Which of the following is NOT conducive to the successful operation of a cartel? A) Market demand for the good is relatively inelastic. B) The cartel supplies all of the world’s output of the good. C) Cartel members have substantial cost advantages over non-member producers. D) The supply of non-cartel members is very price elastic. […]
Under the kinked demand model, suppose the firm’s demand curve shifts rightward but the price at which the kink occurs remains the same. In this case, the firm: A) does not change its output. B) increases output. C) decreases output. D) We do not have enough information to answer this question. ANSWER B
The social discount rate is an important component in net present value (NPV) calculations for public policies related to stock externalities, but economists do not agree on which value to use for this rate. Suppose a recent study reports that the NPV of a proposed carbon tax intended to reduce carbon dioxide emissions is positive, […]
When the government controls the price of a product, causing the market price to be below the free market equilibrium price, A) some consumers gain from the price controls and other consumers lose. B) all producers gain from the price controls. C) both producers and consumers gain. D) all consumers are better-off. ANSWER A […]
Use the following two statements to answer this question: I. The price elasticity of demand is constant along the entire length of a linear demand curve. II. The price elasticity of demand is the special name that economists give to the slope of a demand curve. A) I and II are true. B) I is […]
Which of the following is an example of anchoring in retail prices? A) Price tags on the merchandise list a “high” price that is charged at a competing retailer and the a much lower price that the store actually charges. B) An appliance store lists a commercial-quality coffee maker that has high capacity and is […]
Refer to Scenario 14.4. Suppose that the price of the product rises to $5, the price of labor A) will decrease. B) will increase. C) will not change. D) will change in an indeterminate fashion. ANSWER B
When we solve the firm’s cost minimization problem by the method of Lagrange multipliers, the optimal value of the Lagrange multiplier equals the: A) marginal product of labor. B) marginal product of capital. C) marginal cost of production. D) cost-output elasticity. ANSWER C
From any point within the production possibilities frontier, A) the only way to increase production of one good is to decrease production of the other. B) it is possible to increase both people’s utility. C) it is possible to increase output of both goods. D) any move will necessarily decrease production of some good. […]
Refer to Scenario 14.4. Suppose that a subsidy is implemented on each unit of labor hired. Then the number of workers hired A) will decrease. B) will increase. C) will not change. D) will change in an indeterminate fashion. ANSWER B
