Why does a monopsonist’s marginal expenditure curve lie above the labor supply curve? What will be an ideal response? ANSWER To hire additional labor, the monopsonist must increase the wage paid to all units of labor. Thus the marginal expenditure of the next unit of labor is the higher wage plus the wage increase […]
Date: September 9th, 2020
Suppose the fixed cost of Christmas trees business is $7,000 and sunk. The variable cost for each tree is $20. According to the forecast, the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year. The owner A) should shut down the business. B) should keep […]
Date: September 9th, 2020
Output (Total Product) is maximized when A) average productivity is at its maximum. B) the “law of diminishing returns” sets in. C) marginal productivity is zero. D) marginal productivity is at its maximum. ANSWER C
Date: September 9th, 2020
In game theory analysis, what is a “dominant strategy”? What will be an ideal response? ANSWER A strategy that would be the best one for a player in a non-cooperative game no matter what strategies are adopted by the other players in the game.
Date: September 9th, 2020
If there are increasing returns to scale, then it makes sense to consolidate operations into one production facility A) if production above domestic demand can be exported. B) only if the consolidation creates an absolute advantage versus other trading partners. C) if the government subsidizes production. D) Never, because then you lose the possibility of […]
Date: September 9th, 2020
Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk. The estimated variable cost for each tree is $20. According to the forecast, the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year. In the long run, the owner A) should […]
Date: September 9th, 2020
The following matrix shows the payoffs for an advertising game between Coke and Pepsi. The firms can choose to advertise or to not advertise. Numbers in the matrix represent profits; the first number in each cell is the payoff to Coke. (Numbers in millions.) Coke (rows) / Pepsi (columns) Advertise Don’t Advertise Advertise (10, 10 […]
Date: September 9th, 2020
If a firm finds itself operating in Stage I, it implies that A) variable inputs are extremely expensive. B) it overinvested in fixed capacity. C) it underinvested in fixed capacity. D) fixed inputs are extremely expensive. ANSWER B
Date: September 9th, 2020
A firm that operates in Stage III of the short-run production function A) has too much fixed capacity relative to its variable inputs. B) has too little fixed capacity relative to its variable inputs. C) has greatly overestimated the demand for its output. D) should try to increase the amount of variable input used. […]
Date: September 9th, 2020
The term capital budgeting refers to decisions A) which are made in the short run. B) which concern the spreading of expenditures over a period lasting less than one year. C) where expenditures and receipts for a particular undertaking will continue over a relatively long period of time. D) where a receipt of cash will […]
Date: September 9th, 2020
