Economics for Decision Making Final Exam Questions - 2618 Verified Questions

Economics for Decision Making

Final Exam Questions

Course Introduction

Economics for Decision Making introduces students to fundamental economic concepts and analytical tools that inform strategic decisions in business and policy environments. The course explores microeconomic and macroeconomic principles, including supply and demand analysis, market structures, cost-benefit analysis, and the assessment of economic environments. Through real-world case studies and interactive problem-solving, students learn to evaluate trade-offs, anticipate the impact of market changes, and apply economic reasoning to optimize resource allocation and support effective decision-making in various organizational contexts.

Recommended Textbook

Intermediate Microeconomics A Modern Approach 8th Edition by Hal R. Varian

Available Study Resources on Quizplus

71 Chapters

2618 Verified Questions

2618 Flashcards

Source URL: https://quizplus.com/study-set/2624

Page 2

Chapter 1: Budget Constraint

Available Study Resources on Quizplus for this Chatper

58 Verified Questions

58 Flashcards

Source URL: https://quizplus.com/quiz/52312

Sample Questions

Q1) Bella's budget line for x and y depends on all of the following except

A) the amount of money she has to spend on x and y.

B) the price of x.

C) her preferences between x and y.

D) the price of y.

E) None of the above.

Answer: C

Q2) Georgina thrives on two goods: pears and bananas. The cost of pears is 30 pesos each and the cost of bananas is 15 pesos each. If her income is 180 pesos, how many pears can she buy if she spends all of her income on pears?

A) 9

B) 12

C) 4

D) 6

E) None of the above.

Answer: D

To view all questions and flashcards with answers, click on the resource link above. Page 3

Chapter 1: A: Budget Constraint

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52348

Sample Questions

Q1) In Problem 4, Murphy used to consume 100 units of X and 50 units of Y when the price of X was $2 and the price of Y was $4. If the price of X rose to $5 and the price of Y rose to $5, how much would Murphy's income have to rise so that he could still afford his original bundle?

A) $400

B) $350

C) $200

D) $600

E) None of the above.

Answer: B

Q2) In Problem 3, if you could exactly afford either 2 units of x and 7 units of y, or 4 units of x and 3 units of y, then if you spent all of your income on y, how many units of y could you buy?

A) 11

B) 7

C) 15

D) 6

E) None of the above.

Answer: A

To view all questions and flashcards with answers, click on the resource link above. Page 4

Chapter 2: Preferences

Available Study Resources on Quizplus for this Chatper

49 Verified Questions

49 Flashcards

Source URL: https://quizplus.com/quiz/52313

Sample Questions

Q1) A person with reflexive preferences is someone who does not shop carefully.

A)True

B)False

Answer: False

Q2) Recall that Tommy Twit's mother measures the departure of any bundle from her favorite bundle for Tommy by the sum of the absolute values of the differences. Her favorite bundle for Tommy is (2, 7), that is, 2 cookies and 7 glasses of milk. Tommy's mother's indifference curve that passes through the point (c, m) = (4, 5) also passes through

A) the point (6, 3).

B) the points (2, 3), (6, 7), and (4, 9).

C) the point (2, 7).

D) the points (4, 7), (2, 5), and (2, 9).

E) None of the above.

Answer: B

Q3) If someone has the utility function U = 1,000 + 2 min {x, y}, then x and y are perfect complements for that person.

A)True

B)False

Answer: True

To view all questions and flashcards with answers, click on the resource link above. Page 5

Chapter 2: A: Preferences

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52349

Sample Questions

Q1) In Problem 8, Nancy Lerner is taking a course from Professor Goodheart who will count only her best midterm grade and from Professor Stern who will count only her worst midterm grade. In one of her classes, Nancy has scores of 40 on her first midterm and 50 on her second midterm. When the first midterm score is measured on the horizontal axis and her second midterm score on the vertical, her indifference curve has a slope of zero at the point (40, 50). This class could

A) be Professor Stern's but could not be Professor Goodheart's.

B) be either Professor Goodheart's or Professor Stern's.

C) not be either Professor Goodheart's or Professor Stern's.

D) be Professor Goodheart's but could not be Professor Stern's.

E) There is not enough information to tell whose class it could or couldn't be.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 3: Utility

Available Study Resources on Quizplus for this Chatper

57 Verified Questions

57 Flashcards

Source URL: https://quizplus.com/quiz/52314

Sample Questions

Q1) A person with utility function U(x, y) = 5 + y² + 2x has nonconvex preferences.

A)True

B)False

Q2) A person with the utility function U(x, y) = y + x²has convex preferences. A)True

B)False

Q3) Charlie has the utility function U(x_A, x_B) = x_Ax_B. His indifference curve passing through 32 apples and 8 bananas will also pass through the point where he consumes 4 apples and A) 16 bananas.

B) 32 bananas.

C) 68 bananas.

D) 72 bananas.

E) 64 bananas.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 3: A: Utility

Available Study Resources on Quizplus for this Chatper

29 Verified Questions

29 Flashcards

Source URL: https://quizplus.com/quiz/52350

Sample Questions

Q1) In Problem 1, Charlie has the utility function U(x_A, x_B) = x_Ax_B. His indifference curve passing through 15 apples and 16 bananas will also pass through the point where he consumes 3 apples and A) 40 bananas.

B) 83 bananas.

C) 20 bananas.

D) 87 bananas.

E) 80 bananas.

Q2) In Problem 1, Charlie's utility function is U(A, B) = AB, where A and B are the numbers of apples and bananas, respectively, that he consumes. If Charlie is consuming 40 apples and 160 bananas, then if we put apples on the horizontal axis and bananas on the vertical axis, the slope of his indifference curve at his current consumption is A) -4.

B) -8.

C) -41.

D) .

To view all questions and flashcards with answers, click on the resource link above.

Chapter 4: Choice

Available Study Resources on Quizplus for this Chatper

63 Verified Questions

63 Flashcards

Source URL: https://quizplus.com/quiz/52315

Sample Questions

Q1) Clara's utility function is U(x, y) = (x + 2)(y + 1). If her consumption of both x and y are doubled, then her marginal rate of substitution between x and y remains constant.

A)True

B)False

Q2) Peter consumes no commodities other than Miller Lite and Bud Light. His annual budget for these two commodities is described by the equation 5x + 30y = 300, where x is sixpacks of Miller Lite and y is cases of Bud Light. Peter considers 2 cases of Bud Light to be perfect substitutes for 6 sixpacks of Miller Lite.

A) He will consume 60 sixpacks of Miller Lite per year.

B) He will consume 10 cases of Bud Light per year.

C) He will consume 14 cases of Bud Light per year.

D) He will consume 12 sixpacks of Miller Lite per year.

E) He is indifferent between any two bundles that use up his entire income.

Q3) If a consumer does not have convex preferences, then a point of tangency between her indifference curve and her budget line must be an optimal consumption point.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 9

Chapter 4: A: Choice

Available Study Resources on Quizplus for this Chatper

31 Verified Questions

31 Flashcards

Source URL: https://quizplus.com/quiz/52351

Sample Questions

Q1) In Problem 1, Charlie has a utility function U(x_A, x_B) = x_Ax_B, the price of apples is $1, and the price of bananas is $2. If Charlie's income were $160, how many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint?

A) 80

B) 40

C) 8

D) 20

E) 120

Q2) In Problem 1, Charlie has a utility function U(x_A, x_B) = x_Ax_B, the price of apples is $1, and the price of bananas is $2. If Charlie's income were $400, how many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint?

A) 100

B) 20

C) 200

D) 50

E) 300

To view all questions and flashcards with answers, click on the resource link above.

