How do online auction sites like Ebay attempt to overcome the asymmetric information problems associated with goods that the buyer cannot personally inspect before purchase? A) The online auction firm only allows high-quality merchandise to be sold at their site. B) The previous performance (reputations) of the buyer and seller are posted for public review. […]
The link between incentives and economic growth suggests a certain trade-off between equity and efficiency. Indicate whether the statement is true or false ANSWER T
As part of the most recent collective bargaining agreement with state employees, a state government must offer dental insurance at “reasonable, nonprofit rates.” The state plans to self insure in place of using a private insurance company. Statistical evidence suggests that the average household currently spends $300 per year for corrective dental work and $80 […]
What type of good is clean air? A) Rival and exclusive B) Nonrival and exclusive C) Rival and nonexclusive D) Nonrival and nonexclusive ANSWER D
Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the A) firm is maximizing profit. B) firm’s output is smaller than the profit maximizing quantity. C) firm’s output is larger than the profit maximizing quantity. D) firm’s output does not maximize profit, but […]
In closing down a military base, environmental inspectors found 100 tons of toxic waste. Which of the following is NOT a determinant of the consumer surplus generated by cleaning up 40 tons of waste? A) The price of removing a ton of toxic waste B) The original quantity of toxic waste found by the inspectors […]
A maximin strategy A) maximizes the minimum gain that can be earned. B) maximizes the gain of one player, but minimizes the gain of the opponent. C) minimizes the maximum gain that can be earned. D) involves a random choice between two strategies, one which maximizes potential gain and one which minimizes potential loss. […]
What describes the graphical relationship between average product and marginal product? A) Average product cuts marginal product from above, at the maximum point of marginal product. B) Average product cuts marginal product from below, at the maximum point of marginal product. C) Marginal product cuts average product from above, at the maximum point of average […]
Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book). Under price-taking behavior, the total revenue curve should be: A) an inverted U-shaped curve (first increasing and then decreasing). B) a U-shaped curve (first decreasing and then increasing). C) […]
Which of the following is true at the output level where P=MC? A) The monopolist is maximizing profit. B) The monopolist is not maximizing profit and should increase output. C) The monopolist is not maximizing profit and should decrease output. D) The monopolist is earning a positive profit. ANSWER C
