Why are many oligopolistic market outcomes conveniently described by a Prisoners’ Dilemma? A) The firms can always achieve the outcome that maximizes joint outcomes. B) The firms could do better than the Nash equilibrium if they collude. C) The outcome of a Prisoners’ Dilemma is always efficient. D) The outcome of a Prisoners’ Dilemma is […]
Suppose the supply of land is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts rightward (e.g. , previously unusable land is cleared for production), what happens to the aggregate economic rents in this market? A) Decrease B) Increase C) Remain the same […]
Suppose the local market for legal services has an upward sloping supply curve, PL = 150 + 0.0001QL where PL is the price of legal services and QL is the number of hours of legal services. If the equilibrium price of legal services is $250 per hour, what is the aggregate economic rent earned by […]
A point lying beyond the utilities possibilities frontier is A) unattainable. B) efficient. C) inefficient. D) profitable. ANSWER A
Under a transferable emissions permit system with n possible polluters, the government enforces the total amount of emissions allowable at X units by A) setting a different fee for each firm so that each firm chooses to emit X/n units. B) setting the same fee for each firm so that each is forced to emit […]
Transferable permits allow emission reduction to be achieved A) without any impact on the industrial sector, just as a standard would. B) without any impact on the industrial sector, just as fees would. C) at the lowest possible cost. D) with firms monitoring each other, rather than having the government do the monitoring. E) Both […]
Due to capacity constraints, the price elasticity of supply for most products is: A) the same in the long run and the short run. B) greater in the long run than the short run. C) greater in the short run than in the long run. D) too uncertain to be estimated. ANSWER B
A freeze in Florida’s orange growing regions will: A) result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. B) result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. C) result in […]
See Scenario 4.1. What is Daniel’s budget constraint? A) 240 = 3Pc + 3Pd B) 240 = 3Qc + 3Qd C) 240 = (Pc)(Qc) D) 240 = (Qc)(Qd) E) none of the above ANSWER B
The authors note that advertising can make the consumer demand for a product more elastic (price responsive) by expanding the potential range of consumers. As this change in demand occurs (ceteris paribus), what happens to the optimal advertising-sales ratio? A) Increases B) Decreases C) Remains the same D) We do not have enough information to […]