Page 10

Chapter 5: Demand

Available Study Resources on Quizplus for this Chatper

79 Verified Questions

79 Flashcards

Source URL: https://quizplus.com/quiz/52316

Sample Questions

Q1) An Engel curve is a demand curve with the vertical and horizontal axes reversed.

A)True

B)False

Q2) Cecil consumes x₁ and x₂ in fixed proportions. He consumes A units of good 1 with B units of good 2. To solve for his demand functions for goods 1 and 2,

A) setand solve for x₁.

B) solve the following two equations in two unknowns: Ax₁ = Bx₂ and p₁x₁ + p₂x₂ = m.

C) solve the following two equations in two unknowns: Bx₁ = Ax₂ and p₁x₁ + p₂x₂ = m.

D) you only need to use the equation given by his budget line.

E) use the fact that he spends all of his income on good 1 so long as it is the cheaper good.

Q3) If preferences are homothetic and all prices double while income remains constant, then demand for all goods is halved.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

11

Chapter 5: A: Demand

Available Study Resources on Quizplus for this Chatper

22 Verified Questions

22 Flashcards

Source URL: https://quizplus.com/quiz/52352

Sample Questions

Q1) In Problem 13, where x is whips and y is leather jackets, if Kinko's utility function were U(x, y) = min{ 7x, 3x + 12y}, then if the price of whips were $20 and the price of leather jackets were $60, Kinko would demand

A) 4 times as many leather jackets as whips.

B) 3 times as many whips as leather jackets.

C) 5 times as many whips as leather jackets.

D) 2 times as many leather jackets as whips.

E) only leather jackets.

Q2) In Problem 1, if Charlie's utility function were X⁶_AX_B, if apples cost 90 cents each, and if bananas cost 10 cents each, Charlie's budget line would be tangent to one of his indifference curves whenever

A) X_A = 6X_B.

B) X_B = 6X_A.

C) X_B = X_A.

D) 6X_B = 9X_A.

E) 90X_A + 10X_B = M.

To view all questions and flashcards with answers, click on the resource link above.

Page 12

Chapter 6: Revealed Preference

Available Study Resources on Quizplus for this Chatper

58 Verified Questions

58 Flashcards

Source URL: https://quizplus.com/quiz/52317

Sample Questions

Q1) The Laspeyres index of prices in period 2 relative to period 1 tells us the ratio of the cost of buying the period 1 bundle at period 2 prices to the cost of buying the period 1 bundle at period 1 prices.

A)True

B)False

Q2) Consider the case of Ronald. Let the prices and consumptions in the base year be as in situation D, where p₁ = 3, p₂ = 1, x₁ = 5, and x₂ = 15. If in the current year, the price of good 1 is $1 and the price of good 2 is $4, and Ronald's current consumptions of good 1 and good 2 are 25 and 5 respectively, what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer.)

A) 1.50

B) 2.17

C) 1.25

D) 1

E) 3.25

To view all questions and flashcards with answers, click on the resource link above.

Page 13

Chapter 6: A: Revealed Preference

Available Study Resources on Quizplus for this Chatper

26 Verified Questions

26 Flashcards

Source URL: https://quizplus.com/quiz/52353

Sample Questions

Q1) In Problem 4, if situation D is p = (3, 1) and x = (5, 10),

A) Ronald's behavior is consistent with both the Weak and the Strong Axioms of Revealed Preference.

B) Ronald's behavior is consistent with the Weak but not the Strong Axiom of Revealed Preference.

C) Ronald's behavior violates both the Weak and the Strong Axioms of Revealed Preference.

Q2) Let us reconsider the case of Ronald in Problem 4. Let the prices and consumptions in the base year be as in situation D, where p₁ = $3, p₂ = $1, x₁ = 5, and x₂ = 15. If in the current year, the price of good 1 is $1 and the price of good 2 is $2, and his current consumptions of good 1 and good 2 are 25 and 20 respectively, what is the Laspeyres price index of current prices relative to base year prices? (Pick the most nearly correct answer.)

A) 1.17

B) 2.17

C) 0.75

D) 0.50

E) 1.75

To view all questions and flashcards with answers, click on the resource link above. Page 14

Chapter 7: Slutsky Equation

Available Study Resources on Quizplus for this Chatper

51 Verified Questions

51 Flashcards

Source URL: https://quizplus.com/quiz/52318

Sample Questions

Q1) Goods 1 and 2 are perfect complements and a consumer always consumes them in the ratio of 2 units of good 2 to 1 unit of good 1. If a consumer has an income of $120 and if the price of good 2 changes from $3 to $4, while the price of good 1 stays at $1, then the income effect of the price change

A) is 4 times as strong as the substitution effect.

B) does not change the demand for good 1.

C) is exactly twice as strong as the substitution effect.

D) accounts for the entire change in demand.

E) is 3 times as strong as the substitution effect.

Q2) Charlie's utility function is x_Ax_B. The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40. If the price of apples increased to $5 and the price of bananas stayed constant, the substitution effect on Charlie's apple consumption would reduce his consumption by A) 4 apples.

B) 13 apples.

C) 8 apples.

D) 16 apples.

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above. Page 15

Chapter 7: A: Slutsky Equation

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52354

Sample Questions

Q1) In Problem 1, Charlie's utility function is x_Ax_B. The price of apples used to be $1 per unit, and the price of bananas $2 per unit. His income was $40 per day. If the price of apples increased to $1.75 and the price of bananas fell to $.25, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of

A) $76.

B) $18.75.

C) $56.25.

D) $37.50.

E) $150.

Q2) Neville, in Problem 2, has a friend named Algernon. Algernon has the same demand function for claret as Neville, namely q = .02m - 2p, where m is income and p is price. Algernon's income is $5,500 and he initially had to pay a price of $20 per bottle of claret. The price of claret rose to $50. The substitution effect of the price change

A) reduced his demand by 60.

B) reduced his demand by 18.

C) reduced his demand by 102.

D) increased his demand by 60.

E) reduced his demand by 28.

To view all questions and flashcards with answers, click on the resource link above.

Page 16

Chapter 8: Buying and Selling

Available Study Resources on Quizplus for this Chatper

75 Verified Questions

75 Flashcards

Source URL: https://quizplus.com/quiz/52319

Sample Questions

Q1) Will is paid $10 an hour for the first 40 hours per week that he works. He can also work as many hours overtime as he wishes to. He is paid $15 an hour for every hour that he works beyond 40 hours a week. Leisure is a normal good for Will and he is currently working some overtime. If his hourly wage for the first 40 hours per week that he works rises to $12 and his wages for overtime remain at $15 per hour, he will choose to work

A) fewer hours per week.

B) more hours per week.

C) the same number of hours per week.

D) more hours per week if and only if his income exceeds his labor income.

E) more hours per day if and only if he works less than 20 hours overtime per week.

Q2) If a consumer is a buyer of some goods and a seller of others, then a change in prices will generate an extra income effect in the Slutsky equation due to the revaluation of the consumer's endowment.

A)True

B)False

Q3) Is it ever possible that an increase in the price of a good for which a person is a net seller can make him worse off? Use a diagram to illustrate your answer.

To view all questions and flashcards with answers, click on the resource link above.

Page 17

Chapter 8: A: Buying and Selling

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52355

Sample Questions

Q1) Dr. J has 80 hours per week to divide between work and leisure. His wage rate if $5 per hour. Dr. J receives a lump sum payment of $150 per week. Suppose that the first $100 per week of his labor income is untaxed, but all labor income above $100 is taxed at a rate of 70%.

A) Dr. J's budget line has no kinks in the part of it that corresponds to a positive labor supply.

B) The slope of Dr. J's budget line is everywhere -1.50.

C) Dr. J's budget line has a kink in it at the point where he takes 70 units of leisure.

D) Dr. J's budget line has a kink where his income is $250 and his leisure is 60 hours.

