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
The above figure shows Bob’s utility function. He currently has $50 and is considering an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0. Bob will make the investment A) if it costs less than $50. B) if it costs less than $30. C) if it […]
Date: September 9th, 2020
The F-test is used in forecasting to A) establish confidence intervals for testing regression coefficients. B) examine the degree of multicollinearity among independent variables. C) determine how well a regression equation can account for dependent variable values. D) determine whether an identification problem exists. ANSWER C
Date: September 9th, 2020
During droughts, cities often impose water use restrictions on consumers. Suppose a representative consumer has preferences for Water (W) and other goods (X) given by the utility function: U(W,X) = WX. Suppose the price of other goods is $1 and the price of water is initially 50¢. The consumer has a budget of $50/week. a. […]
Date: September 9th, 2020
Vertically integrated firms can use transfer pricing A) to avoid government price controls. B) as a way to compensate managers for transferring among departments in a vertically integrated firm. C) to avoid paying market prices for inputs. D) to shift profit. ANSWER D
Date: September 9th, 2020
A holdup problem occurs A) when a financial institution undertakes too little investment in security. B) when one firm must make a specific investment and a second firm takes advantage of it. C) if the firm that moves second in a Stackelberg game chooses the incorrect output level. D) if you are entering into a […]
Date: September 9th, 2020
Consider a monopolist with linear (inverse) demand p = a – bQ and constant average and marginal cost, c. Derive the monopolist’s profit and the deadweight loss generated. Show that in such cases of linear demand and constant average and marginal cost, the deadweight loss is 50% of the monopolist’s profits. ANSWER Profit = […]
Date: September 9th, 2020
Market structure depends upon A) the ease of entry and exit. B) the ability of firms to differentiate their goods and services. C) the number of firms in the market. D) All of the above. ANSWER D
Date: September 9th, 2020
