Bookstores often offer annual memberships that allow customers to purchase books at a 10% discount. Explain why this may increase profits of the bookstore. What will be an ideal response? ANSWER This book club membership program is an example of a two-part tariff. If the consumer purchases a membership, they are able to purchase […]
Which of the following is NOT true about the supply of labor to the firm in a competitive labor market? A) It is horizontal. B) It is perfectly elastic. C) It is equal to the marginal expenditure curve. D) It is upward sloping. ANSWER D
In the ________, two duopolists compete by simultaneously selecting price. A) Cournot model B) Nash model C) Bertrand model D) kinked-demand model E) none of the above ANSWER C
Use the data in the table below to answer the following questions about a firm. Units of Units of Total Marginal Output Input X Input Y Product Product of X Price 0 25 0 $10 1 25 2 10 2 25 7 10 3 25 14 10 4 25 20 10 5 25 23 10 […]
The statement: “If everyone trades in the competitive marketplace, all mutually beneficial trades will be completed, and the resulting equilibrium allocation of resources will be economically efficient.” is formally known as: A) the law of supply and demand. B) the first theorem of supply and demand. C) the first theorem of welfare economics. D) the […]
Consider the demand curve of the form Q = a – bP. If a is a positive real number, and b = 0, then demand is A) completely inelastic. B) inelastic, but not completely. C) unit elastic. D) elastic, but not infinitely. ANSWER A
What is the economies of scope character for a firm that has a straight-line product transformation curve? A) Economies of scope (SC > 0) B) Diseconomies of scope (SC < 0) C) SC = 0 D) SC = 1 ANSWER C
Which of the following is true concerning the income effect of a decrease in price? A) It will lead to an increase in consumption only for a normal good. B) It always will lead to an increase in consumption. C) It will lead to an increase in consumption only for an inferior good. D) It […]
Trisha’s Fashion Boutique sells earrings and pendants. Trisha has two types of customers. Their willingness-to-pay for earrings and pendants are given in the table below. If Trisha bundles the earrings and pendants together, could she increase revenue? Earrings Pendant Type I 100 65 Type II 90 75 ANSWER If Trisha bundles the products together […]
The indifference curves of two investors are plotted against a single budget line. Indifference curve A is shown as tangent to the budget line at a point to the left of indifference curve B’s tangency to the same line. A) Investors A and B will hold the same portfolio. B) Investors A and B will […]
