Econ Quizzes

Suppose mountain spring water can be produced at no cost and that the demand and marginal revenue curves for mountain spring water are given as follows: Q = 6000 - 5P MR = 1200 - 0.4Q Refer to the above scenario. What will be the price in the long run if the industry is a Cournot duopoly? $600 $900 $400 $800 Competition will drive the price to zero.

$400

A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q Refer to the scenario. How much profit does the monopolist earn? $4987.50 $4512.50 $475.00 $5.00

$4512.50

Big Truck Hauling Company uses 5 trucks worth $1,000 each and employs 10 employees at a cost of $400 each. What is the company's fixed cost? $1,000 $5,000 $4,000 $9,000

$5,000

Scenario: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q Refer to the scenario. What is the profit maximizing price? $5.00 $95.00 $10.00 $52.50

$52.50

If the Q d = 50 - 4 P and Q S = 2 + 4 P, the equilibrium price for the product is ________. $10 $6 $4 $2

$6

The above table shows a sample of prices and the quantity sold by a monopolist. Refer to the table above. What is the monopolist's total revenue if they charge a price of $95? $9,450 $9,500 $95 $10

$9,500

The more block prices a monopoly can set instead of setting a single price, the: -the more producer surplus. -the larger the total welfare. -smaller the deadweight loss. -All of the above.

-All of the above.

Which of the following best describes the basic characteristics of noncooperative oligopoly models? -Managers make decisions based on the strategy they think their rivals will pursue. -Managers attempt to deliberately mislead their rivals regarding the strategy they will pursue. -Managers refuse to negotiate with their rivals when it comes to such decisions as what price to charge. -When making decisions, managers basically ignore the mutual interdependence that exists among rivals.

-Managers make decisions based on the strategy they think their rivals will pursue.

Suppose the firms in a monopolistically competitive market are earning positive economic profits. What will happen to move the market to its long-run equilibrium? -More close substitutes will appear in the market. -Some firms will exit the market if they can't cover all of their fixed and variable costs. -The demand curves faced by firms in the market will shift to the right. -The firms' demand curves will become less elastic.

-More close substitutes will appear in the market.

Which of the following conditions must be TRUE so that a firm can profitably price discriminate? -The good cannot be easily resold. -The good is a non-durable. -There are no other firms in the market. -All of the above.

-The good cannot be easily resold.

Charging a higher price for a motel room to customers with dogs or cats than to customers with no pets is most likely an example of: -second-degree price discrimination. -first-degree price discrimination. -actual cost differences. -third-degree price discrimination.

-actual cost differences.

Implicit collusion, where players do NOT have an explicit agreement -are strictly prohibited under antitrust laws. -maximizes total surplus in the market. -results in cheating. -are not strictly prohibited under antitrust laws.

-are not strictly prohibited under antitrust laws.

The above figure 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 -neither firm can improve its payoff by setting a low price given that the other firm is setting a high price. -setting a high price is the dominant strategy for each firm. -there is no dominant strategy for either firm. -both firms can improve their payoff by setting a low price given that the other firm is setting a high price.

-both firms can improve their payoff by setting a low price given that the other firm is setting a high price.

Peak-load pricing -charges more for a good during periods of high demand. -is generally used during January and February. -charges more for a hotel room the higher up the mountain it is. -charges less for a good during periods of high demand, because of regulatory reasons.

-charges more for a good during periods of high demand.

In a two-player simultaneous game, if player A has a dominant strategy and player B does not, player B will -employ a mixed strategy. -assume that player A does not choose her dominant strategy. -not achieve a Nash equilibrium. -choose his best strategy assuming that player A plays her dominant strategy.

-choose his best strategy assuming that player A plays her dominant strategy.

When there is a capacity constraint, -firms can use peak-load pricing to increase profits during periods of high demand. -firms face sunk costs when deciding whether or not to expand. -consumers will avoid the producer and go with a firm that has extra capacity. -firms are not maximizing their profits during high season.

-firms can use peak-load pricing to increase profits during periods of high demand.

