In the ultimatum experiment, what are the usual outcomes? A) Proposer proposes to give the minimum positive amount to the responder in all the rounds. B) Proposer and responder are rational all the time. C) Proposer proposes to give about 30~40% of total amount to the responders. D) Proposer proposes to give 60~70% of total […]
The above figure shows the market for crude oil. If a consumer group convinces the government to set a maximum price of $2 per barrel, then A) 300 barrels of crude oil will be sold at $2. B) zero barrels of crude oil will be sold. C) zero barrels of crude oil will be demanded. […]
The winner’s curse occurs when A) bidders “shade” their bids. B) the winning bid is higher than the good’s common value. C) the winner buys something he didn’t need. D) the winning bid is higher than the private value of the good. ANSWER B
Compared to a direct cash transfer payment of an identical amount, food stamps make individuals who desire less food than the value of the food stamps _____. a. better off b. worse off c. indifferent between food and all other goods d. prefer food too all other goods on the margin ANSWER b
Individuals who live in public housing _____. a. live in better housing than if public housing was not available b. are better off than they would be absent public housing c. forfeit their eligibility for the EITC d. are automatically enrolled in the TANF program ANSWER b
When diminishing marginal returns set in, A) average product is increasing. B) average variable cost is decreasing. C) average cost is decreasing. D) None of above. ANSWER D
Suppose the price of crude oil drops from $150 a barrel to $120 a barrel. The quantity bought remains unchanged at 100 barrels. The coefficient of price elasticity of demand in this example would be A) -0.5. B) infinity. C) -1.0. D) 0. ANSWER D
When a firm has the power to establish its price A) P = MR. B) P = MC. C) P > MR. D) P < MR. ANSWER C
Bob’s winery sells bottles of their expensive, high-quality wine and a cheaper low-quality wine. Visitors have to drive 45 minutes to get to Bob’s winery. Bob also sells his wine at a shop in the city where consumers don’t have to drive a long distance and charges the same prices. Assuming the preferences of the […]
Explain why it is unwise to bid more than your valuation of the good in a sealed bid second-price auction. What will be an ideal response? ANSWER Assume you have a valuation of the good equal to $50. The price the winning bidder pays is equal to the second highest bid. If you bid […]
