Midterm 2 Econ

Game theory is useful to analyze oligopoly markets because ​a. each firm is a price taker. ​b. the market is comprised of a single firm. ​c. the firms in the market engage in strategic behavior. ​d. each firm produces a differentiated product.

​c. the firms in the market engage in strategic behavior.

*image with this question* If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to a. $1,000. b. $2,000. c. $3,000. d. $4,000.

a. $1,000.

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute a. $150 to GDP. b. $250 to GDP. c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. d. $400 to GDP.

b. $250 to GDP.

Curve B is the demand curve. Curve A is the marginal revenue curve. Curve C is the average total cost curve and Curve D is the marginal cost curve. For a monopolist, profit will be maximized by charging a price equal to *image with this question* A. P5. b. P4. c. P3. d. P1.

A. P5.

The natural rate of unemployment a. arises from a single problem that has a single solution. b. is easy for policymakers to reduce. c. Both a and b are correct. d. None of the above is correct.

None of the above is correct.

A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.90 per unit. The marginal revenue of the 151st unit of output is a. -$5.10. b. -$0.10. c. $2.45. d. $5.10.

a. -$5.10

*there is table with this one* Which of the following areas represents the profit earned by this profit-maximizing monopolist? a. BCFE b. ABE c. EFG d. CFIH

a. BCFE

Upland has a population of 15,000, of whom 9,000 work 8 hours a day to produce real output of $342,000. Lowland has a population of 8,000, of whom 7,000 work 7 hours a day to produce real output of $171,500. a. Upland has higher productivity and higher real GDP per person than Lowland. b. Upland has higher productivity but lower real GDP per person than Lowland. c. Upland has lower productivity but higher real GDP per person than Lowland. d. Upland has lower productivity and lower real GDP per person than Lowland.

a. Upland has higher productivity and higher real GDP per person than Lowland.

Laurel and Janet are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $12,000 and the other will earn $2,000. In this version of the prisoners' dilemma, if the game is played only once, Laurel should a. advertise, but if the game is to be repeated many times she should probably not advertise. b. advertise, and if the game is to be repeated many times she should still probably advertise. c. not advertise, but if the game is to be repeated many times she should probably advertise. d. not advertise, and if the game is to be repeated many times she should still not advertise.

a. advertise, but if the game is to be repeated many times she should probably not advertise.

Other things the same, which of the following would increase productivity? a. an increase in either human or physical capital b. an increase in human capital but not an increase in physical capital c. an increase in physical capital but not an increase in human capital d. neither an increase in human capital nor an increase in physical capital

a. an increase in either human or physical capital

Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. If BQ and Exxoff are able to successfully cooperate to maximize their joint profits, BQ will a. drill one well and Exxoff will drill one well. b. drill one well and Exxoff will drill two wells. c. drill two wells and Exxoff will drill one well. d. drill two wells and Exxoff will drill two wells.

a. drill one well and Exxoff will drill one well.

A cooperative agreement among oligopolists is less likely to be maintained, a. the greater the number of oligopolists. b. the larger the number of buyers of the oligopolists' product. c. the smaller the number of buyers of the oligopolists' product. d. the more likely it is that the game among the oligopolists will be played over and over again.

a. the greater the number of oligopolists.

Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. If BQ were to drill a second well and Exxoff also drilled a second well, what would BQ's profit be? a. $31 million b. $62 million c. $67 million d. $86 million

b. $62 million

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit? a. $60 b. $70 c. $100 d. $120

b. $70

Labor Data for Aridia Year- Adult population- Number of employed-Number of unemployed 2010-2,000-1,400-200 2011-3,000-1,300-600 2012-3,200-1,600-200 The number of adults not in the labor force of Aridia in 2011 was a. 600. b. 1,100. c. 1,700. d. 2,400.

b. 1,100.

Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. *there is an image with this one* The more frequently this game is played, the more likely it is that a. both firms will produce a good quality product. b. both firms will produce a poor quality product. c. both firms experience a reduction in profits compared to the Nash equilibrium outcome. d. one firm will experience an increase in profits and the other will experience a decrease in profits.

b. both firms will produce a poor quality product.

A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job is a. counted as out of the labor force but should be counted as unemployed. b. counted as unemployed but should be counted as out of the labor force. c. correctly counted as out of the labor force. d. correctly counted as unemployed.

b. counted as unemployed but should be counted as out of the labor force.

