibrium prices and higher equilibrium quantity. D: lower equilibrium prices and lower equilibrium quantity.
A C
A Nash equilibrium with a noncredible threat as a component is A: a subgame perfect equilibrium. B: not a subgame perfect equilibrium. C: a sequential equilibrium. D: a somewhat subgame perfect equilibrium.
B
A lump sum or a fixed tax of $1 on ticket rides in amusement parks will change the equilibrium price of ticket rides by A: $1. B: less than $1. C: more than $1. D: an indeterminable amount.
B
A new firm enters a market that is initially serviced by a Bertrand duopoly charging a price of $20. What will the new price be should the three firms coexist after the entry? A: $25 B: $20 C: $15 D: $8
B
A new firm enters a market that is initially serviced by a Cournot duopoly charging a price of $20. What will the new market price be should the three firms coexist after the entry? A: $20 B: below $20 C: above $20 D: none of the provided answers
B
According to the principal-agent problem, if performance-based rewards to managers are reduced/removed, the profits of the firm will A: rise. B: fall. C: remain constant. D: neither rise, fall, nor remain constant.
B
As we move down along a linear demand curve, the price elasticity of demand becomes more A: elastic. B: inelastic. C: log-linear. D: variable.
B
Chris raises cows and produces cheese and milk because he enjoys A: economies of scale. B: economies of scope. C: cost complementarity. D: working.
B
If A and B are complementary goods, a decrease in the price of good A would A: have no effect on the quantity demanded of B. B: lead to an increase in demand for B. C: lead to a decrease in demand for B. D: not have an effect on the demand for B nor lead to an increase or decrease in the demand for B.
B
If consumers expect future prices to be higher, A: they substitute current purchases for future purchases of perishable products. B: stockpiling will happen when the products are durable in nature. C: the position of the demand will not change. D: the demand for automobiles today will not change.
B
If good A is an inferior good, an increase in income leads to A: a decrease in the demand for good B. B: a decrease in the demand for good A. C: an increase in the demand for good A. D: no change in the quantity demanded of good A.
B
If quantity demanded for sneakers falls by 10 percent when price increases 25 percent, we know that the absolute value of the own price elasticity of sneakers is A: 2.5 B: .0.4 C: 2.0. D: 0.27.
B
If the cross-price elasticity between goods A and B is negative, we know the goods are A: inferior goods. B: complements. C: inelastic. D: substitutes.
B
If the interest rate is 5 percent, $100 received at the end of seven years is worth how much today? A: 100/(0.05)^7 B: 100/(1 + 0.05)^7 C: 100/(1 + 5)^7 D: 100
B
If the production function is Q = K.5L.5 and capital is fixed at 1 unit, then the average product of labor when L = 36 is A: 1/3. B: 1/6. C: 2/3. D: 2/6.
B
It is estimated that over 100,000 students will apply to the top 30 MBA programs in the United States this year. What would you expect to happen to the number of applicants if the starting salaries of managers with MBA degrees remained constant but salaries of managers without such degrees decreased by 20 percent? A:There is no way of telling. B: It would increase. C: It would not change. D: It would decrease
B
Often owners of firms who hire managers must install incentive or bonus plans to ensure that the A: company is financially secure. B: manager will work hard. C: manager will maintain employee morale. D: company will have positive economic profits.
B
Spot exchanges are generally preferred when A: transaction costs are high. B: the input market is competitive. C: there is opportunism. D: bargaining costs are high.
B
Suppose the firm achieves total revenue of $1,000 by selling 100 units, while facing total costs of $900. If the firm produces and sells 101 units, their total revenue is $1,009 and their total costs is $905. Should the firm produce and sell the extra unit? A: no, since marginal profits are declining B: yes, since marginal profits are positive C: yes, since profits are positive D: no, since profits are declining
B
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use A: more capital and less labor. B: more labor and less capital. C: three times more capital than labor D: one half as much labor as capital
B
Technological advances will cause the supply curve to A: shift to the left. B: shift to the right. C: become flatter. D: become steeper.
B
The Bertrand model of oligopoly reveals that A: capacity constraints are not important in determining market performance. B: perfectly competitive prices can arise in markets with only a few firms. C: changes in marginal cost do not affect prices. D: all of the provided statements are true.
B
The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good. How will the demand for good X change if the price of good Y increases? A: It will decrease. B: It will increase. C: It will stay the same
B
The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good. How will the demand for good Y change if consumer incomes increase? A: It will stay the same. B: It will decrease. C: It will increase.
B
The industry elasticity of demand for gadgets is −2, while the elasticity of demand for an individual gadget manufacturer's product is −2. Based on the Rothschild approach to measuring market power, we conclude that A: there is little monopoly power in this industry. B: there is significant monopoly power in this industry. C: the Herfindahl index for this industry is −2. D: the Herfindahl index for this industry is 2.