E) Dr. J's budget line has a piece that is a horizontal straight line.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 9: Intertemporal Choice

Available Study Resources on Quizplus for this Chatper

61 Verified Questions

61 Flashcards

Source URL: https://quizplus.com/quiz/52320

Sample Questions

Q1) Ymir Larson farms near Niffleheim, Minnesota. He works 80 hours a week. He can either grow rutabagas or raise pigs. Every hour that he spends growing rutabagas gives him $2 of income this year. Every hour that he spends raising pigs this year will add $4 to his income next year. In fact, next year's weekly income will be 100 + 4H dollars where H is the number of hours he spends raising pigs this year. Ymir's utility function is U(c₁, c₂) = min{c₁, c₂}, where c₁ and c₂ are his consumption expenditures this year and next year. Ymir doesn't believe in banks and will neither lend money nor borrow money.

a. Draw Ymir's budget line for current and future consumption, labeling key points on it.

b. How many hours a week will he choose to spend raising pigs?

c. How much money will he spend per week on consumption in each year?

Q2) If the interest rate is less than the inflation rate, a rational person will never save money.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 19

Chapter 9: A: Intertemporal Choice

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52356

Sample Questions

Q1) In the village in Problem 10, if the harvest this year is 4,000 bushels of grain and the harvest next year will be 1,200 bushels and if rats eat 10% of any grain that is stored for a year, how many bushels of grain could the villagers consume next year if they consume 1,000 bushels of grain this year?

A) 2,700

B) 5,850

C) 3,900

D) 5,200

E) 1,300

Q2) Suppose that Molly from Problem 2 had an income of $500 in period 1 and an income of $880 in period 2. Suppose that her utility function were c^a₁c¹^-^a₂,

where a = 0.60 and the interest rate were 10%. If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would

A) stay constant.

B) increase by $300.

C) double.

D) increase by $150.

E) increase by $500.

To view all questions and flashcards with answers, click on the resource link above.

Page 20

Chapter 10: Asset Markets

Available Study Resources on Quizplus for this Chatper

46 Verified Questions

46 Flashcards

Source URL: https://quizplus.com/quiz/52321

Sample Questions

Q1) If the rate of inflation is greater than the interest rate,

A) you should consume all of your wealth in the first period.

B) you are better off keeping your money in a mattress at home (assuming no risk of it being stolen) than at a bank.

C) you will necessarily consume less this period than you would if the rate of inflation were less than the interest rate.

D) you will necessarily consume more this period than you would if the rate of inflation were less than the interest rate.

E) None of the above.

Q2) You buy a painting for $1,280. Its market value will rise by $80 per year for the next 30 years. It is worth $80 a year to you to have it hanging on the wall. The interest rate is 10%. In how many years will you sell it?

A) 30

B) Immediately

C) 8

D) 4

E) 5

To view all questions and flashcards with answers, click on the resource link above.

Chapter 10: A: Asset Markets

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52357

Sample Questions

Q1) The sum of the terms of the infinite geometric series 1, 0.78, 0.78², 0.78³, . . . is closest to

A) infinity.

B) 1.78.

C) 0.56.

D) 4.55.

E) 128.21.

Q2) The price of an antique is expected to rise by 6% during the next year. The interest rate is 7%. You are thinking of buying an antique and selling it a year from now. You would be willing to pay a total of 600 dollars for the pleasure of owning the antique for a year. How much would you be willing to pay to buy this antique? (See Problem 5.)

A) 12,600 dollars

B) 60,000 dollars

C) 600 dollars

D) 8,571.43 dollars

E) 6,000 dollars

To view all questions and flashcards with answers, click on the resource link above.

Chapter 11: Uncertainty

Available Study Resources on Quizplus for this Chatper

39 Verified Questions

39 Flashcards

Source URL: https://quizplus.com/quiz/52322

Sample Questions

Q1) Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p)u(c₂), where for any x < $2,000, u(x) = 2x, and for x greater than or equal to $2,000, u(x) = 2,000 + x.

A) For bets that involve no chance of her wealth exceeding $2,000, Sally will take any bet that has a positive expected net payoff.

B) Sally will be risk averse if her income is less than $2,000 but risk loving if her income is more than $2,000.

C) Sally will be risk neutral if her income is less than $2,000 and risk averse if her income is more than $2,000.

D) Sally will never take a bet if there is a chance that it leaves her with wealth less than $4,000.

E) None of the above are true.

Q2) An expected utility maximizer's preferences between two bundles contingent on event 1 happening must be independent of what he will get if event 2 happens.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 23

Chapter 11: A: Uncertainty

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52358

Sample Questions

Q1) Sally Kink is an expected utility maximizer with utility function pu(c₁) + (1 - p)u(c₂), where for any x < 8,000, u(x) = 2x, and for x greater than or equal to 8,000, u(x) = 16,000 + x.

A) Sally will never take a bet if there is a chance that it leaves her with wealth less than $16,000.

B) Sally will be risk neutral if her income is less than $8,000 and risk averse if her income is more than $8,000.

C) Sally will be risk averse if her income is less than $8,000 but risk loving if her income is more than $8,000.

D) For bets that involve no chance of her wealth exceeding $8,000, Sally will take any bet that has a positive expected net payoff.

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above.

24

Chapter 12: Risky Assets

Available Study Resources on Quizplus for this Chatper

16 Verified Questions

16 Flashcards

Source URL: https://quizplus.com/quiz/52323

Sample Questions

Q1) Bill owns an export business. The expected profit from his business is $100,000 a year. For every 1% increase in the value of the Japanese yen relative to the dollar, its profits increase by $20,000. Bill plans to buy one of two firms. One is an import business which returns an expected profit of $70,000. For every 1% increase in the value of the Japanese yen relative to the dollar, the profits of this firm shrink by $5,000. The second is a safe domestic firm which is certain to yield him $70,000 a year. The two firms cost the same. If Bill is risk averse,

A) he should buy the domestic firm.

B) he should buy the import firm.

C) he should buy half of each of these two firms.

D) it doesn't matter which he buys.

E) he should buy 80% of the domestic firm and 20% of the import firm.

Q2) If the returns on two assets are negatively correlated, then a portfolio that contains some of each will have less variance in its return per dollar invested than either asset has by itself.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 25

Chapter 12: A: Risky Assets

Available Study Resources on Quizplus for this Chatper

10 Verified Questions

10 Flashcards

Source URL: https://quizplus.com/quiz/52359

Sample Questions

Q1) Suppose that Fenner Smith of Problem 2 must divide his portfolio between two assets, one of which gives him an expected rate of return of 15% with zero standard deviation and one of which gives him an expected rate of return of 45% and has a standard deviation of 10. He can alter the expected rate of return and the variance of his portfolio by changing the proportions in which he holds the two assets. If we draw a "budget line" with expected return on the vertical axis and standard deviation on the horizontal axis, depicting the combination that Smith can obtain, the slope of this budget line is

A) 1.50.

B) -1.50.

C) -3.

D) 3.

E) 4.50.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 13: Consumers Surplus

Available Study Resources on Quizplus for this Chatper

42 Verified Questions

42 Flashcards

Source URL: https://quizplus.com/quiz/52324

Sample Questions

Q1) Bernice has the utility function u(x, y) = min{x, y}, where x is the number of pairs of earrings she buys per week and y is the number of dollars per week she has left to spend on other things. (We allow the possibility that she buys fractional numbers of pairs of earrings per week.) If she originally had an income of $18 per week and was paying a price of $6 per pair of earrings, then if the price of earrings rose to $10 per pair, the compensating variation of that price change (measured in dollars per week) would be closest to

A) $20.57.

B) $6.55.

C) $10.29.

D) $21.57.

E) $19.57.

