ECON 13-14-16-18

A firm is said to have market power if it charges a price ________ of production. A)higher than the marginal cost B)equal to the marginal cost C)lower than the marginal cost D)equal to the average fixed cost

A

A player has a dominant strategy when ________. A)she has only one best response to every possible strategy of the other player B)her chosen strategy matches the best response of the other player in the game C)she has many best responses to any strategy of the other player in the game D)her chosen strategy gives her a lower payoff than the other player

A

A strategy is called a mixed strategy if it involves choosing ________. A)different actions randomly B)an action that yields a higher payoff to the opponent C)one particular action for a situation D)an action that yields a zero payoff to the player

A

Economists call the influences of the decisions of others on our decisions ________. A)peer effects B)herd effects C)cluster effects D)externalities

A

Game theory is the study of ________. A)strategic interactions B)irrational decision making C)program evaluation D)policy analysis

A

In a first-price auction, the ________ bidder wins the good being auctioned. A)highest B)second-highest C)lowest D)first

A

In a simultaneous-move game, ________. A)each player has to make his choice without knowing his rival's choice B)each player has to make his choice after knowing his rival's choice C)there is always more than one Nash equilibrium D)there is always more than one dominant strategy equilibrium

A

In an English auction, ________. A)the auctioneer begins the bidding process with a low starting bid B)the bidders begin the bidding process with a high starting bid C)the auctioneer begins the bidding process with a high starting bid D)the bidders decide the starting bid

A

La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly? A)La Dila will face the entire market demand. B)La Dila will lose all its market share. C)Swiss Pro will earn positive economic profits. D)Swiss Pro will gain market share.

A

People giving to charity because they value helping others is categorized as ________. A)pure altruism B)impure altruism C)consumerism D)rationalism

A

Refer to the scenario above. Does Mello Yello have a dominant strategy? A)Yes. Regardless of whether Mountain Dew chooses to advertise, Mello Yello's profits are always highest if it advertises. B)Yes. Regardless of whether Mountain Dew chooses to advertise, Mello Yello's profits are always highest if it does not advertise. C)No. D)Not enough information is provided to answer the question.

A

Scenario: Tom, Pat, Arthur, and Julie are participating in a second-price auction for a good. Tom values the good at $150,Pat values it at $180, Arthur values it at $250, and Julie values it at $200.62) Refer to the scenario above. The winner of this auction will earn a surplus of ________ if he or she follows his or her dominant strategy. A)$50 B)$100 C)$400 D)$200

A

Stephanie wants to buy a laptop. She has chosen a particular model. However, before ordering it online, she decides to read some of the user reviews provided on the Web site. She overlooks negative feedback by some users and focuses only on positive feedback. This is an example of ________ bias. A)confirmation B)attentional C)distinction D)attenuation

A

Under Bertrand competition, ________. A)the Nash equilibrium is marginal cost pricing (the perfectly competitive outcome) B)there are multiple Nash equilibria C)the Nash equilibrium is monopoly pricing D)there is no set of strategies that lead to a Nash equilibrium

A

Under the dominant-firm ("Godfather") price leadership model, A)all firms but the dominant firm are price takers. B)the market can be characterized as a balanced oligopoly C)the demand curve faced by the dominant firm is steeper than the market demand curve. D)All of the above are correct.

A

Which of the following describes a feature of a monopolistically competitive market? A)Social surplus is not maximized, but product diversity may add to consumer welfare. B)Social surplus is maximized, and some products will be priced below the competitive level. C)Social surplus is not maximized, but the prices will be lower than the competitive level. D)Social surplus is maximized but at prices possibly above the competitive level.

A

Which of the following is likely to be observed among unemployed individuals if government offers generous unemployment benefits?A)Decreased motivation to look for a job B)An increase in the acceptance of low-paying jobs C)A decrease in current consumption D)Increased motivation to look for a job

A

________ is a tendency to search for information that reaffirms individuals' own beliefs, thus entrenching them further in their own prejudices. A)Confirmation bias B)Negativity bias C)Attentional bias D)Attenuation bias

A

________ refers to actions taken by one party in a transaction that are relevant for, but not observed by, the other party. A)Moral hazard B)A negative externality C)Bargaining D)A positive externality

A

________ refers to an action that an individual with private information takes to convince others about her information. A)Signaling B)Sniping C)Speculating D)Hedging

A

10)Refer to the scenario above. Which is true? A)This game has two dominant strategy equilibria. B)This game has two Nash equilibria. C)This game has a dominant strategy equilibrium. D)This game has one Nash equilibrium.

