In the Stackelberg model, the leader has a first-mover advantage because it A) has lower costs than the follower. B) commits to producing a larger quantity. C) reacts to the follower’s decision. D) differentiates its output. ANSWER B
Date: September 9th, 2020
Many people tend to buy multiple cars from the same manufacturer because A) doing so reduces the asymmetric information problem; consumers have better knowledge of quality. B) doing so reduces the asymmetric information problem; consumers have better knowledge of prices. C) doing so doesn’t change the asymmetric information problem but consumers have more information. D) […]
Date: September 9th, 2020
Describe how the risk premium for a person with a convex utility function is determined. What will be an ideal response? ANSWER A person with a convex utility function is risk preferring. This person will not pay a premium to avoid risk. The risk premium is zero.
Date: September 9th, 2020
If only one firm operates in a market, and a potential entrant is blockaded from entering the market, then the incumbent firm must A) have acted to prevent entry. B) be pricing where price equals marginal cost. C) be a natural monopoly. D) be the Stackelberg leader. ANSWER C
Date: September 9th, 2020
With asymmetric information firms might be reluctant to improve the quality of their products because A) it costs them more to produce the better quality product. B) they are not able to completely capture the benefits of the improvement. C) consumers do not value the better product. D) consumers are better informed about the product […]
Date: September 9th, 2020
Compared to a cost plus incentive fee contract, the cost plus percentage fee contract has strong incentives to minimize costs. a. True b. False ANSWER b
Date: September 9th, 2020
There is no relationship between the size of a bureau’s budget and the income earned by the bureaucrat in charge of the bureau. a. True b. False ANSWER b
Date: September 9th, 2020
Define imputed rental income. Is imputed rental income taxed? Based on your answer, discuss the tax code treatment of homeowners and renters on equity grounds. What will be an ideal response? ANSWER Imputed rental income is what an owner-occupied home could be rented for if not owner-occupied. Imputed rental income is not taxed under […]
Date: September 9th, 2020
The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. Suppose a $30 fee is required to enter the market. If firm A chooses its strategy first, then A) firm A will not enter. B) neither firm will enter. C) both firms will enter. D) […]
Date: September 9th, 2020
A increase in quantity demanded as a result of a change in price A) is a rightward shift of the demand curve. B) is a leftward shift of the demand curve. C) leaves the demand curve unchanged. D) is not possible. ANSWER C
Date: September 9th, 2020