Q2) If somebody is buying 10 units of x and the price of x falls by $3, then that person's net consumer's surplus must increase by at least $30.

A)True

B)False

Q3) Consumer's surplus is another name for excess demand.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 27

Chapter 13: A: Consumers Surplus

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52360

Sample Questions

Q1) Betsy's utility function for BMWs and money is given by 24,000x + y, where x is the number of BMWs she has and y is the amount of money she has. Her income is $32,000. Her reservation price for one BMW is

A) $24,000.

B) $24,000 - p.

C) $24,000 - y.

D) $8,000.

E) $56,000.

Q2) In Problem 1, Sir Plus has a demand function for mead that is given by the equation D(p) = 100 - p. If the price of mead is $95, how much is Sir Plus's net consumer's surplus?

A) 12.50

B) 6.25

C) 25

D) 5

E) 9,500

To view all questions and flashcards with answers, click on the resource link above.

28

Chapter 14: Market Demand

Available Study Resources on Quizplus for this Chatper

101 Verified Questions

101 Flashcards

Source URL: https://quizplus.com/quiz/52325

Sample Questions

Q1) Using the graph of a demand curve, explain why marginal revenue is less than price.

Q2) The demand for drangles is given by D(p) = (p + 1)^-², where p is the price of drangles. If the price of drangles is $19, then the price elasticity of demand for drangles is

A) -3.80

B) -7.60

C) -5.70

D) -3.80.

E) -1.90

Q3) If consumer 1 has the demand function x₁ = 1,000 - 2p and consumer 2 has the demand function x₂ = 500 - p, then the aggregate demand function for an economy with just these two consumers would be x = 1,500 - 3p for p < 500.

A)True

B)False

Q4) The demand curve is inelastic for inferior goods and elastic for normal goods.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 29

Chapter 14: A: Market Demand

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52361

Sample Questions

Q1) In the same football conference as the university in Problem 9 is another university where the demand for football tickets at each game is 80,000 - 4,000p. If the capacity of the stadium at that university is 50,000 seats, what is the revenue-maximizing price for this university to charge per ticket?

A) $10

B) $5

C) $7.50

D) $20

E) $30

Q2) In Problem 6, the only quantities of good 1 that Barbie can buy are 1 unit or zero units. For x₁ equal to zero or 1 and for all positive values of x₂, suppose that Barbie's preferences were represented by the utility function (x₁ + 6)(x₂ + 4). Then if her income were $16, her reservation price for good 1 would be

A) $2.86.

B) $2.50.

C) $5.71.

D) $1.50.

E) $.57.

To view all questions and flashcards with answers, click on the resource link above.

Page 30

Chapter 15: Equilibrium

Available Study Resources on Quizplus for this Chatper

48 Verified Questions

48 Flashcards

Source URL: https://quizplus.com/quiz/52326

Sample Questions

Q1) Schrecklich and Lamerde are two obscure modernist painters, who are no longer alive but whose paintings are still enjoyed by persons of dubious taste. The demand function for Schrecklichs is 200 - 4P_S - 2P_L and the demand function for Lamerdes is 200 - 3P_L - P_S, where P_S and P_L are respectively the price of Schrecklichs and Lamerdes. If the world supply of Schrecklichs is 110 and the world supply of Lamerdes is 110, then the equilibrium price of Schrecklichs is

A) $9.

B) $22.50.

C) $36.

D) $27.

E) $18.

Q2) If the supply curve is vertical, then the amount supplied is independent of price.

A)True

B)False

Q3) An economic situation is Pareto optimal only if there is no way to make someone better off.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 31

Chapter 15: A: Equilibrium

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52362

Sample Questions

Q1) Suppose that King Kanuta from Problem 11 demands that each of his subjects give him 3 coconuts for every coconut that they consume. The king puts all of the coconuts that he collects in a large pile and burns them. The supply of coconuts is given by S(p_s)= 100p_s, where p_s is the price received by suppliers. The demand for coconuts by the king's subjects is given by D(p_d) = 7,650 - 100p_d, where p_d is the price paid by consumers. In equilibrium, the price received by suppliers will be

A) $153.

B) $18.

C) $27.

D) $38.25.

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 16: Auctions

Available Study Resources on Quizplus for this Chatper

36 Verified Questions

36 Flashcards

Source URL: https://quizplus.com/quiz/52327

Sample Questions

Q1) An auctioneer allows bidders to examine a jar of pennies, but he does not allow them to open the jar and count the pennies. The jar is then sold by means of an English auction. Economists call an auction of this type a private-values auction, since opinions differ.

A)True B)False

Q2) In a common-value auction, the bids of other bidders can influence the maximum amount that one is willing to pay for an object, while in a private-value auction this is not the case.

A)True B)False

Q3) It is often the case that a seller can increase his profit from an auction by setting a reserve price even if he has to destroy the object being auctioned if nobody bids as high as the reserve price.

A)True B)False

To view all questions and flashcards with answers, click on the resource link above. Page 33

Chapter 16: A: Auctions

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52363

Sample Questions

Q1) An antique cabinet is being sold by means of an English auction. There are four bidders, Gloria, Elise, Judy, and Arabella. These bidders are unacquainted with each other and do not collude. Gloria values the cabinet at $800, Elise values it at $500, Judy values it at $1,800, and Arabella values it at $600. If the bidders bid in their rational self-interest, the cabinet will be sold to

A) Gloria for about $800.

B) either Judy or Gloria for about $800. Which of these two buyers gets it is randomly determined.

C) Judy for slightly more than $800.

D) Judy for about $1,800.

E) either Judy or Gloria for about $500. Which of these two buyers gets it is randomly determined.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 17: Technology

Available Study Resources on Quizplus for this Chatper

52 Verified Questions

52 Flashcards

Source URL: https://quizplus.com/quiz/52328

Sample Questions

Q1) It is possible to have decreasing marginal products for all inputs, and yet have increasing returns to scale.

A)True B)False

Q2) A production isoquant is a locus of combinations of inputs that are equally profitable.

A)True B)False

Q3) The production set of a firm is the set of all products the firm can produce.

A)True B)False

Q4) The economist's distinction between the long run and the short run captures the idea that quantities of some factor inputs can be varied in the short run but not in the long run.

A)True B)False

Q5) The production function f(x, y) = x + y has constant returns to scale. A)True B)False

To view all questions and flashcards with answers, click on the resource link above. Page 35

Chapter 17: A: Technology

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52364

Sample Questions

Q1) In Problem 3, if the exponents in the production function were 0.40 for x₁ and 0.40 for x₂, this production function would exhibit (constant, increasing, decreasing) returns to scale and (would, would not) have diminishing technical rate of substitution.

A) increasing, would

B) decreasing, would not C) constant, would

D) constant, would not

E) decreasing, would

Q2) A firm has the production function f(x, y) = x^1.20y². This firm has

A) constant returns to scale.

B) decreasing returns to scale and increasing marginal product for factor x.

C) increasing returns to scale and decreasing marginal product for factor x.

D) decreasing returns to scale and diminishing marginal product for factor x.

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 18: Profit Maximization

Available Study Resources on Quizplus for this Chatper

52 Verified Questions

52 Flashcards

Source URL: https://quizplus.com/quiz/52329

Sample Questions

Q1) If the short-run marginal costs of producing a good are $40 for the first 200 units and $50 for each additional unit beyond 200, then in the short run, if the market price of output is $46, a profit-maximizing firm will

A) produce a level of output where marginal revenue equals marginal costs. B) produce as much output as possible since there are constant returns to scale. C) produce up to the point where average costs equal $46.

D) not produce at all, since marginal costs are increasing.

E) produce exactly 200 units.