B

A ________ is a complete plan describing how a player will act. A)policy B)strategy C)hypothesis D)payoff

B

A ________ is a plan by one firm to price a good at marginal cost forever if the other cheats on an agreement. A)pure strategy B)grim strategy C)collusion D)price discrimination

B

A best response is ________. A)an action choice that results in equal payoffs to all the players in a game B)one player's optimal action choice taking the other player's action as given C)an action choice that always results in a zero payoff to the opponent D)one player's optimal action choice taken irrespective of the action of the other player

B

An industry is deemed concentrated when ________. A)each firm in that industry has a small market share B)a few firms account for a large fraction of the total sales in that industry C)all the firms in that industry charge a price lower than the average cost of production D)most of the firms in that industry earn zero economic profits in the long run

B

An open-outcry auction is an auction where ________. A)public goods are sold B)bidders know about one another's bids C)free goods are distributed among the general public D)bids are placed privately

B

Buyers and sellers in a flea market often determine the terms of exchange through a process of ________. A)arbitration B)bilateral bargaining C)sniping D)collective bargaining

B

Christine works as a receptionist in an office. While at work, she is not supposed to access social networkingWeb sites. However, as her browsing activities are not monitored, she often uses the office network to access these Web sites. This is an example of ________. A)adverse selection B)moral hazard C)a positive externality D)the free-rider problem

B

Elly owns a small coffee shop. She has only one employee. One weekend, she decides to take a break from work.She is wondering whether she should trust her employee to run the shop in her absence. If she does not trust him, she would have to keep the shop closed, in which case neither she nor her employee will be able to make money. In contrast, if she trusts him, he can either cooperate and run the shop or he can defect and steal from the shop. If he cooperates, both of them will earn money. If he steals from the shop, he will make more money while she will lose.71) Refer to the scenario above. Which of the following will happen in this case? A)Elly will trust her employee, and her employee will cooperate. B)Neither of them will make any money. C)Elly will trust her employee, but her employee will defect. D)Only Elly will make money.

B

Goods that are similar but are not perfect substitutes are called ________ goods. A)normal B)differentiated C)homogeneous D)inferior

B

In a market with asymmetric information, ________. A)sellers have very low bargaining power B)buyers and sellers have different information about the good being traded C)people tend to overuse a resource is such a way that it gets exhausted D)people with an informational disadvantage experience positive externalities

B

In a market with asymmetric information, gains from trade occur if ________. A)the opportunity cost of consuming a good is zero B)the value of a good to a buyer is greater than its value to a seller C)the value of a good to a seller is greater than its value to a buyer D)the variable cost of producing a good is zero

B

More people started building houses in the earthquake-prone regions of Polonia after its government launched a compensation scheme for houses damaged in earthquakes in these regions. This is an example of________. A)adverse selection B)moral hazard C)a positive externality D)herd behavior

B

Oligopolists merge to ________. A)reduce prices B)increase market power C)increase market supply D)increase market demand

B

Overbidding in a second-price auction is likely to result in a ________. A)negative producer surplus B)negative consumer surplus C)zero producer surplus D)positive consumer surplus

B

Refer to the scenario above. The optimal strategy for Rachel is to bid a price ________. A)above her willingness to pay B)up to her willingness to pay C)equal to half the amount she is willing to pay D)equal to 5/6 times her willingness to pay

B

Refer to the scenario above. Which of the following is true? A)Firm 1 should never choose to offer a discount regardless of Firm 2's plan. B)Firm 2 should offer a discount if Firm 1 offers a discount. C)Firm 2 should never offer a discount regardless of Firm 1's choice. D)Firm 2 should always offer a discount regardless of Firm 1's plan.

B

Scenario: Neil and Claire are playing a game. Neil has been given five cookies and has been asked to decide how many he would like to give Claire. Claire has to decide whether to accept Neil's offer or reject it.65) Refer to the scenario above. This is an example of a(n) ________. A)mixed strategy game B)ultimatum game C)symmetric game D)prisoners' dilemma game

B

Scenario: You are playing a game of "Friend or Foe?" You and your classmate are taken to two different rooms and asked to choose whether the other is a friend or foe. You are told that if both of you choose "friend," you will get $10 each. However, if both of you choose "foe," neither of you will get anything. If one of you chooses "friend" while the other chooses "foe," the one who chooses "foe" will get $20, while the one who chooses "friend" will get nothing.70) Refer to the scenario above. If there is fairness penalty of $12, ________. A)both you and your friend will choose "foe" B)both you and your friend will choose "friend" C)you will choose "foe," while your friend will choose "friend" D)you will choose "friend," while your friend will choose "foe"

