A player that starts at the end of the game and progresses to the first move to determine best responses A) doesn’t understand how to play a game. B) is acting irrationally. C) is using backward induction. D) is using the Stackelberg Strategy. ANSWER C
Date: September 9th, 2020
If a change is a Pareto improvement, then A) we also achieve Pareto efficiency. B) consumer surplus is maximized. C) it also passes the cost-benefit test. D) the distributional effect is likely to be regressive. ANSWER C
Date: September 9th, 2020
Explain the difference between economic and normal profits. What will be an ideal response? ANSWER Normal profit is the amount of profit necessary to insure that a firm continues to operate in the long run, and it is based on the profit that could be earned in its next best alternative activity. It is […]
Date: September 9th, 2020
The demand curve is: QD = 500 – 1/2 P. a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic? b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic? c. Find the point at which point elasticity is equal to […]
Date: September 9th, 2020
A sub-game perfect Nash equilibrium is defined as A) a set of strategies that are a Nash equilibrium in every subgame of a static game. B) a set of strategies that are a Nash equilibrium in every subgame of a dynamic game. C) a set of strategies that are a Nash equilibrium in a single […]
Date: September 9th, 2020
What is the relationship between food stamps and cash transfer payments? When, if ever, are they equivalent? When, if ever, might they diverge? What will be an ideal response? ANSWER Food stamps are equivalent to cash transfer payments in situations where recipients would have spent that much on food anyway had they been given […]
Date: September 9th, 2020
For the utility function U = Wa, what values of “a” correspond to being risk averse, risk neutral, and risk loving? What will be an ideal response? ANSWER 0 < a < 1 implies risk averse. a = 1 implies risk neutral. a > 1 implies risk loving.
Date: September 9th, 2020
Johnny owns a house that would cost $100,000 to replace should it ever be destroyed by fire. There is a 0.1% chance that the house could be destroyed during the course of a year. Johnny’s utility function is U = W0.5. How much would fair insurance cost that completely replaces the house if destroyed by […]
Date: September 9th, 2020
Jeong’s uncompensated demand for gizmos is given by Q = 30 – 2p. Jeong’s marginal willingness to pay function is A) 30-2p. B) 15-.5Q. C) 30-2Q. D) -2. ANSWER B
Date: September 9th, 2020
A monopolist faces the (inverse) demand for its product: p = 50 – 2Q. The monopolist has a marginal cost of 10/unit and a fixed cost given by F. a. Assume that F is sufficiently small such that the monopolist produces a strictly positive level of output. What is the profit-maximizing price and quantity? b. […]
Date: September 9th, 2020
