Question 1

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

Accepted Answer

A) 2000Q+100 
B) 2000Q²+100Q 
C) 1000Q²+100Q+10 
D) 1000Q+100+10/Q 
E) 100Q+10+1/Q 
A) 2000Q+100 
B) 2000Q²+100Q 
C) 1000Q²+100Q+10 
D) 1000Q+100+10/Q 
E) 100Q+10+1/Q D

Question 2

Which characteristic is present in a perfectly competitive market?

Accepted Answer

A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Firms can enter and exit the market very easily 
E) all of the above 
A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Firms can enter and exit the market very easily 
E) all of the above E

Question 3

Which characteristic does not describe a perfectly competitive market?

Accepted Answer

A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Industry-level price elasticity is finite 
E) Firm-level price elasticity of demand facing another perfect competitor is infinite 
A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Industry-level price elasticity is finite 
E) Firm-level price elasticity of demand facing another perfect competitor is infinite D

Question 4

At what point can a firm achieve a profit maximizing quantity?

Accepted Answer

A) MR>MC B) MC=D C) MRMC B) MC=D C) MR

Question 5

Why does a Nash equilibrium represent a plausible outcome for a game?

Accepted Answer

A) If Party A chooses first,the outcome is the same as its expectation regardless of B's choice 
B) If Party B chooses first,the outcome is the same as its expectation regardless of A's choice 
C) Regardless of which party chooses first,if they both expect the other to choose a its Nash equilibrium,then both parties expectations will equal the outcome. 
D) Neither party needs to make a choice,the market forces an agreeable equilibrium outcome 
E) None of the above are correct 
A) If Party A chooses first,the outcome is the same as its expectation regardless of B's choice 
B) If Party B chooses first,the outcome is the same as its expectation regardless of A's choice 
C) Regardless of which party chooses first,if they both expect the other to choose a its Nash equilibrium,then both parties expectations will equal the outcome. 
D) Neither party needs to make a choice,the market forces an agreeable equilibrium outcome 
E) None of the above are correct

Question 6

Which of the following variables does not influence the quantity of product that a firm is able to sell?

Accepted Answer

A) Price of the product 
B) Price of related products 
C) Plant production costs 
D) Incomes and tastes of consumers 
E) Advertising 
A) Price of the product 
B) Price of related products 
C) Plant production costs 
D) Incomes and tastes of consumers 
E) Advertising

Question 7

What is a Nash equilibrium?

Accepted Answer

A) A state where each player is doing the best it can,given the strategies of all other players 
B) A state where the sum of all payoffs is maximized 
C) A state where the players always have achieved their best possible result 
D) A state at which the MR=MC for a firm 
E) A state where each player always must play a dominant strategy 
A) A state where each player is doing the best it can,given the strategies of all other players 
B) A state where the sum of all payoffs is maximized 
C) A state where the players always have achieved their best possible result 
D) A state at which the MR=MC for a firm 
E) A state where each player always must play a dominant strategy

Question 8

Which of the following would be an example of a good with elastic demand?

Accepted Answer

A) Bread 
B) Work Shoes 
C) Prescription medicine 
D) Luxury speedboat 
E) Raincoats in winter 
A) Bread 
B) Work Shoes 
C) Prescription medicine 
D) Luxury speedboat 
E) Raincoats in winter

Question 9

In which of the following markets is a consumer less sensitive to price?

Accepted Answer

A) Airlines 
B) Refrigerators 
C) Health Care 
D) Computer components 
E) Washing Machines 
A) Airlines 
B) Refrigerators 
C) Health Care 
D) Computer components 
E) Washing Machines

Question 10

In which of the following markets is a consumer more sensitive to price?

Accepted Answer

A) Credit Cards 
B) Items sold door to door 
C) Customized software upgrade 
D) Copier/Printer Toner 
E) Health Care 
A) Credit Cards 
B) Items sold door to door 
C) Customized software upgrade 
D) Copier/Printer Toner 
E) Health Care

Question 11

What is the revenue destruction effect?

Accepted Answer

A) The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units 
B) The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit 
C) The loss in revenue a firm incurs due to brand level elasticities 
D) The loss in revenue a firm incurs due to being in a perfectly competitive market 
E) The loss in revenue a firm incurs due to predatory pricing 
A) The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units 
B) The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit 
C) The loss in revenue a firm incurs due to brand level elasticities 
D) The loss in revenue a firm incurs due to being in a perfectly competitive market 
E) The loss in revenue a firm incurs due to predatory pricing

Question 12

If η=.8 and P=$25,what is MR?

Accepted Answer

A) $20 
B) $6.25 
C) -$5 
D) -$6.25 
E) $5 
A) $20 
B) $6.25 
C) -$5 
D) -$6.25 
E) $5

Question 13

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

Accepted Answer

A) $200K,-$100K 
B) $200K,$100K 
C) $300K,$100K 
D) $300K,-$100K 
E) $200K,$200K 
A) $200K,-$100K 
B) $200K,$100K 
C) $300K,$100K 
D) $300K,-$100K 
E) $200K,$200K

Question 14

What is a sunk cost?

