Which of the following is NOT a necessary condition for long-run equilibrium under perfect competition? A) No firm has an incentive to enter the market. B) No firm has an incentive to exit the market. C) Prices are relatively low. D) Each firm earns zero economic profit. E) Each firm is maximizing profit. ANSWER […]
Date: September 9th, 2020
The segregation of Hispanic students is somewhat less than those of black students. Indicate whether the statement is true or false ANSWER F
Date: September 9th, 2020
What happens in a perfectly competitive industry when economic profit is greater than zero? A) Existing firms may get larger. B) New firms may enter the industry. C) Firms may move along their LRAC curves to new outputs. D) There may be pressure on prices to fall. E) All of the above may occur. […]
Date: September 9th, 2020
The major cause of a 3-4% increase in unemployment over a short time period is likely to be a structural unemployment change. Indicate whether the statement is true or false ANSWER F
Date: September 9th, 2020
Consider the following output-choice game for two firms: Firm 2 – low Firm 2 – medium Firm 2 – high Firm 1 – low 150, 150 100, 160 75, 100 Firm 1 – medium 160, 100 110, 110 50, 75 Firm 1 – high 100, 75 75, 50 0, 0 What is the outcome of […]
Date: September 9th, 2020
Explain what the principal-agent problem is, and explain evidence of its existence in hospitals in the United States. What will be an ideal response? ANSWER The principal-agent problem is an example of asymmetric information in the market place. This problem occurs when one person’s welfare (the principal) depends upon what another person does (the […]
Date: September 9th, 2020
Len is putting in a new swimming pool. He can either heat his pool with natural gas or with solar power. If he chooses solar power it will cost him more today, but he will recover these costs over the next 7 years in savings on his natural gas bill. The solar heater is expected […]
Date: September 9th, 2020
Asymmetric information problems arise A) in horizontally integrated firms, but not vertically integrated firms. B) in vertically integrated firms, but not horizontally integrated firms. C) in both vertically and horizontally integrated firms. D) only in firms that do not have the advantage of either horizontal or vertical integration. E) only when a single firm is […]
Date: September 9th, 2020
When a drug company develops a new drug it is granted a ________ making it illegal for other firms to enter the market until the ________ expires. A) franchise; franchise B) copyright; copyright C) government license; government license D) patent; patent ANSWER D
Date: September 9th, 2020
Which factors determine the firm’s elasticity of demand? A) Elasticity of market demand and number of firms B) Number of firms and the nature of interaction among firms C) Elasticity of market demand, number of firms, and the nature of interaction among firms D) none of the above ANSWER C
Date: September 9th, 2020
