Government expenditures on housing subsidies at all levels total more than $45 billion a year. a. True b. False ANSWER a
Date: September 9th, 2020
When a prisoners’ dilemma game is repeated a finite number of times (T) A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. C) firms cooperate and achieve the collusive Nash […]
Date: September 9th, 2020
Which of the following is a Pareto improvement? A) A monopolist loses its monopoly when a government policy allows another firm to enter the market, resulting in lower prices and higher quantity available for consumers. B) A government policy is implemented that results in the middle class being better off, and the very rich only […]
Date: September 9th, 2020
There exists a substantial underground market in food stamps. a. True b. False ANSWER a
Date: September 9th, 2020
Consider a general cost function C(q), with Average Cost=C(q)/q. Prove using calculus that the quantity which minimizes the Average Cost function is also at the point where the Marginal Cost equals the Average Cost. To do this, first derive the necessary condition for the AC to be at a minimum. ANSWER Consider a cost […]
Date: September 9th, 2020
In a sense, a cartel is self-destructive because A) it reduces consumer surplus. B) it sets price above marginal cost. C) each cartel member has the incentive to cheat on the cartel. D) each cartel member earns economic profit. ANSWER C
Date: September 9th, 2020
When Trina can afford bundles A and B but not C, she purchases bundle A. When Trina can afford bundles A and C, but not B, she purchases bundle C. We can conclude her preference ordering of the three bundles is (in order from most preferred to least) A) C, A, B. B) B, A, […]
Date: September 9th, 2020
If Ann’s utility function is U = W0.5, and she invests in a business which can yield $6,400 with probability 1/5, and $3600 with probability 4/5, then her risk premium to avoid bearing this risk is A) $36. B) $41.6. C) $64. D) $100. ANSWER A
Date: September 9th, 2020
A consumer purchases housing (H) and spends the remainder of income on the composite good (C). The government is considering one of two policies. Policy A taxes housing by $50 per unit consumed. With the tax in place, the consumer purchases 100 units of housing. Policy B collects a lump-sum tax of $5,000 from the […]
Date: September 9th, 2020
Why would a firm choose to remain in an industry in which it makes an economic profit of zero? What will be an ideal response? ANSWER Making an economic profit of zero does not mean that the firm is not making any money. It means that it is covering all its costs, including opportunity […]
Date: September 9th, 2020