B

The ________ the Herfindahl-Hirschman Index, the ________ is. A)higher; less concentrated an industry B)higher; more concentrated an industry C)lower; more concentrated an industry D)lower; higher the profits earned in an industry

B

The exit of firms from a monopolistically competitive market structure causes the demand curves facing the existing sellers to shift ________ and to become ________. A)leftward; steeper B)rightward; steeper C)rightward; flatter D)leftward; flatter

B

The merger of Sprint and T-Mobile is an example of: A)a vertical merger B)a horizontal merger C)a leveraged buyout D)a diversified merger

B

The residual demand curve facing a firm in a monopolistically competitive industry is ________. A)identical to the demand curve facing a perfectly competitive firm B)the demand that is not satisfied by other producers C)the firm's marginal revenue schedule D)identical to the market demand curve

B

Which of the following is a problem that arises in a health insurance market? A)A fierce competition exists between insurance providers. B)A disproportionate number of high-risk individuals tend to buy insurance. C)Only risk-averse individuals buy insurance. D)There are a large number of buyers of various insurance programs.

B

Which of the following is true of an extensive-form game? A)It involves simultaneous decision making by the players. B)It involves sequential decision making by the players. C)The players in the game earn equal payoffs in equilibrium. D)The sum of the payoffs to the players in the game is always constant.

B

Which option correctly sorts different market structures in terms of competitiveness, from the most competitive to the least?A)Monopolistic competition, perfect competition, monopoly, oligopoly B)Perfect competition, monopolistic competition, oligopoly, monopoly C)Perfect competition, monopolistic competition, monopoly, oligopoly D)Perfect competition, oligopoly, monopolistic competition, monopoly

B

________ helps an individual make economic decisions when the individual's behavior determines the payoffs to others. A)Empiricism B)Game theory C)Public economics D)Macroeconomics

B

________ occurs when one agent in a transaction knows about a hidden characteristic of a good. A)The tragedy of the commons B)Adverse selection C)The moral hazard problem D)The free-rider problem

B

according to the ________, as long as property rights are clearly defined, two agents can always bargain to reach the efficient outcome. A)Ricardian theory on rent B)Coase theorem C)revenue equivalence theorem D)envelope theorem

B

A firm is likely to pay high efficiency wages when ________. A)it is easy to monitor workers B)there is excess supply of labor in the labor market C)it is not easy to monitor workers D)the minimum wages are set above the equilibrium wage rate

C

A monopolistically competitive firm ________. A)loses all of its business if it increases price slightly B)faces a perfectly inelastic demand curve C)can increase price without losing all of its business D)faces a perfectly elastic demand curve

C

A monopolistically competitive firm makes positive economic profits if ________. A)price is less than average total cost B)price equals average fixed cost C)price is higher than average total cost D)price equals marginal cost

C

A payoff matrix shows the ________. A)different combinations of two goods that can be bought with a given income B)payments made to the owners of each factor of production for the production of a good C)return from each action that players can take in a game D)various combinations of inputs required to produce a good

C

Collusion occurs when firms ________. A)compete with one another by setting a price slightly lower than their rivals' prices B)charge a price equal to their marginal cost of production C)conspire to set the quantity they produce or the prices they charge D)compete with one another by differentiating their products

C

The long-run equilibrium for a monopolistically competitive firm occurs ________. A)along the upward-sloping portion of its average total cost curve B)at the minimum point of its marginal cost curve C)along the downward-sloping portion of its average total cost curve D)at the minimum point of its average cost curve

C

The willingness of individuals to sacrifice their own well-being to either improve the well-being of others or to punish those whom they perceive as behaving unkindly is called ________. A)indoctrination B)altruism C)fairness D)rationalism

C

Tom wants to buy a used iPhone from an online exchange Web site. He expects 50 percent of the used phones to have some defect. He is willing to pay up to $80 for a phone without any defect and $0 for a defective phone. An owner of a good-quality iPhone is likely to sell his phone if he gets a price of $70.45) Refer to the scenario above. Which of the following problems is likely to occur in this market? A)Moral hazard B)The fallacy of composition C)Adverse selection D)The free-rider problem

C

Which of the following is a feature of an oligopoly? A)There are a large number of sellers in this market. B)Each firm in this market earns zero economic profits. C)Each firm's actions affect the decisions of its rivals in this market. D)There are no barriers to entry in this market.

