Question #1: We expect economic profits to be __________ accounting profits due to the nature of __________.
A) less than; opportunity costs.
B) more than; opportunity costs.
C) less than; the learning curve.
D) more than; the learning curve.
Question #2: Suppose that we observe Dennis working 3 hours per day. What must his marginal cost be?
A) 12.
B) 28.
C) 20.
D) 24.
E) 16
hours Total Earnings
1 32
2 60
3 84
4 104
5 120
6 132
Question #3: For question 3 refer to the following diagrams.
You have two employees, Lucy and Ethel, and must assign them the tasks of filling candy boxes or stomping grapes. The table to the right gives their respective daily production possibilities frontiers (PPFs). How should you assign these tasks?
A) Lucy should be assigned to candy and Ethel to grapes.
B) Lucy should be assigned to grapes and Ethel to candy.
C) Lucy should do all the work because she has the absolute advantage in each.
D) Ethel should do all the work because she has the absolute advantage in each.
Question #4: Suppose that macaroni and cheese is an inferior good. When income increases, and at the same time the price of pasta decreases (pasta is an input for producing macaroni), what happens to the equilibrium price and quantity of macaroni and cheese?
A) Price falls and quantity increases.
B) Price falls and the effect on quantity is ambiguous.
C) Price rises and the effect on quantity is ambiguous.
D) Price rises and the quantity decreases.
E) None of the above.
Question #5: When the magazine, Consumer Reports, publishes an article on the desirable features and rankings of automobile tires, it is an example of information pertaining to
A) an experience good.
B) a credence good.
C) a search good.
D) an intermediate good.
Question #6: The owner of Taco Joe’s has estimated that if he lowers the price of a burrito from $2.00 to $1.50, he will increase sales from 400 to 500 burritos per day. The demand for burritos is
A) elastic.
B) inelastic.
C) unitary elastic.
D) perfectly elastic.
Question #7: The demand curve for your product is P = 1000 - 2×Q and you have constant marginal cost equal to 400. According to the midpoint pricing rule, your profit maximizing price should be
A) $1000.
B) $400.
C) $300.
D) $700.
E) $450.
Question #8: Suppose that elasticity of demand for your product is 3 and your marginal cost is 12. Then – according to the rule for markup pricing on cost – you should charge a price of
A) 36.
B) 4.
C) 18.
D) 24.
E) None of the above – more information is needed.
Question #9: A loss-making firm stands to gain rather than shutting down so long as
A) average variable cost is greater than marginal cost.
B) price is sufficient to cover average fixed cost.
C) average fixed cost is greater than average variable cost.
D) price is sufficient to cover average variable cost.
Question #10: Spreading the fixed costs of distribution over multiple products is known as __________, whereas the decrease in average variable cost due to the effect of cumulative production over time is known as _________.
A) economies of scope; learning effects.
B) economies of scale; learning effects.
C) economies of scope; economies of scale.
D) learning effects; economies of scale.
Question #11: A dominant strategy is one that
A) maximizes profits.
B) gives you an advantage over all your competitors.
C) gives the highest possible payoff to the player.
D) is best for a player under all possible circumstances.
E) is never Pareto efficient
Question #12: What strategy combination is a Nash equilibrium for the game below?
A) (A, B).
B) (A, D).
C) (B, C).
D) (B, D).
c d
A 3,3 1,4
B 4,0 o,2
Question #13: Suppose you are considering participating in an auction to buy a framed cel of Bugs Bunny in the ring with “The Crusher.” If successful, you plan to hang the cel in your den. This is an example of a(n)
A) private value auction.
B) common value auction.
C) affiliated value auction.
D) English auction.
Question #14: Ethics
A) are part of the opportunity cost of doing business.
B) make decision makers consider the long-run implications of any decision.
C) can lead to desirable outcomes in situations where self-interest is socially deficient.
D) all of the above.
E) none of the above.
Question #15: In a common value auction, bidders will NOT shade their bid in a(n) auction.
A) first-price sealed-bid
B) second-price sealed-bid
C) Dutch (oral descending-price)
D) English (oral ascending price)
E) None of the above; shading always occurs to offset the winner's curse