Q2) A competitive firm produces output using three fixed factors and one variable factor. The firm's short-run production function is q = 154x - 5x², where x is the amount of variable factor used. The price of the output is $2 per unit and the price of the variable factor is $8 per unit. In the short run, how many units of x should the firm use?

A) 15

B) 30

C) 17

D) 7

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above.

Page 37

Chapter 18: A: Profit Maximization

Available Study Resources on Quizplus for this Chatper

21 Verified Questions

21 Flashcards

Source URL: https://quizplus.com/quiz/52365

Sample Questions

Q1) In Problem 12, if the price of the output good is $4, the price of factor 1 is $1, and the price of factor 2 is $3, what is the profit-maximizing amount of factor 1?

A) 8

B) 2

C) 1

D) 0

E) There is not enough information to tell.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 19: Cost Minimization

Available Study Resources on Quizplus for this Chatper

77 Verified Questions

77 Flashcards

Source URL: https://quizplus.com/quiz/52330

Sample Questions

Q1) An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $10, respectively. The minimum cost of producing 160 units is therefore

A) $2,000.

B) $2,400.

C) $800.

D) $8,000.

E) $1,600.

Q2) If the production function for tuna casseroles is min{x1,x2 2}, where x1 is the amount of factor 1 and x2 is the amount of factor x2, find the cost function for tuna casseroles.

Q3) A competitive, cost-minimizing firm has the production function f (x, y) = x + 2y and uses positive amounts of both inputs. If the price of x doubles and the price of y triples, then the cost of production will more than double.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 39

Chapter 19: A: Cost Minimization

Available Study Resources on Quizplus for this Chatper

26 Verified Questions

26 Flashcards

Source URL: https://quizplus.com/quiz/52366

Sample Questions

Q1) In Problem 2, suppose that a new alloy is invented which uses copper and zinc in fixed proportions where 1 unit of output requires 3 units of copper and 3 units of zinc for each unit of alloy produced. If no other inputs are needed, the price of copper is $4, and the price of zinc is $5, what is the average cost per unit when 4,000 units of the alloy are produced?

A) $1.33

B) $14.17

C) $1,333.33

D) $27

E) $14,166.67

Q2) Suppose that Nadine in Problem 1 has a production function 3x₁ + x₂. If the factor prices are $12 for factor 1 and $3 for factor 2, how much will it cost her to produce 20 units of output?

A) $430

B) $780

C) $60

D) $80

E) $70

To view all questions and flashcards with answers, click on the resource link above.

Chapter 20: Cost Curves

Available Study Resources on Quizplus for this Chatper

51 Verified Questions

51 Flashcards

Source URL: https://quizplus.com/quiz/52331

Sample Questions

Q1) A firm has a short-run cost function c(y) = 3y + 14 for y > 0 and c(0) = 10. The firm's quasi-fixed costs are

A) $10.

B) $4.

C) $9.

D) $14.

E) They are not possible to determine from this information.

Q2) A firm has a short-run cost function c(y) = 3y + 11 for y > 0 and c(0) = 8. The firm's quasi-fixed costs are

A) $8.

B) $11.

C) $3.

D) $7.

E) They are not possible to determine from this information.

Q3) The marginal cost curve passes through the minimum point of the average fixed cost curve.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Chapter 20: A: Cost Curves

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52367

Sample Questions

Q1) In Problem 2, if Mr. Dent Carr's total costs were 5s² + 50s + 20, then if he repairs 10 cars, his average variable costs will be

A) $100.

B) $102.

C) $150.

D) $200.

E) $75.

Q2) In Problem 3, Rex Carr could pay $10 for a shovel that lasts one year and pay $5 a car to his brother Scoop to bury the cars, or he could buy a low-quality car smasher that costs $200 a year to own and that smashes cars at a marginal cost of $1 per car. If it is also possible for Rex to buy a high-quality hydraulic car smasher that cost $300 per year to own and if with this smasher he could dispose of cars at a cost of $.75 per car, it would be worthwhile for him to buy this high-quality smasher if he planned to dispose of

A) at least 400 cars per year.

B) no more than 400 cars per year.

C) no more than 200 cars per year.

D) at least 410 cars per year.

E) at least 200 cars per year.

To view all questions and flashcards with answers, click on the resource link above.

Page 42

Chapter 21: Firm Supply

Available Study Resources on Quizplus for this Chatper

41 Verified Questions

41 Flashcards

Source URL: https://quizplus.com/quiz/52332

Sample Questions

Q1) The Lost Mountains of northern Iowa are inhabited by the rare Marshallian deer. Patches of grass are far apart in this rugged land. If a deer finds a fresh patch of grass and spends h hours grazing it, it gets the square root of h units of grass. The deer compete for grass. When there are n deer, it takes a deer n 2 minutes to find a fresh patch. A deer can survive if it gets 1 unit of grass every 200 minutes.

a. Find the average cost in time of a unit of grass if a deer gets y units of grass from each patch.

b. How much time will an efficient deer spend in each patch when there are n deer? (Hint: Minimize aver-age cost.)

c. Since there is free entry into the deer business, the equilibrium population is the maximum number of efficient deer who can survive. How many is this?

Q2) A firm faces competitive markets both for its inputs and its outputs. If its long-run supply curve is q = 3p,then it cannot have constant returns to scale.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 43

Chapter 21: A: Firm Supply

Available Study Resources on Quizplus for this Chatper

15 Verified Questions

15 Flashcards

Source URL: https://quizplus.com/quiz/52368

Sample Questions

Q1) A firm has a long-run cost function, C(q) = 8q² + 288. In the long run, this firm will supply a positive amount of output, as long as the price is greater than

A) $200.

B) $192.

C) $96.

D) $48.

E) $101.

Q2) Suppose that Dent Carr's long-run total cost of repairing s cars per week is c(s) = 3s² + 75. If the price he receives for repairing a car is $36, then in the long run, how many cars will he fix per week if he maximize profits?

A) 0

B) 12

C) 9

D) 6

E) 18

To view all questions and flashcards with answers, click on the resource link above. Page 44

Chapter 22: Industry Supply

Available Study Resources on Quizplus for this Chatper

49 Verified Questions

49 Flashcards

Source URL: https://quizplus.com/quiz/52333

Sample Questions

Q1) In a competitive market, if both demand and supply curves are linear, then a per-unit tax of $10 will generate exactly the same deadweight loss as a per-unit subsidy of $10.

A)True

B)False

Q2) The cheese business in Lake Fon-du-lac, Wisconsin, is a competitive industry. All cheese manufacturers have the cost function C = Q² + 16, while demand for cheese in the town is given by Q_d = 120 - P. The long-run equilibrium number of firms in this industry is

A)14.

B) 28.

C) 22.

D) 120.

E) 29.

Q3) The price elasticity of demand for gasoline in the United States is equal to 0.15. How should the price elasticity of demand for the individual firm compare to 0.15 (higher, lower, same, can't tell)? Explain why.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 22: A: Industry Supply

Available Study Resources on Quizplus for this Chatper

33 Verified Questions

33 Flashcards

Source URL: https://quizplus.com/quiz/52369

Sample Questions

Q1) Suppose that the garden gnome industry was in long-run equilibrium given the circumstances described in Problem 1. Suppose, as in Problem 2, that it was discovered to everyone's surprise on January 1, 1993, after it was too late to change orders for gnome molds, that the cost of the plaster and labor needed to make a gnome had changed to $9. If the demand curve does not change, what will happen to the equilibrium price of gnomes?

A) Stays constant.

B) Rises by $2.

C) Falls by $2.

D) Rises by $9.

E) Falls by $4.50.

Q2) In Problem 1, if the cost of plaster and labor were $11 per gnome and everything else is as in the problem (gnome molds cost $1,000, interest rate is 10%), what is the lowest price of gnomes at which there would be a positive supply in the long run?