C

11)Refer to the scenario above. What is the equilibrium outcome in this case? A)Firm 2 will dump its waste into the river, and Firm 1 will not dump its waste. B)Firm 1 will dump its waste into the river, and Firm 2 will not dump its waste. C)Neither of the firms will dump its waste into the river. D)Both firms will dump their waste into the river.

D

A ________ is a formal organization of producers who agree on anticompetitive actions. A)partnership B)duopoly C)monopoly D)cartel

D

A car insurance company pays 90 percent of the total damage in case of an accident. This is an example of________. A)a brokerage fee B)a subsidy C)a dividend payment D)a coinsurance

D

A manufacturer of a sugar substitute has launched a campaign against the consumption of sugar. This is an example of ________. A)sniping B)backward induction C)anchoring D)indoctrination

D

A monopolistically competitive firm shuts down in the short run if ________. A)average total cost exceeds price B)marginal revenue covers average fixed costs C)marginal revenue equals marginal cost D)total revenues do not cover variable costs

D

A teacher tells her students that she will give them a riddle that each student has to solve separately. Each student has to then announce his or her answer in the class. Those who get the correct answer will get a gift.Kate, a student in the class, decides to give the answer that most students give, although the answer she gets from solving the riddle is quite different. This is an example of ________. A)adverse selection B)moral hazard C)a pecuniary externality D)an information cascade

D

As the number of firms in an oligopolistic market increases, ________. A)prices tend to rise above marginal cost B)the profits earned by firms tend to rise C)the market demand for a good tends to fall D)prices tend to decline toward marginal cost

D

George donates money to charity only when somebody he knows approaches him for such donations. This is an example of ________. A)liberalism B)rationalism C)pure altruism D)impure altruism

D

In a Dutch auction, the ________ wins the good. A)bidder with the lowest value for the good B)second bidder C)bidder who bids up to his value for the good D)bidder who stops the auction

D

In an oligopoly industry with differentiated products, price ________. A)is always the same as the monopoly price B)is unaffected by the number of firms in the industry C)typically increases as the number of firms increases D)typically decreases as the number of firms increases

D

In which of the following market structures is there at least the possibility of earning profits in the long-run equilibrium? A)Monopoly only B)Monopolistic competition, monopoly, and oligopoly C)Perfect competition and monopolistic competition D)Monopoly and oligopoly

D

Kim is participating in an auction in which bids are placed publicly and the price of the good being auctioned increases until there is only one standing bid. This is an example of a(n) ________ auction. A)Dutch B)first-price C)second-price D)English

D

Refer to the scenario above. Which of the following is likely to happen if Elly is known to be vengeful? A)Only Elly will make money. B)Only Elly's employee will make money. C)Neither of them will make money. D)Both Elly and her employee will earn money.

D

The optimal strategy of a goalie in penalty kicking is similar to that in ________. A)the prisoners' dilemma B)an extensive-form game C)a symmetric game D)a zero-sum game

D

The winner of a second-price auction pays an amount equal to ________. A)his valuation of the good B)half of his bid C)the lowest bid D)the second-highest bid

D

Voters are often influenced by opinion polls. They end up voting for the party that is likely to win according to the opinion poll. This occurs because of ________. A)signaling B)sniping C)anchoring D)herding

D

When one firm merges with one of its suppliers, this is referred to as a: A)horizontal merger B)output merger C)conglomerate merger D)vertical merger

D

Which of the following is a difference between an oligopoly with homogeneous products and a monopoly? A)The firms in an oligopoly with homogeneous products earn positive economic profits in the long run, while a monopoly earns zero economic profits in the long run. B)There are huge barriers to entry in an oligopoly with identical products, while there are no barriers to entry in a monopoly. C)The firms in an oligopoly with identical products charge a price higher than marginal cost in the long run, while a monopoly charges a price lower than marginal cost in the long run. D)The firms in an oligopoly with homogeneous products face stiff competition from their rivals, while there is no competition in a monopoly.

D

Which of the following is true of a Nash equilibrium? A)A Nash equilibrium cannot occur if each player is aware of the strategies of other players. B)A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses. C)A game can have only one Nash equilibrium. D)No player can improve his payoff by changing his strategy in a Nash equilibrium.

D

________ is a market structure in which many rival firms produce differentiated products. A)An oligopoly B)A monopoly C)Perfect competition D)Monopolistic competition

D