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
Which of the following is cited as a problem with the kinked demand curve model? A) It assumes that firms do not attempt to maximize profits. B) It assumes that firms determine the profit-maximizing level of output by equating marginal cost and average variable cost. C) It does not explain how the equilibrium market price […]
If the consumer has a great deal of time to adjust to an increase in the price of gasoline, which of the following is correct? A) Quantity demanded will be relatively sensitive to the change in price. B) The percentage change in quantity demanded will be quite small relative to the percentage change in price. […]
With respect to prices, at the macroeconomic level attention is focused on relative prices, while at the microeconomic level attention is focused on absolute prices. Indicate whether the statement is true or false ANSWER FALSE
Why is the prisoner’s dilemma game useful in studying oligopoly behavior? A) Because oligopolies make out like bandits. B) To illustrate the problems encountered when making decisions under uncertainty. C) To show that oligopolies behave as monopolists in the long run and earn positive economic profits. D) To illustrate how barriers to entry lead to […]
All else constant, as the price of petroleum increases relative to the prices of other inputs to the production process, in their effort to minimize their total costs of production, we can expect to see firms employ: A) less of each of the inputs of production. B) more petroleum and less of the other inputs […]
Assume a firm uses two inputs, capital and labor. All else constant, an increase in the price of labor would create an incentive for the firm to: A) substitute labor for capital in its production function. B) substitute capital for labor in its production function. C) hire more capital and labor. D) hire less capital […]
Managerial economics refers to the application of microeconomics to business decision making. Indicate whether the statement is true or false ANSWER TRUE
Macroeconomics is concerned with the behavior of all of the firms in a particular industry, while microeconomics focuses on a single firm in the same industry. Indicate whether the statement is true or false ANSWER FALSE