Coupons represent a form of price discrimination because they offer a low-cost way for firms to: -retain loyal customers who are not price sensitive. -offer discounts to consumers who buy larger quantities. -perfectly price discriminate. -identify customers with apparently more elastic demand and offer them a lower price.

-identify customers with apparently more elastic demand and offer them a lower price.

If a monopolist faces entry by a potential rival, investing to lower its marginal cost -is a credible way to deter entry. -will not occur, even when there are no barriers to entry. -is not a credible threat. -is credible but will not deter entry.

-is a credible way to deter entry.

Group price discrimination has ________ consumer surplus than under ________. -less; single-price monopoly -more; an elastic demand curve -less; perfect competition -more; perfect competition

-less; perfect competition

If the consumption of sugar does not change at all following a price increase from 50 cents per pound to 65 cents per pound, the demand for sugar is considered to be A)perfectly elastic. B)perfectly inelastic. C)unitary elastic. D)relatively inelastic.

B)perfectly inelastic.

The purpose of making assumptions in economic model building is to: A)minimize the amount of work an economist must do. B)force the model to yield the correct answer. C)simplify the model while keeping important details. D)express the relationship mathematically.

C)simplify the model while keeping important details.

Suppose the supply of non-OPEC oil increases due to new petroleum discoveries in other countries. What happens to the price of oil on the world market? Increases Remains the same Decreases We do not have enough information to answer this question.

Decreases

"Cheap talk" is considered cheap because -communications via phone or email these days has a cost that is close to zero. f-irms avoid the costs of hiring lawyers. -a firm can say anything, but may actually do something different. t-he cost of talking is far outweighed by the gains to be made in coordinating efforts.

a firm can say anything, but may actually do something different

Economic competition refers to ________. an intense rivalry among buyers in a market a market structure and the behavior of the buyers and sellers in that market a market structure in which there is an intense rivalry among individual firms and buyers an intense rivalry among individual firms

a market structure and the behavior of the buyers and sellers in that market

The airline industry is best classified as: monopolistically competitive a monopoly. perfectly competitive. an oligopoly.

an oligopoly.

The price elasticity of demand is a measure of a)the demand for a product holding price constant. b)the responsiveness of the quantity demanded to price changes. c)the shift in the demand curve when price changes. d)the quantity demanded at a given price.

b)the responsiveness of the quantity demanded to price changes.

Why don't we see firms tie-in the sales of fish filets with the sales of pencils? -because the demands for these two goods are positively correlated -It violates the Clean Food Act of 1908. -because the demands for these two goods are independent -because the demands for these two goods are negatively correlated

because the demands for these two goods are independent

An example of a market where a Bertrand model would be plausible is the market for beer. wheat. oil. sugar.

beer.

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 firm A will not enter. firm B's entry is blockaded. both firms will enter. firm A will enter and firm B will not.

both firms will enter.

A perfect price discriminating monopoly: increases market inefficiency. captures all consumer surplus. decreases total welfare. creates deadweight loss.

captures all consumer surplus.

Marginal analysis ________. maximizes the difference between marginal revenue and total cost maximizes the difference between marginal revenue and marginal cost compares the total benefit and total cost of an action compares the marginal benefit and marginal cost of an action

compares the marginal benefit and marginal cost of an action

The difference between what a consumer is willing to pay for a unit of a good and what must be paid when actually buying it is called: net utility. producer surplus. cost benefit analysis. consumer surplus.

consumer surplus.

In a repeated prisoners' dilemma game: the outcomes are the same as in a static prisoners' dilemma game. the players act sequentially. firms' choices are not influenced by their opponents' actions. cooperation may result if the game is played indefinitely.

cooperation may result if the game is played indefinitely.

