Job is a smoker. He has a utility function for cigarettes smoked in bars (q1 ) and a composite good (q2 ) given by U(q1,q2 ) = 10q1.5 + q2 Job’s income is $100 and faces prices p1 = 5 and p2 = 1. The government is planning to ban smoking in bars. Compute the […]
Date: September 9th, 2020
A cartel is defined to be A) any oligopolistic industry with fewer than 4 firms. B) a form of oligopoly in which firms agree to sell at different prices like in monopolistic competition. C) a form of oligopoly in which firms formally agree to establish a common strategy, often a common price, in effect acting […]
Date: September 9th, 2020
Social Security is paid for by an earmarked payroll tax. a. True b. False ANSWER a
Date: September 9th, 2020
One way to avoid holdups is to A) use contracts. B) vertically integrate. C) use multiple sources. D) All of the above. ANSWER D
Date: September 9th, 2020
One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer A) entry, and the firms to split the output equally. B) no entry, and for the incumbent to produce the Stackelberg leader level of output. C) entry, and for the incumbent to produce the Stackelberg leader level of output. D) […]
Date: September 9th, 2020
This question has you determine the effect of a tax on labor on the long-run cost function. Consider a firm with the production function f(L,K) = LK. The wage rate and rental rate on capital are w and r, respectively. a. Using the Lagrangian, derive the long-run cost function for this firm. b. Suppose the […]
Date: September 9th, 2020
Under perfect competition A) information about prices is hard to obtain. B) there is a maximum number of firms that can enter the market. C) if a firm exits the market, price will rise. D) transaction costs are low. ANSWER D
Date: September 9th, 2020
Explain why the “kinked demand curve” model of oligopoly represents a game theory approach to oligopolistic behavior. What will be an ideal response? ANSWER Game theory usually is defined as studying how individuals form strategies when they are aware that their decisions affect the decisions of other which, in turn, will affect the outcome […]
Date: September 9th, 2020
A successful and stable cartel can be established if there are A) many firms producing a storable product. B) many firms producing a perishable product. C) a few firms producing a storable product. D) a few firms producing a perishable product. ANSWER C
Date: September 9th, 2020
The government requires the steel industry to adopt new eco-friendly machines, which cannot be used in other industries. If the machines are very expensive and the capital market does not work efficiently, then A) entrants are encouraged to enter the market and adopt the new machines. B) firms can easily leave the steel industry without […]
Date: September 9th, 2020