A) $11

B) $22

C) $13.20

D) $12.10

E) $13.20.

To view all questions and flashcards with answers, click on the resource link above.

Page 46

Chapter 23: Monopoly

Available Study Resources on Quizplus for this Chatper

76 Verified Questions

76 Flashcards

Source URL: https://quizplus.com/quiz/52334

Sample Questions

Q1) A profit-maximizing monopolist faces a downward-sloping demand curve that has a constant elasticity of -4. The firm finds it optimal to charge a price of $24 for its output. What is its marginal cost at this level of output?

A) $55

B) $18

C) $48

D) $10

E) $24

Q2) A monopolist faces the inverse demand curve p = 64 - 2q. At what level of output is his total revenue maximized?

A) 24

B) 26

C) 8

D) 32

E) 16

Q3) Since a monopoly charges a price higher than marginal cost, it will produce an inefficient amount of output.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 47

Chapter 23: A: Monopoly

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52370

Sample Questions

Q1) In Problem 6, if there are no fixed costs and marginal cost is constant at $24, the price elasticity of demand at the profit-maximizing level of output is closest to

A) -1.63.

B) -0.61.

C) -3.26.

D) -6.53.

E) -0.31.

Q2) The demand for Professor Bongmore's new book is given by the function Q = 6,000100p. If the cost of having the book edited and typeset is $18,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits by

A) having it edited and typeset and selling 2,800 copies.

B) not having it edited and typeset and not selling any copies.

C) having it edited and typeset and selling 5,600 copies.

D) having it edited and typeset and selling 3,000 copies.

E) having it typeset and selling 1,400 copies.

To view all questions and flashcards with answers, click on the resource link above. Page 48

Chapter 24: Monopoly Behavior

Available Study Resources on Quizplus for this Chatper

34 Verified Questions

34 Flashcards

Source URL: https://quizplus.com/quiz/52335

Sample Questions

Q1) A monopolist sells in two markets. The demand curve for her product is given by p₁ = 141 - 3x₁ in the first market and p₂ = 1152x₂ in the second market, where x_i is the quantity sold in market i and p_iis the price charged in market i. She has a constant marginal cost of production, c = 3, and no fixed costs. She can charge different prices in the two markets. What is the profit-maximizing combination of quantities for this monopolist?

A) x₁ = 46 and x₂ = 30.

B) x₁ = 51 and x₂ = 23.

C) x₁ = 23 and x₂ = 28.

D) x₁ = 33 and x₂ = 26.

E) x₁ = 43 and x₂ = 38.

Q2) In a monopolistically competitive industry with zero profits, each firm will produce less than the amount that minimizes average costs.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Chapter 24: A: Monopoly Behavior

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52371

Sample Questions

Q1) A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges $2 in one market and $12 in the other market. At these prices, the price elasticity in the first market is -2.50 and the price elasticity in the second market is -0.70. Which of the following actions is sure to raise the monopolist's profits?

A) Raise p₂.

B) Raise both p₁ and p₂.

C) Lower p₂.

D) Raise p₁ and lower p₂.

E) Raise p₂and lower p₁.

Q2) If a monopolist faces an inverse demand curve, p(y) = 100 - 2y and has constant marginal costs of $24 and zero fixed costs and if this monopolist is able to practice perfect price discrimination, its total profits will be

A) $1,444.

B) $19.

C) $2,166.

D) $722.

E) $361.

To view all questions and flashcards with answers, click on the resource link above. Page 50

Chapter 25: Factor Markets

Available Study Resources on Quizplus for this Chatper

24 Verified Questions

24 Flashcards

Source URL: https://quizplus.com/quiz/52336

Sample Questions

Q1) The frangle industry is a monopoly, with a demand curve 100 - p, where p is the price of frangles. It takes one unit of labor and no other inputs to produce a frangle. The Frangle-Makers Guild is a strong union. The guild sets a wage and prevents anyone from working for less than that wage. The frangle monopoly must pay that wage but can hire as much labor as it chooses to. If the guild chooses a wage so as to maximize the total earnings (wage times number of units of labor hired) of frangle makers, then

A) the price of frangles will be $50.

B) the price of frangles will be $25.

C) the price of frangles will equal the wage rate.

D) the wage rate will be $25.

E) the wage will be $50.

Q2) A monopsonist's market power enables him to hire labor at a marginal cost that is lower than the wage rate.

A)True

B)False

Q3) A monopsony occurs when two previously competing firms reach an agreement to collude on price.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 51

Chapter 25: A: Factor Markets

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52372

Sample Questions

Q1) Suppose that in Problem 2, the demand curve for mineral water is given by p = 2012q, where p is the price per bottle paid by consumers and q is the number of bottles purchased by consumers. Mineral water is supplied to consumers by a monopolistic distributor, who buys from a monopolist producer who is able to produce mineral water at zero cost. The producer charges the distributor a price of c per bottle, that will maximize the producer's total revenue. Given his marginal cost of c, the distributor chooses an output to maximize profits. The price paid by consumers under this arrangement is

A) $15.

B) $.83.

C) $1.67.

D) $10.

E) $5.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 26: Oligopoly

Available Study Resources on Quizplus for this Chatper

56 Verified Questions

56 Flashcards

Source URL: https://quizplus.com/quiz/52337

Sample Questions

Q1) There are two major producers of corncob pipes in the world, both located in Herman, Missouri. Suppose that the inverse demand function for corncob pipes is described by p = 160 - 3q, where q is total industry output, and marginal costs are zero. What is the Cournot reaction function of firm 1 to the output, q₂, of firm 2?

A) 160 - 3q²₂

B) 160 - 3q₂

C) 26.67 - .5q₂

D) 53.33 - 3q₂

E) 163 - 6q₂

Q2) An industry has two firms-a Stackelberg leader and a follower. The price of the industry output is given by P = 36 - Q, where Q is the total output of the two firms. The follower has a marginal cost of $0. The leader has a marginal cost of $9. How much should the leader produce in order to maximize profits?

A) 12

B) 18

C) 9

D) 7

E) None of the above.

To view all questions and flashcards with answers, click on the resource link above. Page 53

Chapter 26: A: Oligopoly

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52373

Sample Questions

Q1) Suppose that the duopolists Carl and Simon in Problem 1 face a demand function for pumpkins of Q = 16,800 - 800P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that each farmer has a constant marginal cost of $1 for each pumpkin produced. If Carl believes that Simon is going to produce Q_s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits. Carl's reaction function is R_C(Q_s) =

A) 16,800 - 800Q_s.

B) 4,000 -.

C) 8,000 -.

D) 16,800 - 1,600Q_s.

E) 12,000 - Q_s.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 27: Game Theory

Available Study Resources on Quizplus for this Chatper

34 Verified Questions

34 Flashcards

Source URL: https://quizplus.com/quiz/52338

Sample Questions

Q1) If the number of persons who attend the club meeting this week is X, then the number of people who will attend next week is 80 + 0.20X. What is a long-run equilibrium attendance for this club?

A) 80

B) 400

C) 160

D) 100

E) 20

Q2) While game theory predicts noncooperative behavior for a single play of the prisoner's dilemma, it would predict cooperative tit-for-tat behavior if the same people play prisoner's dilemma together for, say, 20 rounds.

A)True

B)False

Q3) If a game does not have an equilibrium in pure strategies, then it will not have an equilibrium in mixed strategies either.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 55

Chapter 27: A: Game Theory

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52374

Sample Questions

Q1) (See Problem 1.) Alice and Betsy are playing a game in which each can play either of two strategies, leave or stay. If both play the strategy leave, then each gets a payoff of $100. If both play the strategy stay, then each gets a payoff of $800. If one plays stay and the other plays leave, then the one who plays stay gets a payoff of $C and the one who plays leave gets a payoff of $D. When is the outcome where both play leave a Nash equilibrium?