*this one was an image* If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to a. remain unchanged. b. decrease. c. increase as long as the new level of output is at least Q2. d. increase as long as the new level of output is at least Q1.

b. decrease.

Discouraged workers are included in the a. unemployed category. b. not in the labor force category. c. labor force category. d. employed category.

b. not in the labor force category.

Changes in real GDP reflect a. only changes in prices. b. only changes in the amounts being produced (quantities). c. both changes in prices and changes in the amounts being produced. d. neither changes in prices nor changes in the amounts being produced.

b. only changes in the amounts being produced (quantities).

Real GDP will increase a. only when prices increase. b. only when output increases. c. when prices increase or output increases. d. All of the above are correct.

b. only when output increases.

Anna recently graduated from college with a degree in electrical engineering, but she has not yet started looking for a job. She is a. unemployed. b. out of the labor force c. cyclically unemployed d. employed because she will have a job soon

b. out of the labor force

Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. *this one is an image* Acme and Pinnacle agree to cooperate so as to maximize total profit. If this game is played repeatedly and Acme uses a tit-for-tat strategy, it will choose a a. good quality product in the first round and in subsequent rounds it will choose whatever Pinnacle chose in the previous round. b. poor quality product in the first round and in subsequent rounds it will choose whatever Pinnacle chose in the previous round. c. good quality product in all rounds, regardless of the choice made by Pinnacle. d. poor quality product in all rounds, regardless of the choice made by Pinnacle.

b. poor quality product in the first round and in subsequent rounds it will choose whatever Pinnacle chose in the previous round.

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. *this is a table* Year-Price of Cereal-Quantity of Cereal- Price of Milk-Quantity of Milk 2008-$4.00-50-$1.00- 150 2009- $4.00-100-$2.00-200 2010-$5.00-200- $3.00-200 2011-$6.00-250-$3.50-2 In 2009, this country's a. real GDP was $350 b. real GDP was $600 c. real GDP was $700 d. real GDP was $800

b. real GDP was $600

Only two firms, ABC and XYZ, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. *this is a table* Price- Quantity- Total Revenue 28- 0-0 26-5-130 24-10-240 22-15-330 20-20-400 18-25-450 16-30-480 14-35-490 12-40-480 10-45-450 8-50-400 6-55-330 4-60-240 2-65-130 0-70-0 If ABC and XYZ operate to jointly maximize profits, then what is the price? a. $14 b. $16 c. $18 d. $20

c. 18

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan where it is sold, in which country's GDP will the car be counted? a. Japan's, because Honda is a Japanese company b. Japan's because that is where the car is purchased c. The United States because that is where it was built d. The United States because the workers are US residents

c. The United States because that is where it was built

An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals, is called a. a general equilibrium. b. a dominant equilibrium. c. a Nash equilibrium. d. an oligopoly equilibrium.

c. a Nash equilibrium.

If total spending rises from one year to the next, then a. the economy must be producing a larger output of goods and services. b. goods and services must be selling at higher prices. c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both. d. unemployment must be decreasing.

c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

A monopolist's average revenue is always a. equal to marginal revenue. b. greater than the price of its product. c. equal to the price of its product. d. less than the price of its product.

c. equal to the price of its product.

GDP is reported by the Bureau of Labor Statistics a. as a growth rate of nominal GDP every month b. as a growth rate of real GDP every month c. every quarter d. as nominal GDP per capita

c. every quarter

In determining living standards, productivity plays a key role a. for individuals, but not for nations. b. for nations, but not for individuals. c. for both nations and individuals. d. for neither nations nor individuals.

c. for both nations and individuals.

A monopoly market a. always maximizes total economic well-being. b. always minimizes consumer surplus. c. generally fails to maximize total economic well-being measured by total surplus d. generally fails to maximize producer surplus.

c. generally fails to maximize total economic well-being measured by total surplus

In the prisoners' dilemma game with Bonnie and Clyde as the players, the likely outcome is one a. that involves neither Bonnie nor Clyde pursuing a dominant strategy. b. in which neither Bonnie nor Clyde confesses. c. in which both Bonnie and Clyde confess. d. that is ideal for Bonnie and Clyde.

c. in which both Bonnie and Clyde confess.

