Question 1

The basic law of demand says that all other things being the same,_______________________.

Accepted Answer

A) The lower the price of a product, the less of it consumers will purchase 
B) The higher the price of a product, the less of it consumers will purchase 
C) The lower the price of a product, the more of it consumers will purchase 
D) The higher the price of a product, the more of it consumers will purchase 
E) The greater the number of units of a product sold in the past, the more of it consumers will purchase that product in the future 
A) The lower the price of a product, the less of it consumers will purchase 
B) The higher the price of a product, the less of it consumers will purchase 
C) The lower the price of a product, the more of it consumers will purchase 
D) The higher the price of a product, the more of it consumers will purchase 
E) The greater the number of units of a product sold in the past, the more of it consumers will purchase that product in the future C

Question 2

Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Average Fixed Costs?

Accepted Answer

AFC(Q)= $ \frac{13}{Q} $

Question 3

In what special situation might the law of demand not hold?

Accepted Answer

A) In a perfectly competitive market 
B) When there is a high price elasticity of demand 
C) When MR=MC 
D) At the Nash Equilibrium 
E) If high prices confer prestige 
A) In a perfectly competitive market 
B) When there is a high price elasticity of demand 
C) When MR=MC 
D) At the Nash Equilibrium 
E) If high prices confer prestige E

Question 4

If η=.8 and P=$25,what is MR?

Accepted Answer

A) $20 
B) $6.25 
C) -$5 
D) -$6.25 
E) $5 
A) $20 
B) $6.25 
C) -$5 
D) -$6.25 
E) $5

Question 5

The following figure plots Short Run Average Cost functions for small,medium,and large plants. Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

Accepted Answer

A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
E) Q₅ 
A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
E) Q₅

Question 6

What is a Nash equilibrium?

Accepted Answer

A) A state where each player is doing the best it can, given the strategies of all other players 
B) A state where the sum of all payoffs is maximized 
C) A state where the players always have achieved their best possible result 
D) A state at which the MR=MC for a firm 
E) A state where each player always must play a dominant strategy 
A) A state where each player is doing the best it can, given the strategies of all other players 
B) A state where the sum of all payoffs is maximized 
C) A state where the players always have achieved their best possible result 
D) A state at which the MR=MC for a firm 
E) A state where each player always must play a dominant strategy

Question 7

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

Accepted Answer

A) 2000Q+100 
B) 2000Q²+100Q 
C) 1000Q²+100Q+10 
D) 1000Q+100+10/Q 
E) 100Q+10+1/Q 
A) 2000Q+100 
B) 2000Q²+100Q 
C) 1000Q²+100Q+10 
D) 1000Q+100+10/Q 
E) 100Q+10+1/Q

Question 8

If a firm is producing as efficiently as it knows how,the how will the total cost function slope?

Accepted Answer

A) Upward 
B) Downward 
C) No Slope 
D) Downward until an output threshold value, then upward 
E) Upward until an output threshold value, then downward 
A) Upward 
B) Downward 
C) No Slope 
D) Downward until an output threshold value, then upward 
E) Upward until an output threshold value, then downward

Question 9

In the following sequential decision tree,Alpha chooses a strategy first and then Beta chooses a strategy.Using backwards inductions,determine the Subgame Perfect Nash Equilibrium strategies and payoffs?

Accepted Answer

Alpha - Medium with

Question 10

Which of the following cost line items would be a fixed cost?

Accepted Answer

A) Commissions to Salespeople 
B) Rent 
C) Raw Materials 
D) Packaging 
E) Shipping/Delivery Charges 
A) Commissions to Salespeople 
B) Rent 
C) Raw Materials 
D) Packaging 
E) Shipping/Delivery Charges

Question 11

Suppose a firm's plant produces Q units in any given year.The plant itself operates with annualized costs of $10M and other annual fixed expenses totaling $3M.In addition,the firm's variable costs depend on Q and are given by the formula 5Q²+3Q.What is the formula for the firm's Average Variable Costs?

Accepted Answer

The answer of Suppose a firm's plant produces Q units...

Question 12

Which of the following best describes marginal cost?

Accepted Answer

A) The per-unit-of-output cost for a product 
B) The incremental cost of producing one more unit of output. 
C) A cost invariant to the firm's output 
D) The sum of all costs associate with the production of a product 
E) The cost of fixed items such as general and administrative expenses 
A) The per-unit-of-output cost for a product 
B) The incremental cost of producing one more unit of output. 
C) A cost invariant to the firm's output 
D) The sum of all costs associate with the production of a product 
E) The cost of fixed items such as general and administrative expenses

Question 13

What are the Nash Equilibrium Strategies and corresponding payoffs for the following matrix?

Accepted Answer

Alpha - Enter Market

Question 14

Which of the following variables does not influence the quantity of product that a firm is able to sell?

Accepted Answer

A) Price of the product 
B) Price of related products 
C) Plant production costs 
D) Incomes and tastes of consumers 
E) Advertising 
A) Price of the product 
B) Price of related products 
C) Plant production costs 
D) Incomes and tastes of consumers 
E) Advertising

Question 15

What is the revenue destruction effect?

Accepted Answer

A) The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units 
B) The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit 
C) The loss in revenue a firm incurs due to brand level elasticities 
D) The loss in revenue a firm incurs due to being in a perfectly competitive market 
E) The loss in revenue a firm incurs due to predatory pricing 
A) The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units 
B) The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit 
C) The loss in revenue a firm incurs due to brand level elasticities 
D) The loss in revenue a firm incurs due to being in a perfectly competitive market 
E) The loss in revenue a firm incurs due to predatory pricing

Question 16

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

Accepted Answer

A) $200K, -$100K 
B) $200K, $100K 
C) $300K, $100K 
D) $300K, -$100K 
E) $200K, $200K 
A) $200K, -$100K 
B) $200K, $100K 
C) $300K, $100K 
D) $300K, -$100K 
E) $200K, $200K

Question 17

In which of the following markets is a consumer more sensitive to price?

