If a monopolist faces entry by a potential rival, investing to lower its marginal cost A) is a credible way to deter entry. B) is not a credible threat. C) is credible but will not deter entry. D) will not occur, even when there are no barriers to entry. ANSWER A
Date: September 9th, 2020
The three models of oligopolies, Cournot, Stackelberg and Bertrand, all assume firms independently choose the quantity of output to produce. Indicate whether the statement is true or false ANSWER False. While the Cournot and Stackelberg models assume quantity choice as the action, in the Bertrand model, firms choose price.
Date: September 9th, 2020
A firm that backward vertically integrates A) moves downstream in the production process. B) requires that the production process be relatively simple. C) has to merge with another firm. D) may be producing its own inputs. ANSWER D
Date: September 9th, 2020
Mergers are closely scrutinized by the government because A) they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). B) they always result in a more efficient market. C) they always result in lower joint profits of the firms involved. D) all mergers are undesirable. ANSWER A […]
Date: September 9th, 2020
For a monopoly market, if the Lerner Index is 2, then A) the monopoly is maximizing its profit. B) the price elasticity of demand is -2. C) the price elasticity of demand is -0.5. D) None of the above. ANSWER C
Date: September 9th, 2020
Given that the characteristics of Social Security are determined through the political process, we would expect that young workers would _____ when given the opportunity to vote on the program. a. oppose increases in Social Security taxes b. oppose increasing the retirement age c. oppose means-testing of retirees d. be strongly in favor of the […]
Date: September 9th, 2020
As a result of the pay-as-you-go nature of Social Security financing, the continuation of benefit payments is dependent upon _____. a. new individuals entering the system b. the current tax level c. current economic growth rates d. the Baby Boomer’s decision on when to retire ANSWER a
Date: September 9th, 2020
In the U.S., charging monopoly-level prices A) is evidence of a conspiracy. B) is illegal. C) is not necessarily illegal. D) constitutes a per se violation. ANSWER C
Date: September 9th, 2020
Distinguish between risk that can be reduced through diversification and risk that cannot be reduced through diversification. What will be an ideal response? ANSWER Risk that cannot be diversified away affects all investments equally. Examples would include war and natural disasters. Risk that can be reduced through diversification includes changes to the value of […]
Date: September 9th, 2020
A firm’s horizontal dimension refers to A) its size in its primary market. B) its size in all markets in which is competes. C) the level of supply chain integration the firm undertakes. D) the number of stages in the production process that are upstream from the stages the firm undertakes. ANSWER A
Date: September 9th, 2020
