Assume a monopolistically competitive firm comes up with a new innovation that allows it to earn above-normal economic profits. Given the nature of the market in which it operates, over time those profits will be competed away as new competitors enter the market. Indicate whether the statement is true or false ANSWER TRUE
The primary objective of a cartel is to: A) maximize the amount of profit received by each member of the organization. B) maximize the joint profits of the members of the organization. C) ensure each member of the organization some minimum amount of profit. D) maximize the average profits of the members of the organization. […]
Long-run average cost is defined as: A) the minimum average cost of producing any level of output when all inputs are variable. B) the minimum average cost of producing any level of output when the amount of capital is varied and all other inputs are held constant. C) the average of the short-run costs associated […]
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 […]
The term “relative price” is used to refer to how the current price of a good or service compares to the price of the same item in the previous time period. Indicate whether the statement is true or false ANSWER FALSE
A car dealer wants to get rid of the stock of last year’s model. Assume that the dealer knows from past experience that the price elasticity of demand for cars is unitary (= 1). If the price of the cars is currently $20,000 and the dealer wants to increase the quantity demanded from 30 units […]
In which of the following market structures would X-inefficiency be most likely to exist? A) Perfect competition. B) Monopolistic competition. C) Oligopoly. D) Monopoly. ANSWER D
In deciding which model of a car to buy, microeconomic theory maintains that consumers are concerned about the absolute price of a particular car, rather than its relative price. Indicate whether the statement is true or false ANSWER FALSE
In order for the first player to move in a sequential game to be able to gain an advantage from making the first move, the player must: A) possess a dominant strategy that is better than the other player’s dominant strategy. B) be able to achieve a higher maximum payoff than the other player. C) […]
An increase in the amount of competition with other firms that employ “best practices” would be likely to cause a particular firm’s labor productivity to: A) increase B) stay the same. C) decrease. D) cannot be determined without additional information. ANSWER A
