Final Exam Flashcards
Limited liability was traditionally a benefit to A) corporations. B) cartels. C) sole proprietorships. D) partnerships.
A) corporations.
If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then
A) social welfare is larger than under perfect competition.
B) the monopoly’s profits are larger than under single-price monopoly.
C) consumer surplus is larger than under single-price monopoly.
D) the monopoly’s profits are larger than under perfect price discrimination.
B) the monopoly’s profits are larger than under single-price monopoly.
In a repeated prisoners’ dilemma game
A) cooperation may result if the game is played indefinitely.
B) the players act sequentially.
C) firms’ choices are not influenced by their opponents’ actions.
D) the outcomes are always the same as in a static prisoners’ dilemma game.
A) cooperation may result if the game is played indefinitely.
In a sequential game, a player that starts his reasoning at the end of the game and progresses to the
first move to determine his best responses
A) is treating this as a static game.
B) is using backward induction.
C) doesn’t understand how to play a game.
D) is acting irrationally.
B) is using backward induction.
If a production process generates pollution, then a competitive market will produce more of the good
than is socially optimal because
A) firms take all costs into consideration.
B) firms ignore the costs of production that they do not have to pay themselves.
C) firms must pay all costs of production but ignore some of them.
D) firms set price equal to social marginal cost.
B) firms ignore the costs of production that they do not have to pay themselves.
A drought in the Midwest where wheat is grown will raise the price of wheat because of a A) rightward shift in the supply curve. B) leftward shift in the demand curve. C) leftward shift in the supply curve. D) rightward shift in the demand curve.
C) leftward shift in the supply curve.
Shirking is most likely to occur when A) employees are paid an hourly wage. B) the principal monitors the agents extensively. C) employees are paid a commission. D) a piece rate contract is used.
A) employees are paid an hourly wage.
Adverse selection occurs when there is A) full information. B) a worker who shirks because his boss does not watch him. C) an unobserved characteristic. D) unobserved behavior.
C) an unobserved characteristic.
Fixed costs are
A) a production expense that changes with the quantity of output produced.
B) the amount by which a firm’s cost changes if the firm produces one more unit of output.
C) a production expense that does not vary with output.
D) equal to total cost divided by the units of output produced.
C) a production expense that does not vary with output.
If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is A) elastic. B) unit elastic. C) perfectly elastic. D) inelastic.
D) inelastic.
A person who starts dangerous motorbike racing after signing a contract with a health insurance company is an example of A) moral hazard. B) signaling. C) screening. D) adverse selection.
A) moral hazard.
In a perfectly competitive market, in both the short run and the long run
A) the number of firms in the market is fixed.
B) firms operate only if they make a positive profit.
C) the supply curve is the sum of the individual firms’ supply curves.
D) All of the above.
C) the supply curve is the sum of the individual firms’ supply curves.
In a Stackelberg oligopoly
A) there is no Nash equilibrium.
B) both firms act simultaneously, but one chooses price and the other output level.
C) the leader moves first, and the follower chooses its price in the second stage of the game.
D) the leader moves first, and the follower chooses its output in the second stage of the game.
D) the leader moves first, and the follower chooses its output in the second stage of the game.
Patents A) create monopoly power. B) always increase total welfare. C) are a form of trade secret. D) always decrease total welfare.
A) create monopoly power.
Expected utility is
A) the probability-weighted mean of the utility gained from a set of possible outcomes.
B) negative for risk-averse people.
C) the maximum utility that a person can get from a set of possible outcomes.
D) indeterminant for risk preferring people.
A) the probability-weighted mean of the utility gained from a set of possible outcomes.
