Quizzes Flashcards
Assume an agent has convex indifference curves. Which of the following statements are true? Check all that apply.
A) If there is an increase in the interest rate, a saver will be better off.
B) If there is a decrease in the interest rate, a saver who stays a saver will be worse off.
C) If there is an increase in the interest rate, a borrower will stay a borrower
D) If there is an increase in the interest rate, a saver will stay a saver
Convex Indifference Curves
A) If there is an increase in the interest rate, a saver will be better off.
B) If there is a decrease in the interest rate, a saver who stays a saver will be worse off.
D) If there is an increase in the interest rate, a saver will stay a saver
If the nominal interest rate is 0.25 and the inflation rate is 0.07, then what is the real interest rate?
0.18
0.17
0.23
0.32
0.27
0.16
Formula:
0.17
Madam Wa’s utility is given by U(c1,c2)=c1+c2, where c1 is consumption in period 1 and c2 is consumption in period 2. There is no inflation and the interest rate , r = 0.03. Which of the following statements can be true? (Check all that apply)
The slope of Madam Wa’s indifference curve is -1
Madam Wa will be a saver.
Madam Wa will not consume anything in the first period.
Madam Wa prefers to consumer positive quantities in both periods.
The slope of Madam Wa’s indifference curve is -1
Madam Wa will be a saver.
Madam Wa will not consume anything in the first period.
A
A
Rooroo owns a financial asset that pays $148.82 with 70% probability and $45.60 with 30% probability.
If Rooroo’s utility is given by U(w)=ln(w), what is the minimum amount you must pay Rooroo to buy this financial asset from her.
(Round to two decimal points at each step)
104.58
Which of the following signal that a person is very risk averse? (check all that apply)
High Arrow-Pratt Measure
Low risk premium
Low certainty equivalence
Convex utility function
High Arrow-Pratt Measure
Low certainty equivalence
This question is on the topic of intertemporal substitution.
Which of the following statements are true? (check all that apply)
An increase in the interest rate can cause a utility-maximizing saver to become a borrower.
In a two-period model, if a utility maximizer chooses to borrow at an interest rate of 3% and save at an interest rate of 15%, this person must be worse off due to the rise in the interest rate.
When the interest rate falls, a utility maximizing borrower with convex indifference curves will continue to be a borrower.
In the two-period model, where c2 is plotted on the vertical axis, if the absolute value of the slope of the budget constraint decreases, it could be due to an increase in inflation.
When the interest rate falls, a utility maximizing borrower with convex indifference curves will continue to be a borrower.
In the two-period model, where c2 is plotted on the vertical axis, if the absolute value of the slope of the budget constraint decreases, it could be due to an increase in inflation.
Which of the following statements are true? (check all that apply)
If a person is risk averse for all levels of wealth, then his utility function is strictly concave.
Fair insurance implies that the price of $1 of insurance is equal to the probability of the good state occurring.
If a risk averse person is offered fair insurance against loss and maximizes expected utility, they will full insure.
If a person partially insures, he prefers the good state to occur instead of the bad state
If a risk averse person is offered fair insurance against loss and maximizes expected utility, they will full insure.
If a person partially insures, he prefers the good state to occur instead of the bad state
Which of the following was NOT discussed in the first Monopoly lecture?
Twice slope rule for marginal revenue
Third degree price discrimination
A quote by Adam Smith on perfect competition
The cancer drug, Revlimid, is an example of a product that enjoys a monopoly.
Third degree price discrimination
Which of the following options would make the following sentence true? (Check all that apply)
If the market demand curve becomes more elastic, ____________________________________ .
marginal revenue stays constant
price markup over marginal cost decreases
profits remain constant
barriers to entry fall
price markup over marginal cost decreases
Which of the following statements are true? Select all that apply.
An increase in the interest rate will necessarily result in a decrease in the present value of a given stream of positive incomes.
Of any two gambles, no matter what their expected returns, a rick averter will choose the one with the smaller variance.
If marginal cost is zero, the monopolist will maximize profit by producing where demand is unit elastic.
When a firm produces on the inelastic portion of the demand curve, it makes negative profits
An increase in the interest rate will necessarily result in a decrease in the present value of a given stream of positive incomes.
If marginal cost is zero, the monopolist will maximize profit by producing where demand is unit elastic.
Which of the following are necessary in order for a monopolist to practice third degree price discrimination? (check all that apply)
The ability to prevent arbitrage.
Identify individual demand curves.
Identify market demand curves for different groups.
Distinguish between different groups of customers.
The ability to prevent arbitrage.
Identify market demand curves for different groups.
Distinguish between different groups of customers.
A monopolist receives a subsidy from the government for every unit of output that is consumed. He has constant marginal costs and the subsidy that he gets per unit of output is greater than his marginal cost of production. But to get the subsidy on a unit of output, somebody has to consume it.
He will pay consumers to consume his product.
If he sells at a positive price, demand must be inelastic at that price.
He will sell at a price where demand is elastic.