B
Trade will take place A: if the maximum that a consumer is willing and able to pay is less than the minimum price the producer is willing and able to accept for a good. B: if the maximum that a consumer is willing and able to pay is greater than the minimum price the producer is willing and able to accept for a good. C: only if the maximum that a consumer is willing and able to pay is equal to the minimum price the producer is willing and able to accept for a good. D: if the maximum amount that a consumer is willing to pay equals 0.
B
Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 − 2Q. The cost function for each firm is C(Q) = 4Q. The equilibrium output of each firm is A: 8. B: 16 C: 32. D: 36.
B
Two identical firms compete as a Cournot duopoly. The demand they face is P = 600 − 5Q. The cost function for firm 1 is C1(Q1) = 20Q1, and the cost function for firm 2 is C2(Q2) = 40Q2. The equilibrium output for each firm is A: firm 1 produces 80 and firm 2 produces 40. B: firm 1 produces 40 and firm 2 produces 36. C: Firm 1 produces 30 and firm 2 produces 20. D: firm 1 produces 60 and firm 2 produces 66.
B
When a worker announces that he plans to quit, say next month, the "threat" of being fired has no bite. The worker may find it in his interest to shirk. What can the manager do to overcome this problem? A: Fire the worker as soon as he announces his plans to quit. B: Provide the worker some rewards for good work that extend beyond the termination of employment with the firm. C: Monitor the worker more often than usual and fire him when he is caught shirking. D: Pay the worker some rewards when he announces his plan to quit.
B
When firm 1 enjoys a first-mover advantage in a Stackelberg duopoly, it will produce A: more output and charge a lower price than firm 2. B: more output and charge the same price as firm 2. C: less output and charge the same price as firm 2. D: less output and charge a higher price than firm 2.
B
Which of the following is a correct representation of the profit-maximization condition for a monopoly? A: P = MR. B: MC = MR. C: P = ATC + MR. D: MR = MC + ATC.
B
Which of the following mergers is an example of vertical integration? A: Bethlehem Steel purchases U.S. Steel. B: IBM purchases a California computer chip company C: AT&T purchases MCI. D: GM purchases Ford.
B
You are considering paying $200,000 for an annuity today, and you know you need a yearly cash stream of $10,000 for expenses. What is the minimum annual interest rate (that would create a perpetual cash flow stream) needed for the annuity? A: 0.5 percent B: 5 percent C: 20 percent D: 1 percent
B
The value of the firm is the A: current value of profits. B: present discounted value of all future profits. C: average value of all future profits. D: total value of all future profits.
B because in order to calculate the firm's value, we need to calculate the present value of its profit.
A linear demand function exhibits A: constant demand elasticity. B: more elastic demand as output increases. C: less elastic demand as output increases. D: an indeterminable elastic demand as output increases.
C
A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $15 per hour and capital is rented at $9 per hour. If the marginal product of labor is 40 units of output per hour and the marginal product of capital is 80 units of output per hour, should the firm increase, decrease, or leave unchanged the amount of capital used in its production process? A: The firm should decrease capital. B: The firm should leave capital unchanged. C: The firm should increase capital.
C
A potential problem with piece-rate plans is that A: workers will have a tendency to underproduce the good. B: workers have no incentive to work hard. C: workers may put little emphasis on the quality of the good. D: it is difficult for managers to enforce.
C
Consumer-producer rivalry implies A: a lower price of a good favors both producers and consumers. B: a higher price of a good hurts producers while favoring consumers. C: a higher price of a good favors producers while hurting consumers. D: a lower price of a good hurts both producers and consumers.
C
Costs that are forever lost after they have been paid are A: production costs. B: fixed costs. C: sunk costs. D: variable costs.
C
Fixed costs exist only in A: the long run. B: capital-intensive markets. C: the short run. D: labor-intensive markets
C
Generally when calculating profits as total revenue minus total costs, accounting profits are larger than economic profits because economists take into account A: only explicit costs. B: only implicit costs. C: both explicit and implicit costs. D: that both types of profits are always equal because they account for the same costs.
C
If A and B are complements, an increase in the price of good A would A: have no effect on the quantity demanded of B. B: lead to an increase in demand for B. C: lead to a decrease in demand for B. D: not lead to an effect on the quantity demanded of B nor an increase or decrease in the demand for B.
C
In the long run, perfectly competitive firms produce a level of output such that A: P = MC. B: P = minimum of AC. C: P = MC and P = minimum of AC. D: P > MC.