Accepted Answer

A) Credit Cards 
B) Items sold door to door 
C) Customized software upgrade 
D) Copier/Printer Toner 
E) Health Care 
A) Credit Cards 
B) Items sold door to door 
C) Customized software upgrade 
D) Copier/Printer Toner 
E) Health Care

Question 18

Which characteristic does not describe a perfectly competitive market?

Accepted Answer

A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Industry-level price elasticity is finite 
E) Firm-level price elasticity of demand facing another perfect competitor is infinite 
A) Firms produce identical or nearly identical products 
B) Market price is beyond the control of any individual firm 
C) A firm's demand curve is perfectly horizontal at the market price 
D) Industry-level price elasticity is finite 
E) Firm-level price elasticity of demand facing another perfect competitor is infinite

Question 19

Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand,η?

Accepted Answer

A) 6 
B) .6 
C) 1.67 
D) .8 
E) .17 
A) 6 
B) .6 
C) 1.67 
D) .8 
E) .17

Question 20

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Accepted Answer

A) When average cost is a decreasing function of output, marginal cost is greater than average cost. 
B) When average cost neither increases or decreases (because it is constant or at a minimum point), marginal cost is equal to average cost 
C) The average cost function is always smaller than the marginal cost function 
D) The average cost function is always greater than the marginal cost function 
E) When average cost is an increasing function of output, marginal cost is less than average cost 
A) When average cost is a decreasing function of output, marginal cost is greater than average cost. 
B) When average cost neither increases or decreases (because it is constant or at a minimum point), marginal cost is equal to average cost 
C) The average cost function is always smaller than the marginal cost function 
D) The average cost function is always greater than the marginal cost function 
E) When average cost is an increasing function of output, marginal cost is less than average cost

The basic law of demand says that all other things being the same,_______________________.

In what special situation might the law of demand not hold?

If η=.8 and P=$25,what is MR?

The following figure plots Short Run Average Cost functions for small,medium,and large plants. Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

What is a Nash equilibrium?

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

If a firm is producing as efficiently as it knows how,the how will the total cost function slope?

In the following sequential decision tree,Alpha chooses a strategy first and then Beta chooses a strategy.Using backwards inductions,determine the Subgame Perfect Nash Equilibrium strategies and payoffs?

Which of the following cost line items would be a fixed cost?

Which of the following best describes marginal cost?

What are the Nash Equilibrium Strategies and corresponding payoffs for the following matrix?

Which of the following variables does not influence the quantity of product that a firm is able to sell?

What is the revenue destruction effect?

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

In which of the following markets is a consumer more sensitive to price?

Which characteristic does not describe a perfectly competitive market?

Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand,η?

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Economies of Scale and Scope

Agency and Coordination

The Power of Principles - an Historical Perspective

The Vertical Boundaries of the Firm

Organizing Vertical Boundariesvertical Integration and Its Alternatives

Diversificationpart Threemarket and Competitive Analysis

Competitors and Competition

Strategic Commitment

The Dynamics of Pricing Rivalry

Entry and Exit

Industry Analysispart Fourstrategic Position and Dynamics

Strategic Positioning for Competitive Advantage

Sustaining Competitive Advantage

The Origins of Competitive Advantage, innovation, evolution, and Environment part Five internal Organization

Performance Measurement and Incentives in Firms

Strategy and Structure

Environment, power, and Culture

Filters

Exam 1: Basic Microeconomic Principles

The basic law of demand says that all other things being the same,_______________________.

In what special situation might the law of demand not hold?

If η=.8 and P=$25,what is MR?

The following figure plots Short Run Average Cost functions for small,medium,and large plants. Based on the figure and plots provided,for which quantity level is a medium plant the best choice?

What is a Nash equilibrium?

If TC(Q)=1000Q²+100Q+10,what is the formula for AC(Q)?

If a firm is producing as efficiently as it knows how,the how will the total cost function slope?

In the following sequential decision tree,Alpha chooses a strategy first and then Beta chooses a strategy.Using backwards inductions,determine the Subgame Perfect Nash Equilibrium strategies and payoffs?

Which of the following cost line items would be a fixed cost?

Which of the following best describes marginal cost?

What are the Nash Equilibrium Strategies and corresponding payoffs for the following matrix?

Which of the following variables does not influence the quantity of product that a firm is able to sell?

What is the revenue destruction effect?

Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs.If the entrepreneur's best outside alternative employment opportunity is to earn $300K,what are the firms accounting and economic profits?

In which of the following markets is a consumer more sensitive to price?

Which characteristic does not describe a perfectly competitive market?

Suppose a factory is producing 100 units and the price of each unit is $10.If raising the price to $12 per unit results in a drop in sales of 12 units,what is the price elasticity of demand,η?

Which of the following statements is true regarding the relationship between average and marginal cost functions?

Economies of Scale and Scope

Agency and Coordination

The Power of Principles - an Historical Perspective

The Vertical Boundaries of the Firm

Organizing Vertical Boundariesvertical Integration and Its Alternatives

Diversificationpart Threemarket and Competitive Analysis

Competitors and Competition

Strategic Commitment

The Dynamics of Pricing Rivalry

Entry and Exit

Industry Analysispart Fourstrategic Position and Dynamics

Strategic Positioning for Competitive Advantage

Sustaining Competitive Advantage

The Origins of Competitive Advantage, innovation, evolution, and Environment part Five internal Organization

Performance Measurement and Incentives in Firms

Strategy and Structure

Environment, power, and Culture

Filters