If Walt Disney Company produces a new animated movie for children, they are likely to seek a ________ to protect the work. patent trade secret copyright trademark

copyright

In a sense, a cartel is self-destructive because each cartel member has the incentive to cheat on the cartel. it reduces consumer surplus. it sets price above marginal cost. each cartel member earns economic profit.

each cartel member has the incentive to cheat on the cartel

Perfectly competitive firms are earning economic profits at a market price of $5 and an average total cost of $4. If new firms enter and do not affect the cost for all firms, the market price will ________ until it reaches ________. increase; $5 increase; $4 fall; $4 fall; $5

fall; $4

The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $60 fee is required to enter the market. If firm A chooses its strategy first, then firm A will enter and firm B will not. both firms will enter. firm A will not enter. neither firm will enter.

firm A will enter and firm B will not.

If a firm is a price taker, this means that the firm ________. has no ability to change the price of the good or service has the ability to change the price of the good or service has transaction costs has market power

has no ability to change the price of the good or service

As a result of a change in consumer tastes in favor of your firm's product, you should anticipate a ________ price for your product than the current equilibrium price and a ________ equilibrium quantity than the current equilibrium quantity. higher; higher higher; lower lower; higher lower; lower

higher; higher

The smaller the price elasticity of demand, the ________ the profit-maximizing price and the ________ the markup. lower; smaller higher; larger higher; smaller lower; larger

higher; larger

Price discrimination: -is when consumers use prices to discriminate between different quality products. -allows firms to set a single intermediate price between consumers' low and high willingness to pay. -is a form of pricing where consumers pay different prices for a good. -is illegal in the U.S.

is a form of pricing where consumers pay different prices for a good.

Big Summer Pools is a relatively new company that installs residential pools. The manager has noticed that has the company continues to increase the number of pools installed, its short-run average total cost continues to fall. This information suggests that Big Summer Pools ________. is experiencing diseconomies of scale is experiencing economies of scale is experiencing constant returns to scale should considering reducing the scale of their operations

is experiencing economies of scale

A monopolist creates a deadweight loss by producing a quantity that is ________ the efficient quantity. equal to less than more than exactly double

less than

As a result of a technology advance in the production of your firm's product, you should anticipate a ________ price for your product than the current equilibrium price and a ________ equilibrium quantity than the current equilibrium quantity. higher; higher higher; lower lower; higher lower; lower

lower; higher

If an insurmountable barrier to entry is lifted and a market that was once dominated by a monopolist is now perfectly competitive, the market equilibrium price will be ________ and the market equilibrium quantity will be ________. higher; lower lower; lower lower; higher higher; higher

lower; higher

The fact that the firms in an oligopoly are mutually interdependent means that each firm: -must consider the reactions of its competitors when it sets the price for its output. -produces a product that is identical to the products of its competitors. -faces a perfectly elastic demand curve for its product. -produces a product that is similar, but not identical, to the products of its competitors.

must consider the reactions of its competitors when it sets the price for its output.

With respect to monopolies, deadweight loss refers to the: lost consumer surplus from monopolistic pricing. net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy. socially unproductive amounts of money spent to obtain or acquire a monopoly. none of the above

net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy.

The above figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. The Nash equilibrium in this game does not exist. occurs when firm A sets a high price and firm B sets a low price. occurs when both firms set a high price. occurs when both firms set a low price.

occurs when both firms set a low price.

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q 2. If the market price is $196, what should it do? produce 5 units produce zero units (i.e., shut down) produce 6 units Cannot be determined from the above information

produce 6 units

If you purchase one pound of apples the price is $1.50 per pound. If you buy a five pound bag of apples, the cost is $5.00. This is most likely an example of: lower marginal cost. quantity discounts. price gouging. lower marginal benefit.

quantity discounts.

Tit-for-tat is a ________ game strategy in which a player ________ an opponent's play. single; responds in kind to repeated; ignores repeated; responds in kind to single; ignores

repeated; responds in kind to

Monopoly power results from the ability to: set price above marginal cost. set price above average variable cost. equate marginal cost to marginal revenue. set price equal to marginal cost.

set price above marginal cost.

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because the government will declare it a monopoly. the mill is a natural monopoly. the mill has a very inelastic supply curve. the mill controls a key input.

the mill controls a key input.

