In which of the following scenarios would a predatory pricing scheme have the greatest chance of success, all else constant? A) The predatory price is set well below cost, many rivals are likely to enter after the strategy ends, and profits can be recouped only over a relatively long period of time. B) The predatory […]
At the point on the demand curve at which marginal revenue = 0, the absolute value of the coefficient of the price elasticity of demand is: A) > 1. B) = 1. C) < 1. D) = 0. ANSWER B
Short-run macroeconomic policies concentrate on: A) minimizing fluctuations around potential GDP. B) maximizing fluctuations around potential GDP. C) incentives for increasing productivity and the potential output of the economy. D) none of the above. ANSWER A
Assume a bottled water company is trying to decide on a new pricing strategy. Sound decision making would require the firm’s managers to consider not only how consumers will respond to the product’s own price, but how they will react to the price for the firm’s product relative to the prices of similar products offered […]
Assuming the inverse demand function for good Z can be written as P = 90 – 3Q, when P = 20, the point price elasticity of demand is equal to (approximately): A) -0.22. B) -0.29. C) -0.67. D) -4.5. ANSWER B
In game theory, the strategy that results in the highest payoff to a player regardless of what the other player decides to do is called the: A) Stackleberg equilibrium. B) equilibrium strategy. C) min-max strategy. D) dominant strategy. ANSWER D
Suppose the price of movies seen at a theater rises from $12 per couple to $20 per couple. The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons. What is the arc price elasticity of demand for movies? A) 0.5 B) 0.8 […]
X-inefficiency refers to the situation in which: A) highly competitive firms have less incentive to minimize their costs of production than other firms because the highly competitive firms have almost no chance to earn above-average profits. B) firms are unable to minimize their costs of production because there is no potential for input substitution. C) […]
If the local pizzeria raises the price of a medium pizza from $6 to $10 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the arc price elasticity of demand for pizzas is: A) 0.67. B) 1.5. C) 2.0. D) 3.0. ANSWER D
In game theory, a Nash equilibrium is defined as: A) the dominant strategy of each player. B) a set of strategies for which all players are choosing their best strategy, given the actions of the other players. C) the set of strategies that result in the maximum payoff to each player. D) the set of […]
