Consider a market with (inverse) demand p = 100 – 2Q. There are two firms in the market with constant marginal and average costs of $10. a. Determine the Cournot equilibrium quantities and price b. What would be the collusive (joint-profit maximizing) price and quantity? c. Derive the deadweight loss from (i) Cournot Dupoly, (ii) […]
A production possibilities frontier that is a bowed-inward line implies A) economies of scale. B) diseconomies of scope. C) economies of scope. D) no economies of scope. ANSWER B
If the government has enough knowledge about a market and the damage it causes through pollution, it can force the socially optimal output A) through an emission fee. B) using a ban on pollution. C) by deregulating to eliminate the monopoly. D) All of the above. ANSWER A
The correct expression for cost plus pricing is A) Price = Cost (1 + profit margin). B) Price = Cost + profit margin. C) Price = Cost (1 + mark-up). D) Price = Cost + (1 + mark-up). ANSWER C
Among the advantages of the ________ technique of forecasting are ease of calculation, relatively little requirement for analytical skills, and the ability to provide the analyst with information regarding the statistical significance of results and the size of statistical errors. A) least-squares trend analysis B) compound growth rate C) visual trend-fitting D) expert opinion […]
What happens in a duopoly if both firms try to act as the Stackelberg leader? What will be an ideal response? ANSWER If both firms think they are the leader, they will maximize profits subject to the other firm’s response function. Each firm will produce twice what the other firm thinks it is producing. […]
In the presence of no externalities, A) social marginal cost exceeds private marginal cost. B) social marginal cost is less than private marginal cost. C) social marginal cost equals private marginal cost. D) social marginal cost and private marginal cost cannot be compared. ANSWER C
Charting observations on a semi-logarithmic graph will help the analyst to ascertain whether A) absolute changes from period to period are constant. B) whether percentage changes from period to period are constant. C) whether percentage changes from period to period are declining. D) Both B and C ANSWER D
By far, the most frequently encountered price discrimination is the A) first-degree price discrimination. B) second-degree price discrimination. C) third-degree price discrimination. D) fourth-degree price discrimination. ANSWER C
If a product which costs $8 is sold at $10, the profit margin is A) $2. B) 25%. C) 20%. D) None of the above ANSWER C