A) When D > C and C > $100.

B) Never, since $800 > $100.

C) When $100 > C and D > $800 but not when $800 >D.

D) Whenever D < $800.

E) Whenever $100 > C.

Q2) (See Problem 7.) If the number of persons who attend the club meeting this week is X, then the number of people who will attend next week is 80 + 0.20X. What is a long-run equilibrium attendance for this club?

A) 400

B) 80

C) 100

D) 160

E) 20

To view all questions and flashcards with answers, click on the resource link above.

Page 56

Chapter 28: Game Applications

Available Study Resources on Quizplus for this Chatper

28 Verified Questions

28 Flashcards

Source URL: https://quizplus.com/quiz/52339

Sample Questions

Q1) In the classic 1960s macabre comedy Dr. Strangelove, the Soviet Union constructed a Doomsday Machine which would end all life on earth if ever the Soviet Union were attacked. When playing against a rational opponent, the existence of such a machine would be of great benefit to the Soviets.

A)True

B)False

Q2) For the following scenarios, state whether the strategic effect of the firm's action will cause competitors to behave more or less aggressively, and why.

a. Sleep Country USA announces that it will beat any competitor's advertised price by 5%.

b. Termite Woods, a local, new home development, unexpectedly announces that it will decrease by 50% the number of homes it had planned to build in the coming year.

c. Used car dealership Roach Motors announces a 25% price cut on its entire stock.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 28: A: Game Applications

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52375

Sample Questions

Q1) (See Problem 3.) Two players are engaged in a game of "chicken." There are two possible strategies, Swerve and Drive Straight. A player who chooses to Swerve is called "chicken" and gets a payoff of zero, regardless of what the other player does. A player who chooses to Drive Straight gets a payoff of 84 if the other player Swerves and a payoff of -36 if the other player also chooses to Drive Straight. This game has two pure strategy equilibria and

A) a mixed strategy equilibrium in which each player swerves with probability 0.30 and drives straight with probability 0.70.

B) two mixed strategies in which players alternate between swerving and driving straight.

C) a mixed strategy equilibrium in which one player swerves with probability 0.30 and the other swerves with probability 0.70.

D) a mixed strategy in which each player swerves with probability 0.15 and drives straight with probability 0.85.

E) no mixed strategies.

To view all questions and flashcards with answers, click on the resource link above. Page 58

Chapter 29: Behavioral Economics

Available Study Resources on Quizplus for this Chatper

34 Verified Questions

34 Flashcards

Source URL: https://quizplus.com/quiz/52340

Sample Questions

Q1) With several additional mutations, the bird flu, whose victims to date are mostly poultry, could become a global epidemic. Suppose there are 2 possible courses of action public health officials could take. For treatment A, the lives of 1 million people out of the 10 million affected would be saved. For treatment B, 90% of those infected would not be helped and would die. If infected persons were given a choice between treatments A and B, which of the following scenarios would most likely occur?

A) Treatment A is more effective than treatment B. More people will choose treatment A.

B) Treatment A is less effective than treatment B. More people will choose treatment A.

C) Treatment A is more effective than treatment B. More people will choose treatment B.

D) Treatment A and treatment B are equally effective. More people will choose treatment A.

E) Treatment A and treatment B are equally effective. Equal numbers of people will choose each treatment.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 30: Exchange

Available Study Resources on Quizplus for this Chatper

68 Verified Questions

68 Flashcards

Source URL: https://quizplus.com/quiz/52341

Sample Questions

Q1) Mutt's utility function is U(m, j) = max{ 3m, j} and Jeff's utility function is U(m, j) = 4m + j. Mutt is initially endowed with 4 units of milk and 2 units of juice and Jeff is initially endowed with 4 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

A) left edge and bottom edge of the Edgeworth box.

B) right edge of the Edgeworth box but no other edges.

C) bottom edge of the Edgeworth box but no other edges.

D) left edge of the Edgeworth box but no other edges.

E) right edge and top edge of the Edgeworth box.

Q2) If the assumptions of the first theorem of welfare economics apply and if the economy is in a competitive equilibrium, then any reallocation that benefits someone must harm someone else.

A)True

B)False

Q3) Every allocation on the contract curve is Pareto optimal.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 60

Chapter 30: A: Exchange

Available Study Resources on Quizplus for this Chatper

30 Verified Questions

30 Flashcards

Source URL: https://quizplus.com/quiz/52376

Sample Questions

Q1) Suppose that in Problem 8, Mutt's utility function is U(m, j) = max{ 2m, j} and Jeff's utility function is U(m, j) = 3m + j. Mutt is initially endowed with 6 units of milk and 2 units of juice, and Jeff is initially endowed with 2 units of milk and 6 units of juice. If we draw an Edgeworth box with milk on the horizontal axis and juice on the vertical axis and if we measure goods for Mutt by the distance from the lower left corner of the box, then the set of Pareto optimal allocations includes the

A) left edge of the Edgeworth box but no other edges.

B) bottom edge of the Edgeworth box but no other edges.

C) left edge and bottom edge of the Edgeworth box.

D) right edge of the Edgeworth box but no other edges.

E) right edge and top edge of the Edgeworth box.

Q2) ...

To view all questions and flashcards with answers, click on the resource link above.

Chapter 31: Production

Available Study Resources on Quizplus for this Chatper

35 Verified Questions

35 Flashcards

Source URL: https://quizplus.com/quiz/52342

Sample Questions

Q1) In the process of producing 1 hormone-free, stress-free, happy cow, the New Age Cattle Ranch produces 1 ton of natural, organic plant fertilizer. Demand for the ranch's cattle is given by P_c = 2,000 - 20Q_c, and demand for fertilizer is given by P_f = 500 - 4Q_f. The cost of producing Q cow-fertilizer bundles is C = 5,000 + 400Q. To maximize profits, the ranch should

A) produce 40 cow-fertilizer units, sell 40 cattle, and sell 40 tons of fertilizer.

B) produce 40 cow-fertilizer units, sell 40 cattle, and sell 12.50 tons of fertilizer.

C) produce 62.50 cow-fertilizer units, sell 40 cattle, and sell 62.50 tons of fertilizer.

D) produce 43.75 cow-fertilizer units, sell 43.75 cattle, and sell 43.75 tons of fertilizer.

E) produce 50 cow-fertilizer units, sell 50 cattle, and dispose of all the fertilizer in an environmentally friendly manner.

To view all questions and flashcards with answers, click on the resource link above. Page 62

Chapter 31: A: Production

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52377

Sample Questions

Q1) On a certain island there are only two goods, wheat and milk. The only scarce resource is land. There are 1,000 acres of land. An acre of land will produce either 16 units of milk or 31 units of wheat. Some citizens have lots of land; some have just a little bit. The citizens of the island all have utility functions of the form U(M, W) = MW. At every Pareto optimal allocation,

A) the number of units of milk produced equals the number of units of wheat produced. B) total milk production is 8,000 units.

C) all citizens consume the same commodity bundle.

D) every consumer's marginal rate of substitution between milk and wheat is -1.

E) None of the above is true at every Pareto optimal allocation.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 32: Welfare

Available Study Resources on Quizplus for this Chatper

27 Verified Questions

27 Flashcards

Source URL: https://quizplus.com/quiz/52343

Sample Questions

Q1) An allocation is fair if whenever one person envies another, the envied person does not envy the envier.

A)True

B)False

Q2) A tiny fishing village has 3 residents. Ann has a utility of 10, Bruce has a utility of 6, and Charlie has a utility of 7. If the mayor uses a Rawlsian social welfare function, the social welfare of this tiny village would be

A)6

B)10

C)23

D)420

E) 20.49.

