exam practice

Question 1

a firm that is threatened by the potential entry of competitions into a market builds excess production capacity. this is an example of …

Answer 1

a credible threat

Question 2

a monopolists faces a MR function defined as MR = 20 - Q. the monopolists marginal cost is equal to $15 at all levels of output. how many units of output should the firm produce in order to max profits?

Answer 2

5

Question 3

a nash equilibrium is always a dominant strategy equilibruim

Answer 3

false

Question 4

a perfectly competitive firm is selling 150 units of output per week at a price of $10 . average total cost is $11, average variable cost is $8 and marginal cost is $12. from this info, it is clear that the firm,

Answer 4

can increase its profit by producing less output per week

Question 5

business profit is equal to total revenue minus

Answer 5

explicit costs

Question 6

if a firm raises its price by 10% and total revenue remains constant, then

Answer 6

the price of elasticity of demand for its output if unitary, marginal revenue is equal to 0, quantity demanded had decreased by 10 %

Question 7

if a good is inferior, then

Answer 7

the income elasticity fo demand will be negative

Question 8

if a firms average total costs are $200 per unit and average fixed costs are $70 per unit. what are the average variable costs?

Answer 8

$130 per unit

Question 9

if the price elasticity of demand for a firms output is elastic, then the firms marginal revenue is

Answer 9

positive, and an increase in price will cause total revenue to decrease

Question 10

if the price of a good increases while the quantitity of the good exchanged on markers decreases, then the most likely explanation is that there has been

Answer 10

a decrease in supply

Question 11

if two goods are complements in consumption, then an increase in the price of one of these goods will cause

Answer 11

the demand for the other good to decrease

Question 12

if we assume that the current equilibrium wage for low-skilled labor is $8 per hour and the min wage is increased from $5.75 to $7.25 per hour, then

Answer 12

unemployment among low-skilled workers will remain unaffected

Question 13

in the short run, a monopolists will shut down if it is producing a level of output where marginal revenue is equal to short-run marginal cot and price is

Answer 13

less than average variable costs

Question 14

learning curve represents the relationship btw

Answer 14

average variable costs and the cumulative number of units produced

Question 15

managerial revenue is equal to price for which one of the following types of market structure

Answer 15

perfect competition

Question 16

market equilibruim refers to a situation in which market price

Answer 16

is at a level where there is neither a shortage nor a surplus

Question 17

graph with two downward slopes represents a

Answer 17

monoploists

Question 18

highest line is

Answer 18

average total costs,

Question 19

lowest line is

Answer 19

average fixed

Question 20

suppose that the firm is an oligopolistic market engage is a price war and as a result all firms earn lower profits. game theory would describe tis as

Answer 20

a prisoner dilemma

Question 21

a contribution margin per unit is equal to the

Answer 21

difference between price and average variable costs

Question 22

the economic term for the costs associated with negotiating and enforcing a contract is

Answer 22

transactional costs

Question 23

the law of demand refers to

Answer 23

inverse relationship btw the price of a commodity and the quality demanded for the commodity per time period

Question 24

the long run average cost curve is at a minimum at a level of output where

Answer 24

the firm is expecting constant returns to scale, it is equal to long run marginal costs, and the long run average costs curve is tangent to the lowest point on a short run average total costs

Question 25

the value of the firm is given by

Answer 25

present value of all expected future profits

Question 26

when rent control is imposed above the market price it will

Answer 26

create no impact on the market

Question 27

which of the following developments in the housing market will help increase housing prices

Answer 27

a decline in supply

Question 28

which of the following is the best definition of economic profit

Answer 28

business profit minus implicit costs

Question 29

which of the following short-run cost curves declines continuously

Answer 29

average fixed costs

Question 30

which theory of profit holds that profit will be higher in industries where firms in the industry are able to prevent other firms from entering the industry

Answer 30

monopoly theory