He will give the good away for free.
If he sells at a positive price, demand must be inelastic at that price.
This question tests concepts from previous lectures.
Which of the following statements are true?
If at the current price, demand is inelastic, raising the price will increase the monopolist’s revenue.
A monopolist with zero marginal cost who charges a uniform price always prices on the unit elastic point on the demand curve.
A rational person will not save money if the interest rate is less than the inflation rate.
A risk loving person always prefers a lottery over a fixed amount.
If at the current price, demand is inelastic, raising the price will increase the monopolist’s revenue.
A monopolist with zero marginal cost who charges a uniform price always prices on the unit elastic point on the demand curve.
George Nootle paid $25 to purchase an investment that has a 50% chance of being worth $90 and a 50% chance of being worth $10. From this information, we can conclude that George is
risk loving.
risk neutral.
risk averse.
risk loving or risk neutral but not risk averse.
risk loving, risk neutral or risk averse.
risk loving, risk neutral or risk averse.
Which of the following statements are true? (check all that apply)
The stackelberg leader always makes at least as much profit as he would if it was a Cournot market.
The stackelberg leader always makes more profit than the follower.
The Stackelberg equilibrium is located on the follower’s best response function.
In a Cournot duopoly, the lower marginal cost firm produces more than the higher marginal cost firm.
The stackelberg leader always makes at least as much profit as he would if it was a Cournot market.
The Stackelberg equilibrium is located on the follower’s best response function.
In a Cournot duopoly, the lower marginal cost firm produces more than the higher marginal cost firm.
Consider a Stackelberg market with a leader and follower who maximize profits by choosing quantity. As local elections near, the city council decides to reduces local property taxes which constitute a lump sum tax. The reduction is $400 per year for the leader and $150 a year for the follower. As a result, the firms
increase their output by equal amounts.
both increase their output, with the follower increasing its output by more.
both increase their output, with the leader increasing its output by more.
There is not enough information to determine what each firms will do.
leave their outputs unchanged.
leave their outputs unchanged.
A monopolist faces a constant marginal cost of $1 per unit. At the price he is charging, the price elasticy of demand is -0.5. The monopolist must be
maximizing revenue
charging a price of $1
charging a price that is greater than $2
not maximizing profits
not maximizing profits
oe’s utility function is
. He purchases a risky asset that pays $361 with probability 0.3 and $729 with probability 0.7. What is the risk premium associated with this asset?
$605.16
$618.60
$13.44
$24.60
$594
$13.44
Firm X has constant marginal costs and engages in Bertrand competition in a market of identical goods.
Which of these are best responses of firm X? (check all that apply)
When its competitor charges a price greater than the monopoly price, firm X chooses to charge the monopoly price.
When its competitor charges a price lower than firm X’s marginal cost, firm X chooses to charge at marginal cost.
When its competitor charges a price that is higher than firm X’s marginal cost but lower than the monopoly price, firm X chooses to charge a price slightly lower than the price of its competitor.
When its competitor charges a price equal to firm X’s marginal cost, firm X charges a price slightly higher than its competitor to ensure non-zero profits.
When its competitor charges a price greater than the monopoly price, firm X chooses to charge the monopoly price.
When its competitor charges a price lower than firm X’s marginal cost, firm X chooses to charge at marginal cost.
When its competitor charges a price that is higher than firm X’s marginal cost but lower than the monopoly price, firm X chooses to charge a price slightly lower than the price of its competitor.
Which of the following is NOT an assumption of the Bertrand model which leads the P=MC result?
Both firms produce identical products.
Both firms have the same constant marginal cost.
Both firms have no capacity constraints.
The firms choose prices sequentially.
The firms choose prices sequentially.
Which of the following statements are true? (Check all that apply)
A Stackelberg leader will necessarily make at least as much profits as he would if he acted as a Cournot oligopolist.
In a Cournot market, firms compete simultaneously on either price or quantity.
In a symmetric market (firms have the same costs and the good is identical), if they collude, all firms will produce the same quantity.
In a symmetric market (firms have the same costs and the good is identical), if colluding, all firms will split the total profits equally.
A Stackelberg leader will necessarily make at least as much profits as he would if he acted as a Cournot oligopolist.
Which of the following statements are false? (Select all that apply)
In a two-period model, an agent with perfect complements utility is always insensitive to changes in the interest rate.
A risk neutral person is indifferent between a lottery and the average payout of the lottery.
In a symmetric market, (both firms have the same cost and the good is homogeneous) the Stackelberg leader and Stackelberg follower always produce the same quantity.
A monopolist would always prefer to underproduce than to overproduce relative to the profit maximizing quantity.
In a two-period model, an agent with perfect complements utility is always insensitive to changes in the interest rate.
In a symmetric market, (both firms have the same cost and the good is homogeneous) the Stackelberg leader and Stackelberg follower always produce the same quantity.
A monopolist would always prefer to underproduce than to overproduce relative to the profit maximizing quantity.