Accepted Answer

A) A cost that can be avoided if certain choices are made 
B) A cost that always varies with the output of a factory 
C) The average cost of operating a plant 
D) The "lower envelope" of short-run average cost functions 
E) A cost incurred no matter what the decision is and cannot be avoided 
A) A cost that can be avoided if certain choices are made 
B) A cost that always varies with the output of a factory 
C) The average cost of operating a plant 
D) The "lower envelope" of short-run average cost functions 
E) A cost incurred no matter what the decision is and cannot be avoided

Question 15

Which of the following would be the range of elasticity for a product with an "inelastic" demand?

Accepted Answer

A)     1 
D)    > 2 
E) none of the above 
A)     1 
D)    > 2 
E) none of the above

Question 16

Which of the following would not be a characteristic of a good with an elastic demand?

Accepted Answer

A) The product lacks unique features that differentiate it from competing products 
B) The product is a high percentage of a consumer's total expenditures 
C) The good is an input used to make a product that is sensitive to changes in price 
D) There are many substitutes available for the good 
E) The product has high switching costs 
A) The product lacks unique features that differentiate it from competing products 
B) The product is a high percentage of a consumer's total expenditures 
C) The good is an input used to make a product that is sensitive to changes in price 
D) There are many substitutes available for the good 
E) The product has high switching costs

Question 17

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Accepted Answer

A) When average cost is a decreasing function of output,marginal cost is greater than average cost. 
B) When average cost neither increases or decreases (because it is constant or at a minimum point),marginal cost is equal to average cost 
C) The average cost function is always smaller than the marginal cost function 
D) The average cost function is always greater than the marginal cost function 
E) When average cost is an increasing function of output,marginal cost is less than average cost 
A) When average cost is a decreasing function of output,marginal cost is greater than average cost. 
B) When average cost neither increases or decreases (because it is constant or at a minimum point),marginal cost is equal to average cost 
C) The average cost function is always smaller than the marginal cost function 
D) The average cost function is always greater than the marginal cost function 
E) When average cost is an increasing function of output,marginal cost is less than average cost

Question 18

Which of the following best describes marginal revenue?

Accepted Answer

A) How sales revenue varies as a function of how much product is sold 
B) The incremental sales from producing one more unit of output 
C) Rate of change in total revenue that results from the sale of ΔQ additional units of output 
D) The total sales for a given product based on plant output 
E) Percentage change in quantity divided by percentage change in price 
A) How sales revenue varies as a function of how much product is sold 
B) The incremental sales from producing one more unit of output 
C) Rate of change in total revenue that results from the sale of ΔQ additional units of output 
D) The total sales for a given product based on plant output 
E) Percentage change in quantity divided by percentage change in price

Question 19

The following figure plots Short Run Average Cost functions for small,medium,and large plants.Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

Accepted Answer

A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
E) Q₅ 
A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
E) Q₅

Question 20

Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Short-Run (i.e.one year)Average Costs?

Accepted Answer

The answer of Suppose a firm's plant produces Q units...

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

Which characteristic is present in a perfectly competitive market?

Which characteristic does not describe a perfectly competitive market?

At what point can a firm achieve a profit maximizing quantity?

Why does a Nash equilibrium represent a plausible outcome for a game?

Which of the following variables does not influence the quantity of product that a firm is able to sell?

What is a Nash equilibrium?

Which of the following would be an example of a good with elastic demand?

In which of the following markets is a consumer less sensitive to price?

In which of the following markets is a consumer more sensitive to price?

What is the revenue destruction effect?

If η=.8 and P=$25,what is MR?

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

What is a sunk cost?

Which of the following would be the range of elasticity for a product with an "inelastic" demand?

Which of the following would not be a characteristic of a good with an elastic demand?

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Which of the following best describes marginal revenue?

The following figure plots Short Run Average Cost functions for small,medium,and large plants.Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

Entry and Exit

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Performance Measurement and Incentives

Strategy and Structure

Environment, Power, and Culture

Filters

Exam 15: Economics Primer

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

Which characteristic is present in a perfectly competitive market?

Which characteristic does not describe a perfectly competitive market?

At what point can a firm achieve a profit maximizing quantity?

Why does a Nash equilibrium represent a plausible outcome for a game?

Which of the following variables does not influence the quantity of product that a firm is able to sell?

What is a Nash equilibrium?

Which of the following would be an example of a good with elastic demand?

In which of the following markets is a consumer less sensitive to price?

In which of the following markets is a consumer more sensitive to price?

What is the revenue destruction effect?

If η=.8 and P=$25,what is MR?

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

What is a sunk cost?

Which of the following would be the range of elasticity for a product with an "inelastic" demand?

Which of the following would not be a characteristic of a good with an elastic demand?

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Which of the following best describes marginal revenue?

The following figure plots Short Run Average Cost functions for small,medium,and large plants.Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

Entry and Exit

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Performance Measurement and Incentives

Strategy and Structure

Environment, Power, and Culture

Filters