C
Isoquants are normally drawn with a convex shape because A: inputs are perfectly substitutable. B: inputs are perfectly complementary. C: inputs are not perfectly substitutable. D: inputs are not perfectly complementary.
C
Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average total cost of using 81 units of capital and 9 units of labor is A: $5. B: $75. C: $80. D: incalculable since there is insufficient information to determine the average total costs.
C
Suppose the production function is Q = min{K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed? A: 2 B: 4 C: 8 D: 9
C
Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? A: 3 B: 4 C: 7 D: 45
C
Suppose the production function is given by Q = K1/2L1/2 and that Q = 30 and K = 25. How much labor is employed by the firm? A: 49 B: 6 C: 36 D: 25
C
The production function is Q = K.6 L.4. The marginal rate of technical substitution is A: 2/3 K−1 L. B: K−1 L−1. C: 2/3 K L−1. D: K.4 L−.6.
C
Which of the following payment plans does not give an incentive to a manager to stop shirking? A: flat salary with additional pay based on profits of the firm B: pay schedule based solely on profits earned by the firm C: flat salary regardless of firm profits D: a salary including a percentage of the firm's revenues
C
With linear demand and constant marginal cost, a Stackelberg leader's profits are ___________ the follower. A: less than B: equal to C: greater than D: either less than or greater than
C
Identify whether each of the following transactions involves spot exchange, contract, or vertical integration. Barnacle, Incorporated, has a legal obligation to purchase 2 tons of structural steel per week to manufacture conveyor frames. A: 1Spot exchange B: Vertical integration C: Contract Exxon-Mobil uses the oil extracted from its wells to produce raw polypropylene, a type of plastic. A: Contract B: Vertical integration C: Spot exchange Boat Lifts R Us purchases generic AC motors from a local distributor. A: Spot exchange B:Contract C:Vertical integration Kaspar Construction—a home-building contractor—purchases 50 pounds of nails from the local Home Depot. A: Contract B: Vertical integration C: Spot exchange
C B A C
From a consumer's point of view, which type of oligopoly is most desirable? A: Sweezy B: Cournot C: Stackelberg D: Bertrand
D
If a firm's production function is Leontief and the wage rate goes up, the A: firm must use more labor in order to minimize the cost of producing a given level of output. B: firm must use more capital in order to minimize the cost of producing a given level of output. C: firm must use less labor in order to minimize the cost of producing a given level of output. D: cost minimizing combination of capital and labor does not change.
D
In a competitive industry with identical firms, long-run equilibrium is not characterized by A: P = AC. B: P = MC. C: MR = MC. D: P > MC.
D
It is estimated that over 100,000 students will apply to the top 30 MBA programs in the United States this year. Using the concept of net present value and opportunity cost, when is it rational for an individual to pursue an MBA degree. multiple choice A:When the benefits of attending school are greater than zero. B: When the costs of attending school are near zero. C: When the net present value of attending graduate school is at least $100,000. D: When the net present value of attending graduate school is greater than zero.
D
It is profitable to hire units of labor as long as the value of marginal product A: is less than wage. B: exceeds average product. C: equals price. D: exceeds wage.
D
Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. If ay is positive, then A: goods y and x are complements. B: goods y and x are inferior goods. C: goods y and x are normal goods. D: goods y and x are substitutes.
D
The combinations of inputs that produce a given level of output are depicted by A: indifference curves. B: budget lines. C: isocost curves. D: isoquants.
D
The market demand in a Bertrand duopoly is P = 10 − 3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statement(s) is/are true? A: P = $1. B: Profits of firm 1 = profits of firm 2. C: Producer's surplus of firm 1 = producer's surplus of firm 2. D: All of the statements associated with this question are correct.
D
The maximum legal price that can be charged in a market is A: a price floor. B: an ad valorem tax. C: the market equilibrium price. D: a price ceiling.
D
The primary difference(s) between monopolistic competition and perfect competition A: is the ease of entry and exit into the industry. B: is the number of firms in the market. C: are both the ease of entry and exit into the industry and the number of firms in the market. D: is that products are identical under perfect competition but not under monopolistic competition..
D
The production function for a competitive firm is Q = K.5L.5. The firm sells its output at a price of $10 and can hire labor at a wage of $5. Capital is fixed at 25 units. The profit-maximizing quantity of labor is A: 1. B: 2. C: 10. D: 25.
D
The source(s) of monopoly power for a monopoly may be A: Economies of scale. B: economies of scope. C: patents. D: patents and economies of scale and scope.