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. the market supply curve and the market demand curve the contract curve and the market supply curve the contract curve and the market demand curve the reaction curves for firms 1 and 2 the firm's supply curve and the firm's demand curve

the reaction curves for firms 1 and 2

Mergers are closely scrutinized by the government because -they always result in a more efficient market. -they always result in lower joint profits of the firms involved. -they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). -all mergers are undesirable.

they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly).

If a firm is selling a quantity that is NOT on its best-response curve it is in a Nash equilibrium. will want to change its behavior. will go out of business. is operating in a duopoly.

will want to change its behavior.

Which of the following is an example of a homogeneous good? smart phones sunglasses yellow onions jeans

yellow onions

A perfectly competitive firm is producing 700 units, which is their profit-maximizing output level. The market price for their good is $2 and the firm's average total cost to produce the 700 units is $0.50. What is their profit or loss from producing the 700 units? $1,750 -$1,050 $1,050 -$1,750

$1,050

The aggregate demand for good X is Q = 20 - P. If the price rises from P = $4 to P = $5, what is the change in consumer surplus? $4.50 $5.50 $16 $15.50

$15.50

Refer to the figure above. The consumer surplus derived from pizza consumption is:

$1500; just look at the triangle

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. If the firm will charge a monthly access fee plus a per hour rate, the monthly access fee will equal $16. $1. $8. $5.

$16.

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit-maximizing two-part tariff yields total revenue of $40. $16. $32. $24.

$24.

Assume a firm is a monopoly and enjoys $10 million in profits per year. The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years. If there is no discount rate, how much would the firm be willing to pay to deter entry? $250 million $100 million $25 million $250 billion

$250 million

The above table shows a sample of prices and the quantity sold by a monopolist.Refer to the table above. What is the monopolist's marginal revenue of the 96th unit? $8 $9,504 -$4 $4

$4

Big Truck Hauling Company uses 5 trucks worth $1,000 each and employs 10 employees at a cost of $400 each. What is the company's variable cost? $9,000 $400 $1,000 $4,000

$4,000

For national security reasons a government decides that all of its base metal industry should not be located in the same geographical region, as it presently is. The government decides to allocate production quotas to firms in different parts of the country, but does not restrict in any way the transactions between consumers and base metal producers. This scheme is: -efficient as learning by doing effects will be strongest in the firms set up in new geographical regions. -likely to be inefficient as some of the industry's output is not produced by the firms with the lowest cost. -efficient as consumers still buy from whoever they like. -likely to be inefficient as the scheme will require subsidies to work. -efficient as those consumers who value base metals the most can purchase them.

-likely to be inefficient as some of the industry's output is not produced by the firms with the lowest cost.

The primary objective of a cartel is to: -maximize the average profits of the members of the organization. -maximize the joint profits of the members of the organization. -ensure each member of the organization some minimum amount of profit. -maximize the amount of profit received by each member of the organization.

-maximize the joint profits of the members of the organization.

One interesting feature of a prisoner's dilemma game is that -non-cooperative behavior leads to lower payoffs than cooperative behavior. -cooperative behavior leads to lower payoffs than non-cooperative behavior. -there is never a dominated strategy. -individuals behave irrationally when they behave non-cooperatively.

-non-cooperative behavior leads to lower payoffs than cooperative behavior.

An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a -credible threat. -mixed strategy. -commitment. -non-credible threat.

-non-credible threat.

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will: -set price so as to equate the elasticity of demand across markets. -set a lower price in the market that is more price elastic. -set price equal to marginal cost in both markets. -set a higher price in the market that is more price elastic.

-set a lower price in the market that is more price elastic.

Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Q d = 580.25 - 25.50 P. What is the point elasticity of demand at a price of $5? 2.57 0.28 3.67 0.58

0.28

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is 100 - 4Q. 200 - 2Q. -2. 200 - 4Q.

100 - 4Q.

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals 25. 50. 12.50. 10.

