Question 1

Based on the following diagram if there were a $3.00 price floor:

Accepted Answer

A)  the quantity demanded would be 65. 
B)  the quantity demanded would be 30. 
C)  there would be a shortage of 30. 
D)  there would be a surplus of 30. 
A)  the quantity demanded would be 65. 
B)  the quantity demanded would be 30. 
C)  there would be a shortage of 30. 
D)  there would be a surplus of 30. D

Question 2

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product. Explain.

Accepted Answer

The market price of a good tells the buyer of the good in a market the opportunity cost of providing the good. As long as the value of the good is greater than the price of the good the buyer will make purchases. As a result, as long as the value of a good is higher than the costs of production society will efficiently produce the good, maximizing social well-being.

Question 3

If demand is represented by Qd = 50 -.5P +.005I where I=$50,000 and supply is represented by Qs = 100 +.4P - 2W where wages=W=$15.00, compute the equilibrium price and quantity. where wages=W=$15.00, compute the equilibrium price and quantity. What happens if income falls to I=$40,000?

Accepted Answer

The equilibrium price is $255.56. The equilibrium quantity is 172.22. When income falls to $40,000, the new equilibrium price is $200. The new equilibrium quantity is 150.

Question 4

Tom and Jerry have been roommates for the past two years. During this period, they bought 11 CDs together. Now that each is taking his own apartment, they are deciding how to split their possessions. Tom suggests they take 5 CDs each and give the extra one to Arnold, their neighbor. Jerry, on the other hand, suggests they flip a coin to decide who gets the 11th CD. Assuming they neither like nor dislike being altruistic, which of the two suggestions is Pareto efficient?

Accepted Answer

A)  Tom's suggestion. 
B)  Jerry's suggestion. 
C)  Both suggestions make sense 
D)  Both suggestions do not make sense 
A)  Tom's suggestion. 
B)  Jerry's suggestion. 
C)  Both suggestions make sense 
D)  Both suggestions do not make sense

Question 5

Assume the market for pencils is competitive, and originally in equilibrium. As a result of increases in the price of graphite, the supply of pencils decreases. What is true in the new equilibrium?

Accepted Answer

A)  The price is higher, while the quantity exchanged decreases. 
B)  The price is higher, and the quantity exchanged increases. 
C)  The price is lower, while the quantity exchanged decreases. 
D)  The price is lower, and the quantity exchanged increases. 
A)  The price is higher, while the quantity exchanged decreases. 
B)  The price is higher, and the quantity exchanged increases. 
C)  The price is lower, while the quantity exchanged decreases. 
D)  The price is lower, and the quantity exchanged increases.

Question 6

The demand and supply curves in the market for gasoline are illustrated in the graph.   Starting at the equilibrium point, if the government then imposes a price ceiling of $10, consumer surplus will then be given by the area:

Accepted Answer

A)  A 
B)  A + B 
C)  A + D 
D)  C 
A)  A 
B)  A + B 
C)  A + D 
D)  C

Question 7

Assume the demand function for scooters is given by QD = 20,000 - 10P + 0.2I, where P = price of a scooter, and I = average income of consumers. Also, assume the supply function of scooters is given by QS = 20 P. If the market for scooters is perfectly competitive, and the average income of consumers is $20,000, what are the equilibrium price and quantity in this market?

Accepted Answer

A)  The equilibrium price is $16,000, and 800 scooters are traded. 
B)  The equilibrium price is $1,600, and 32,000 scooters are traded. 
C)  The equilibrium price is $800, and 16,000 scooters are traded. 
D)  The equilibrium price is $800, and 32,000 scooters are traded. 
A)  The equilibrium price is $16,000, and 800 scooters are traded. 
B)  The equilibrium price is $1,600, and 32,000 scooters are traded. 
C)  The equilibrium price is $800, and 16,000 scooters are traded. 
D)  The equilibrium price is $800, and 32,000 scooters are traded.

Question 8

Faith and Hope are 30 year old identical twins. The only difference between Faith and Hope is their credit score. Faith has a proven record of repaying debt. Faith can borrow money at 4.5%. Hope has often missed debt payments. Hope can borrow at 8.5%.
They are considering enrolling in an evening MBA program. They plan on completing the program in two years. Assume the annual tuition is $16,000 for both years. They also anticipate that the non-monetary costs of obtaining an MBA will be $40,000 per year. The twins anticipate that after graduation in two years, their earnings will be $10,000 per year higher until they retire at age 62. Should Faith enroll in the evening MBA program? Should Hope enroll in the evening MBA program?

Accepted Answer

This problem requires use to compare the

Question 9

According to Ronald Coase, allocation of resources in a free-market economy will be efficient as long as:

Accepted Answer

A)  property rights are clearly assigned but not enforced. 
B)  contracting costs are sufficiently high 
C)  property rights are clearly assigned, enforced with low contracting costs 
D)  property rights are assigned to the rich 
A)  property rights are clearly assigned but not enforced. 
B)  contracting costs are sufficiently high 
C)  property rights are clearly assigned, enforced with low contracting costs 
D)  property rights are assigned to the rich

Question 10

Price controls on gasoline:

Accepted Answer

A)  increase consumer surplus for all consumers. 
B)  create a shortage of gasoline. 
C)  create a surplus of gasoline. 
D)  increase producer surplus for all producers. 
A)  increase consumer surplus for all consumers. 
B)  create a shortage of gasoline. 
C)  create a surplus of gasoline. 
D)  increase producer surplus for all producers.