D
Which curve(s) does the marginal cost curve intersect at the (their) minimum point? A: average total cost curve B: average fixed cost curve C: average variable cost curve D: average total cost curve and average variable cost curve
D
Which of the following are measures of industry concentration? A: four-firm concentration ratio and producer surplus B: HHI and consumer surplus C: Consumer surplus and producer surplus D: Four-firm concentration ratio and HHI index
D
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output? A: The MRTS is equal to the ratio of input prices. B: The marginal product per dollar spent on all inputs is equal. C: The marginal products of all inputs are equal. D: The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all inputs is equal.
D
Which of the following is true? A: A monopolist produces on the inelastic portion of its demand. B: A monopolist always earns an economic profit. C: The more inelastic the demand, the closer marginal revenue is to price. D: In the short run, a monopoly will shut down if P < AVC.
D
Which of the following is true? A: In a one-shot game, a collusive strategy always represents a Nash equilibrium. B: A subgame perfect equilibrium occurs when each player is doing the best she(he) can regardless of what the other player is doing. C: Each Nash equilibrium is a subgame perfect equilibrium. D: Every subgame perfect equilibrium is a Nash equilibrium.
D
You are the manager of a small U.S. firm that sells nails in a competitive U.S. market (the nails you sell are a standardized commodity; stores view your nails as identical to those available from hundreds of other firms). You are concerned about two events you recently learned about through trade publications: (1) the overall market supply of nails will decrease by 2 percent, due to exit by foreign competitors; and (2) due to a growing U.S. economy, the overall market demand for nails will increase by 2 percent. Based on this information, should you plan to increase or decrease your production of nails? A: It is not possible to tell with the given information B: Leave output unchanged C: Decrease output D: Increase output
D
Rapel Valley in Chile is renowned for its ability to produce high-quality wine at a fraction of the cost of many other vineyards around the world. Rapel Valley produces over 20 million bottles of wine annually, of which 5 million are exported to the United States. Each bottle entering the United States is subjected to a $0.50 per bottle excise tax, which generates about $2.5 million in tax revenues. Strong La Niña weather patterns have caused unusually cold temperatures, devastating many of the wine producers in that region of Chile. How will La Niña affect the supply and price of Chilean wine? A: It will cause supply to increase and price to decrease. B: It will cause supply to increase and price to increase. C: It will cause supply to decrease and price to decrease. D: It will cause supply to decrease and price to increase. Assuming La Niña does not impact the California wine-producing region, how will La Niña impact the market for Californian wines? A: Equilibrium price and quantity will increase. B: Equilibrium quantity will decrease and equilibrium price will increase. C: Equilibrium quantity and price will decrease. D: Equilibrium quantity will increase and equilibrium price wil
D A
A few years ago, the Boston Globe reported that the city of Boston planned to spend $14 million to convert the FleetCenter sports arena and entertainment center into an appropriate venue for the Democratic National Convention (DNC). The city engaged Shawmut Design and Construction in a contractual relationship to complete the work, which was supposed to start 48 days prior to the commencement of the DNC on July 26. However, when negotiations between Boston's mayor and the police union broke down, the Boston Police Patrolmen's Association took to the picket lines surrounding the FleetCenter and prevented construction crews from beginning the work. The Globe reported that "a truck attempting to deliver steel turned around after a crowd of union members stood at a chain-link gate in front of the arena, shouting 'back it up,' and 'respect the line, buddy.'" Moreover, the Globe reported that "On-duty police officers, who had been instructed to prevent pickets from restricting access, did not intervene." Given the tight construction schedule, construction delays reportedly cost about $100,000 per day. The above scenario was the result of a principal-agent problem. Identify the principal(s) in
D D a hold-up problem
You are the manager of a midsized company that assembles personal computers. You purchase most components - such as random access memory (RAM) - in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost. Based on this information, what can you expect to happen to the price you pay for random access memory? The price will _______ for random access memory. Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession? A: Yes - price will now be unchanged. B: No - price will still increase. C: Maybe - price may ultimately increase or decrease. D: Yes - price will now decrease.
Will increase C
DonutVille caters to its retirement population by selling over 10,000 donuts each week. To produce that many donuts weekly, DonutVille uses 1,000 pounds of flour, which must be delivered by 5:00 AM every Friday morning. How should the manager of DonutVille acquire flour? Flour should be acquired through ______
a contract
For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result of this price increase, the volume of all cereal sold by Big G changed by -5 percent, what can you infer about the own price elasticity of demand for Big G cereal? It is _______ Can you predict whether revenues on sales of its Lucky Charms brand increased or decreased? A: Yes - it increased. B: Yes - it decreased. C: No - you can't tell.
elastic B
In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit's city council is considering passing a statute that would give investment tax credits to auto manufacturers. Effectively, this would reduce auto manufacturers' costs of using capital and high-tech equipment in their production processes. What is the likely impact of this statute on the number of workers this automaker hires? It will ________
decrease