12.50

The demand function for Super Big Bright LED light bulbs is Q d = 45,000,000 - 3,500,000 P. If the company charged a price of $8 per bulb, how many will be demanded? 17 million 10 million 41.5 million 37 million

17 million

A local retailer has decided to carry a well-known brand of shampoo. The marketing department tells them that the quarterly demand by an average man is: Qd = 3 - 0.25P and the quarterly demand by an average woman is: Qd = 4 - 0.5P The market consists of 10,000 men and 10,000 women. How may bottles of shampoo can they expect to sell if they charge $6 per bottle? 33,000 25,000 20,000 10,000 none of the above

25,000 (enter P then multiply by quantity)

If the Q d = 50 - 4 P and Q S = 2 + 4 P, the equilibrium quantity for the product is ________. 4 8 12 26

26

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit maximizing two-part tariff results in the firm selling 8 hours. 5 hours. 10 hours. 4.5 hours.

8 hours.

Scenario: A monopolist faces the following demand curve, marginal revenue curve, and total cost curve for its product: Q = 200 - 2P MR = 100 - Q TC = 5Q ***MC=5*** Refer to the scenario. What is the profit maximizing level of output? 100 90 0 95 none of the above

95

The Nifty Gum Co. has purchased a large parcel of land for $1 million. The company recently discovered that the land is contaminated and is worthless to all possible buyers. The opportunity cost of the land is A)$0. B)$1 million. C)equal to the cost of the factory that was planned to be built there. D)some amount greater than $0 but less than $1 million.

A)$0

If demand is inelastic, A)then a 1% increase in price leads to a fall in quantity of less than 1%. B)then a 1% increase in price leads to a fall in quantity of greater than 1%. C)then a 1% increase in price leads to a fall in quantity of 1%. D)then a 1% increase in price leads to a rise in quantity of less than 1%.

A)then a 1% increase in price leads to a fall in quantity of less than 1%.

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable? Cournot Oligopoly Bertrand Oligopoly Cartel All are equally preferable.

Bertrand Oligopoly

All of the following are true regarding a monopolist's marginal revenue except which one? It is equal to price for all units produced. It is less than the price for all units produced. It is downward sloping. It is equal to the change in total revenue resulting from a change in quantity sold.

It is equal to price for all units produced.

All of the following are true for a perfectly competitive firm's demand curve except which one? It is equal to the market price at all quantities. It is horizontal. It is perfectly elastic. It is equal to the market demand curve.

It is equal to the market demand curve.

The above figure shows the demand and marginal cost curves for a monopoly. Under monopoly, consumer surplus equals a + b + c + d + e + f. a + b + c. a + b. None of the above.

None of the above.

Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P 1 = 4 + 0.5 P 2, and the reaction curve for Firm 2 is P 2 = 4 + 0.5P 1. What is the equilibrium price outcome in this market? P1 = P2 = 4 P1 = P2 = 8 P1 = P2 = 6 P1 = 6 and P2 = 8

P1 = P2 = 8

A an example of a game in which a leader moves first, and then the other rivals follow is a ________ game. finite move Cournot model tit-for-tat Stackelberg model

Stackelberg model

If a perfectly competitive firm is producing 500 units of output and the marginal revenue from producing the 500th unit of output is $4 and the marginal cost is $3.50, which of the following is true? The firm is producing the profit-maximizing output. The firm is taking a loss from producing the 500th unit. The firm should decrease production. The firm should increase production.

The firm should increase production.

Wal-Mart was one of the most successful firms of the 1970s and 1980s. Much of Wal-Mart's success can be credited to its expansion strategy: they rushed to open the first discount store in small towns that could only support one discount store. In the language of game theory: Wal-Mart employed a maximin strategy. Wal-Mart made empty threats. Wal-Mart employed a preemptive strategy. Wal-Mart was a dominant firm.

Wal-Mart employed a preemptive strategy.

Profit is: a)maximized when the marketing department coordinates with the production department. b)used to beat a company's rivals. c)maximized when revenue is maximized. d)the difference between a firm's revenues and its costs.

d)the difference between a firm's revenues and its costs.

Firms in a monopolistically competitive market face ________ demand curves and earn ________ economic profits in the long run. downward sloping; positive downward sloping; zero horizontal; negative horizontal; zero

downward sloping; zero