Which of the following production functions exhibits constant returns to scale? A) q = KL B) q = KL0.5 C) q = K + L D) q = log(KL) ANSWER C
Date: September 9th, 2020
The textbook discusses the carpet industry situated in the southeastern U.S., and the authors indicate that smaller carpet mills have ________ returns to scale while larger mills have ________ returns to scale. A) increasing, decreasing B) increasing, constant C) constant, decreasing D) constant, increasing ANSWER D
Date: September 9th, 2020
In the long run, a firm’s producer surplus is equal to the A) economic rent it enjoys from its scarce inputs. B) revenue it earns in the long run. C) positive economic profit it earns in the long run. D) difference between total revenue and total variable costs. E) difference between total revenue and total […]
Date: September 9th, 2020
The principal-agent problem in corporations exists because the managers of a firm A) may pursue their own goals even when the result is lower profit for owners. B) may know how to operate the business better than absentee owners do, and yet not be allowed to. C) are generally unable to do the monitoring that […]
Date: September 9th, 2020
Managers’ pursuit of which of the following objectives would NOT lead to a principal-agent problem in a corporation? A) The corporation’s growth B) Increased market share for the corporation C) The maximum possible profit for the corporation D) A great “golden parachute” or retirement package E) Increased current salary and fringe benefits ANSWER C […]
Date: September 9th, 2020
Suppose a firm has unavoidable fixed costs of $500,000 per year, and it decides to shut down. What is the firm’s producer surplus? A) PS is positive in this case, but we cannot determine the value based on the given information B) PS is negative in this case, but we cannot determine the value based […]
Date: September 9th, 2020
Playing the game in Scenario 13.13 sequentially would A) not change the equilibrium. B) change the equilibrium to (R1,C1 ). C) change the equilibrium to (R2,C1 ) if R moved first. D) change the equilibrium to (R2,C1 ) if C moved first. E) change the equilibrium to (R2,C2 ). ANSWER C
Date: September 9th, 2020
The ________ elastic a firm’s demand curve, the greater its ________. A) less; monopoly power B) less; output C) more; monopoly power D) more; costs ANSWER A
Date: September 9th, 2020
The more elastic the demand facing a firm, A) the higher the value of the Lerner index. B) the lower the value of the Lerner index. C) the less monopoly power it has. D) the higher its profit. ANSWER B
Date: September 9th, 2020
If the Battle of the Sexes game were played sequentially, A) one of the two pure strategy equilibria would become the only equilibrium. B) the two pure strategy equilibria would alternate in being the equilibrium seen in each round of the game. C) only the mixed strategy equilibrium would exist. D) only the dominant strategy […]
Date: September 9th, 2020