Q3) In a competitive equilibrium, no matter how different their preferences may be, no two people with the same income will envy each other's consumption bundles.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 64

Chapter 32: A: Welfare

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52378

Sample Questions

Q1) A parent has two children living in cities with different costs of living. The cost of living in city B is 3 times the cost of living in city A. The child in city A has an income of $3,000 and the child in city B has an income of $9,000. The parent wants to give a total of $2,000 to her two children. Her utility function is U(C_A, C_B) = C_AC_B, where C_A and C_B are the consumptions of the children living in cities A and B respectively. She will choose to give A) the child in city B 3 times as much money as the child in city A.

B) each child $1,000, even though this will buy less goods for the child in city B.

C) the child in city A 3 times as much money as the child in city B.

D) the child in city B 1.50 times as much money as the child in city A.

E) the child in city A 1.50 times as much money as the child in city B.

To view all questions and flashcards with answers, click on the resource link above. Page 65

Chapter 33: Externalities

Available Study Resources on Quizplus for this Chatper

42 Verified Questions

42 Flashcards

Source URL: https://quizplus.com/quiz/52344

Sample Questions

Q1) If your consumption of toothpaste produces positive externalities for your neighbors (which you ignore), then you are consuming less toothpaste than is Pareto optimal.

A)True

B)False

Q2) The only known way to eliminate externalities is through taxes or subsidies.

A)True

B)False

Q3) A clothing store and a jeweler are located side by side in a shopping mall. If the clothing store spend C dollars on advertising and the jeweler spends J dollars on advertising, then the profits of the clothing store will be (30 + J)C - 2C² and the profits of the jeweler will be (24 + C)J - 2J². The clothing store gets to choose its amount of advertising first, knowing that the jeweler will find out how much the clothing store advertised before deciding how much to spend. The amount spent by the clothing store will be

A) $42.

B) $14.

C) $28.

D) $7.

E) $21.

To view all questions and flashcards with answers, click on the resource link above.

Page 66

Chapter 33: A: Externalities

Available Study Resources on Quizplus for this Chatper

25 Verified Questions

25 Flashcards

Source URL: https://quizplus.com/quiz/52379

Sample Questions

Q1) An airport is located next to a housing development. Where X is the number of planes that land per day and Y is the number of houses in the housing development, profits of the airport are 22X - X² and profits of the developer are 20YY² - XY. Let H₁ be the number of houses built if a single profit-maximizing company owns the airport and the housing development. Let H₂ be the number of houses built if the airport and the housing development are operated independently and the airport has to pay the developer the total "damages" XY done by the planes to the developer's profits.

A) H₁ = 10 and H₂ = 6.

B) H₁ = 8 and H₂ = 9.

C) H₁ = 6 and H₂ = 10.

D) H₁ = H₂ = 6.

E) H₁ = 9 and H₂ = 13.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 34: Information Technology

Available Study Resources on Quizplus for this Chatper

24 Verified Questions

24 Flashcards

Source URL: https://quizplus.com/quiz/52345

Sample Questions

Q1) If the probability that a firm is caught making illegal copies of software increases with the number of copies that the firm makes, then the larger the fine assessed for copying, the smaller will be the number of copies made by each software-copying firm.

A)True

B)False

Q2) Our old friend Edmund Stench from Chapter 2 has now grown up and is in the business of producing punk rock DVDs. He must choose between selling his DVDs to final consumers, or selling his DVDs to firms that will rent them to the public. Which of the following factors would make rentals more attractive than sales?

A) A large number of people interested in viewing punk rock DVDs

B) Large transaction costs of renting

C) high cost of making DVDs relative to transaction costs of renting

D) A small number of people interested in viewing punk rock DVDs

E) High fixed costs of production

Q3) For a good with network externalities, the number of people who are willing to buy a unit of the good is uniquely determined by the price.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Chapter 34: A: Information Technology

Available Study Resources on Quizplus for this Chatper

15 Verified Questions

15 Flashcards

Source URL: https://quizplus.com/quiz/52380

Sample Questions

Q1) Eleven consumers are trying to decide whether to connect to a new communications network. Consumer 1 is of type 1, consumer 2 is of type 2, consumer 3 is of type 3, and so on. Where k is the number of consumers connected to the network (including oneself), a consumer of type n has a willingness to pay to belong to this network equal to k times n. What is the highest price at which 4 consumers could all connect to the network and either make a profit or at least break even?

A) $24

B) $64

C) $40

D) $28

E) $32

To view all questions and flashcards with answers, click on the resource link above.

Chapter 35: Public Goods

Available Study Resources on Quizplus for this Chatper

26 Verified Questions

26 Flashcards

Source URL: https://quizplus.com/quiz/52346

Sample

Questions

Q1) A quiet town in Kansas has 2,000 people, all of whom have the same preferences. There is one private good and one public good. Each person I in town has utility U(x i, y) = x i + y .5, where x i is private good for person i and y is the amount of public good that the town provides. If the private good costs $1 per unit and the public good costs $10 per unit, then the Pareto optimal amount of public good for the town to provide is

A) 100 units.

B) 500 units.

C) 2,000 units.

D) 8,000 units.

E) 10,000 units.

Q2) If preferences are single peaked, then everyone will agree about the right amount of public goods to be supplied.

A)True

B)False

Q3) One of the problems with the Clarke tax mechanism is that when it is used, people have an incentive to lie about their preferences.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above. Page 70

Chapter 35: A: Public Goods

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52381

Sample Questions

Q1) Recall Bob and Ray in Problem 4. They are thinking of buying a sofa. Bob's utility function is U_B(S, M_B) = (1 + S)M_B and Ray's utility function is U_R(S, M_R) = (3 + S)M_R, where S = 0 if they don't get the sofa and S = 1 if they do and where M_B and M_R are the amounts of money they have respectively to spend on their private consumptions. Bob has a total of $1,200 to spend on the sofa and other stuff. Ray has a total of $4,000 to spend on the sofa and other stuff. The maximum amount that they could pay for the sofa and still arrange to both be better off than without it is

A) $1,333.33.

B) $1,600.

C) $850.

D) $2,400.

E) $3,200.

To view all questions and flashcards with answers, click on the resource link above.

Chapter 36: Asymmetric Information

Available Study Resources on Quizplus for this Chatper

31 Verified Questions

31 Flashcards

Source URL: https://quizplus.com/quiz/52347

Sample Questions

Q1) Jan's utility function is C - H², where C is consumption and H is hours worked per day. She can work in the city for 8 hours per day, earning $100 a day. Alternatively, she can rent a small farm from Mr. Porksniffer. If she rents the farm, she can work as many hours a day as she wishes. If she works H hours per day, she can sell her crops for a total of $20H per day, but she must pay Mr. Porksniffer an annual rent of $R. Mr. Porksniffer wants to charge the highest rent $R that he can and still be able to have Jan rent from him. What is the highest rent he can charge? A penny less than

A) $100 per day.

B) $64 per day.

C) $60 per day.

D) $50 per day.

E) $36 per day.

Q2) In a market where there is a pooling equilibrium, different types of agents choose the same action.

A)True

B)False

To view all questions and flashcards with answers, click on the resource link above.

Page 72

Chapter 36: A: Asymmetric Information

Available Study Resources on Quizplus for this Chatper

20 Verified Questions

20 Flashcards

Source URL: https://quizplus.com/quiz/52382

Sample Questions

Q1) Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $150 for a klutz and $50 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month

A) if 20 < H < 60.

B) if 20 < H < 120.

C) only in the limit as H approaches infinity.

D) for all positive values of H.

E) if 16.67 < H < 50.

To view all questions and flashcards with answers, click on the resource link above.