Compared to workers in rich countries, workers in poor countries have a. lower productivity but higher wages b. higher productivity and lower wages c. lower productivity and lower wages d. the same productivity but lower wages e. lower productivity but higher growth rates of productivity f. shorter working hours

c. lower productivity and lower wages

Which of the following transactions is not included in GDP? a. oranges sold to households by a grocer. b. orange juice sold by a restaurant to its diners. c. oranges sold by a farmer to a grocery store. d. All of the above are included in GDP.

c. oranges sold by a farmer to a grocery store.

If duopoly firms that are not colluding were able to successfully collude, then a. price and quantity would rise. b. price and quantity would fall. c. price would rise and quantity would fall. d. price would fall and quantity would rise

c. price would rise and quantity would fall.

Over the last ten years productivity grew more slowly in Iberia than in Aire while the population and total hours worked remained the same in both countries. It follows that a. the standard of living must be higher in Iberia than in Aire. b. real GDP per person must be lower in Iberia than in Aire. c. real GDP per person grew more slowly in Iberia than in Aire. d. All of the above are correct.

c. real GDP per person grew more slowly in Iberia than in Aire.

Which of the following is always measured in prices from a base-year? a. both nominal and real GDP b. nominal but not real GDP c. real but not nominal GDP d. neither nominal nor real GDP

c. real but not nominal GDP

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it a. can prevent children from buying the lower-priced tickets and selling them to adults. b. has some degree of monopoly pricing power. c. can easily distinguish between the two groups of customers. d. All of the above are correct.

d. All of the above are correct.

As the number of sellers in an oligopoly becomes very large, a. the quantity of output approaches the quantity under perfect competition b. the price approaches marginal cost. c. the price approaches the price of a perfectly competitive market d. All of the above are correct.

d. All of the above are correct.

Cyclical unemployment a. has a different explanation than does the natural rate of unemployment. b. refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment. c. is closely associated with short-run ups and downs of economic activity. d. All of the above are correct.

d. All of the above are correct.

A monopolist maximizes profits by a. producing an output level where marginal revenue equals marginal cost. b. charging a price that is greater than marginal revenue. c. earning a profit of (P - MC) x Q. d. Both a and b are correct.

d. Both a and b are correct.

*There Is an image with this one* Curve B is the demand curve. Curve A is the marginal revenue curve. Curve D is the marginal cost curve and curve C is the Average Total Cost curve. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to a. remain unchanged. b. decrease. c. increase as long as the new level of output is at least Q2. d. None of the above is correct. The monopolist currently maximizing profits at Q4.

d. None of the above is correct. The monopolist currently maximizing profits at Q4.

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit? a. $90 b. $105 c. $180 d. Not enough information is given to determine the answer.

d. Not enough information is given to determine the answer.

​Imagine that two oil companies, BQ and Exxoff, own adjacent oil fields. Under the fields is a common pool of oil worth $144 million. Drilling a well to recover oil costs $5 million per well. If each company drills one well, each will get half of the oil and earn a $67 million profit ($72 million in revenue - $5 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue. If each firm is permitted to drill two wells at most, the firms are in a Nash equilibrium when a. BQ drills one well and Exxoff drills two wells. b. BQ drills two wells and Exxoff drills one well. c. both firms drill one well. d. both firms drill two wells.

d. both firms drill two wells.

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has a. reduced measured GDP. b. not affected measured GDP. c. increased measured GDP by the value of the restaurant meals. d. increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

d. increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called a. inventory goods. b. transitory goods. c. final goods. d. intermediate goods.

d. intermediate goods.

A dominant strategy is one that a. makes every player better off. b. makes at least one player better off without hurting the competitiveness of any other player. c. increases the total payoff for the player. d. is best for the player, regardless of what strategies other players follow.

d. is best for the player, regardless of what strategies other players follow.

Jai Li just lost her job because of a downturn in the economy. She hasn't yet started looking for a new one. The Bureau of Labor Statistics counts Jai Li as a. cyclicall unemployed, but not in the labor force. b. cyclically unemployed but in the labor force. c. in the labor force, but not unemployed. d. not in the labor force and not unemployed.

d. not in the labor force and not unemployed.

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital? a. the owner's knowledge of how to prepare vegetarian entrees b. the money in the owner's account at the bank from which she borrowed money c. the tables and chairs in the restaurant d. the fresh fruits, vegetables, and grains the restaurant uses to prepare its meals

the tables and chairs in the restaurant