The benefits from cartelizing are greater if A) the market demand elasticity is higher. B) the market demand elasticity is lower. C) the market price is higher. D) each firm cuts its output more. ANSWER B
Date: September 9th, 2020
In two-part pricing with identical consumers, a firm A) charges a lump-sum fee equal to the consumer surplus. B) sets unit price below marginal cost. C) should go with single-price monopoly pricing to maximize profits. D) Both A and B. ANSWER A
Date: September 9th, 2020
If a short-run fixed cost is sunk, then A) losses can be minimized by shutting down. B) the firm should keep producing to cover the sunk cost. C) the cost cannot be avoided by shutting down. D) Both B and C. ANSWER C
Date: September 9th, 2020
Other things remaining the same, an increase in the price of butter can be expected to A) increase margarine sales. B) decrease margarine sales. C) increase butter sales. D) None of the above ANSWER A
Date: September 9th, 2020
A monopolist faces the (inverse) demand for its product: p = a – bQ. The monopolist has a marginal cost given by c 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? […]
Date: September 9th, 2020
What are the main differences between cash transfer payments and payments in-kind? Excluding paternalistic justifications, is one generally preferable to the other? Why or why not? What will be an ideal response? ANSWER In-kind transfer payments come in the form of goods and services, while cash transfer payments are in the form of money. […]
Date: September 9th, 2020
According to the cost-benefit principle if a change generates $50,000 in gains and $45,000 in losses, A) it is desirable. B) the gain is not large enough to justify the change. C) the desirability depends on who gains and who loses. D) it is a Pareto improvement. ANSWER A
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
