The rate of return on bonds is lower than on stocks over time because A) bond holders cannot diversify. B) bonds have a lower standard deviation in returns. C) stocks have less non-diversifiable risks than bonds. D) bonds are subject to more random risks than stocks. ANSWER B
Date: September 9th, 2020
Vertical restraints in a contract A) are generally illegal in the U.S. B) usually benefit the firm that produces the raw inputs to the production process. C) are used in vertical mergers. D) can approximate the outcome of a vertical merger. ANSWER D
Date: September 9th, 2020
How is a monopolistically competitive industry like perfect competition? How is it like monopoly? What will be an ideal response? ANSWER Monopolistic competition is like perfect competition in that there are many firms and no barriers to entry (and thus long-run economic profits will be zero). It is like monopoly in that firms sell […]
Date: September 9th, 2020
Convenience stores with gas stations tend to sell an essentially identical variety of products and services. Yet this is generally considered to be a monopolistically competitive industry selling differentiated products. How can this be considered a differentiated product? ANSWER These stores are differentiated by location.
Date: September 9th, 2020
The difference between the equivalent variation and compensating variation is greater for goods with large income elasticities. Indicate whether the statement is true or false ANSWER True . According to the Slutsky equation, the difference between the compensated demand and uncompensated demand elasticity is given by the product of budget share and income elasticity. […]
Date: September 9th, 2020
Social Security _____. a. reduces the incentive to save b. increases the incentive to save c. has no effect on saving d. increases the incentive to save when population growth is falling and decreases the incentive to save when population growth is falling ANSWER a
Date: September 9th, 2020
A McDonald’s franchise is an example of A) horizontal integration. B) quasi-vertical integration. C) a vertical merger. D) None of the above. ANSWER B
Date: September 9th, 2020
If there are low barriers to entry, a monopolist A) might undertake investment to lower marginal cost in the face of a potential rival. B) will undertake investment to lower marginal cost in order to increase profits. C) will not undertake investment to lower marginal cost under any circumstances because profits are lower. D) Both […]
Date: September 9th, 2020
Firms can only use one form of price discrimination. Indicate whether the statement is true or false ANSWER False. Firms often combine different forms of price discrimination in order to maximize profits. For example, a ski resort often uses peak-load pricing because skiing is more popular during the high season when the snow is […]
Date: September 9th, 2020
The deadweight loss represent the sum of added consumer and producer surplus if the firm would produce the quantity where P = MC. Indicate whether the statement is true or false ANSWER True . If P = MC is produced quantity increases and the deadweight loss is turned into CS and PS. This will […]
Date: September 9th, 2020
