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
In using regression analysis to estimate demand, which of the following problems is most directly a result of insufficient data? A) the identification problem B) the problem of a low R2 C) the problem of high standard errors D) the problem of insignificant F-statistics ANSWER A
Date: September 9th, 2020
Social Security is the second-largest government redistribution program. a. True b. False ANSWER b
Date: September 9th, 2020
An extra dollar into the Social Security trust fund _____. a. increases the assets of the federal government by a dollar b. decreases the assets of the federal government by a dollar c. has no impact on the assets of the federal government d. speeds up the time until insolvency of the trust fund […]
Date: September 9th, 2020
The outcome of the Stackelberg model is A) a Nash equilibrium. B) the same as the Cournot outcome. C) that the follower earns zero profit. D) that the follower cannot be on its best-response curve. ANSWER A
Date: September 9th, 2020
Suppose the production function is q = 12 L0.25 K0.75. Determine the long-run capital-to-labor ratio (K/L) if the cost a unit of capital (r) is three times the cost of a unit of labor (w). What will be an ideal response? ANSWER The firm minimizes costs by setting MRTS = w/r. MRTS = MPL/MPK […]
Date: September 9th, 2020
Julia is offered two options of government subsidies: $100 food stamp or $100 cash. If she receives $100 cash, she will spend $80 on food. If equivalent evaluation is measured for the situation when only $100 is available to her, the equivalent evaluation is A) greater than $100. B) equal to $100. C) less than […]
Date: September 9th, 2020