Question 11

What are externalities and why is Ronald Coase an important figure in economics?

Accepted Answer

Externalities are unintended consequence

Question 12

Consumer surplus is:

Accepted Answer

A)  the result of a shortage. 
B)  the result of a surplus. 
C)  a measure of the quantity traded by consumers. 
D)  a measure of the gains from trade to consumers. 
A)  the result of a shortage. 
B)  the result of a surplus. 
C)  a measure of the quantity traded by consumers. 
D)  a measure of the gains from trade to consumers.

Question 13

Suppose Sam and Kevin can produce pens and pencils in the times that follows:

Accepted Answer

@#IMG-DLM& (a.) Who has a comparative advantage in

Question 14

The demand and supply curves in the market for gasoline are illustrated in the graph below.   Starting at the equilibrium point, if the government then imposes a price ceiling of $10, the deadweight loss will be the area:

Accepted Answer

A)  D + E 
B)  F + G 
C)  D 
D)  E 
A)  D + E 
B)  F + G 
C)  D 
D)  E

Question 15

Based on the following diagram if there were a $1.50 price ceiling:

Accepted Answer

A)  the quantity demanded would be 65. 
B)  the quantity demanded would be 80. 
C)  there would be a shortage of 30. 
D)  there would be a surplus of 30. 
A)  the quantity demanded would be 65. 
B)  the quantity demanded would be 80. 
C)  there would be a shortage of 30. 
D)  there would be a surplus of 30.

Question 16

Assume the government introduces a $0.50 per gallon tax on gasoline. Which of the following is true?

Accepted Answer

A)  The quantity of subway and bus tickets sold is likely to increase. 
B)  The quantity of cars sold is likely to increase. 
C)  The quantity of gasoline sold is likely to increase. 
D)  The quantity supplied by producers will decrease 
A)  The quantity of subway and bus tickets sold is likely to increase. 
B)  The quantity of cars sold is likely to increase. 
C)  The quantity of gasoline sold is likely to increase. 
D)  The quantity supplied by producers will decrease

Question 17

According to Ronald Coase, for a free-market economy to work efficiently, there needs to be:

Accepted Answer

A)  allocation of private property rights with low transactions cost 
B)  allocation of private property rights with high transactions cost 
C)  a well developed tax code. 
D)  low cost of malpractice insurance 
A)  allocation of private property rights with low transactions cost 
B)  allocation of private property rights with high transactions cost 
C)  a well developed tax code. 
D)  low cost of malpractice insurance

Question 18

Assume the demand function for basketballs is given by QD = 150 - 3P + 0.1I, where P = price of a basketball, and I = average income of consumers. Also, assume the supply of basketballs is given by QS =2P. If the market for basketballs is perfectly competitive, and the average income is equal to $1,500, what are the equilibrium price and quantity? What if a 20% income tax is introduced?

Accepted Answer

A)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. The introduction of an income tax would have no effect on the equilibrium price net of the tax and quantity. 
B)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, and only 108 basketballs would be traded. 
C)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, which would cause the quantity of basketballs traded to increase. 
D)  Before the tax, the equilibrium price is $60, and 108 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, and only 120 basketballs would be traded. 
A)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. The introduction of an income tax would have no effect on the equilibrium price net of the tax and quantity. 
B)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, and only 108 basketballs would be traded. 
C)  Before the tax, the equilibrium price is $60, and 120 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, which would cause the quantity of basketballs traded to increase. 
D)  Before the tax, the equilibrium price is $60, and 108 basketballs are traded. Once the income tax is introduced, the price would decrease by $6, and only 120 basketballs would be traded.

Question 19

Assume Pollutex Inc. produces paper in its plant located on Lake Ontario, half a mile away from CleanAir Camping. Pollutex employs an obsolete production process, dumping scum in the lake. The camp has experienced a steady decline in the number of attendees since Pollutex moved nearby. In particular, the owners forecast that CleanAir Camping will generate a profit of only $50,000 a year in the future, which is $150,000 less than the one generated before Pollutex moved nearby. A cleaner production process is available, which would not require dumping the scum in the lake. However, converting the plant would increase yearly costs by $100,000. Is the current situation Pareto efficient?

Accepted Answer

A)  Yes, since there is no alternative that would make CleanAir better off without hurting Pollutex, and vice versa. 
B)  No, as Pollutex could convert its plant and make CleanAir better off by $150,000. 
C)  No. In fact, CleanAir owners could pay Pollutex a sum between $100,000 and $150,000 a year to convert its plant, and increase profits between $0 and $50,000. 
D)  No. In fact, Pollutex owners could pay CleanAir a sum between $100,000 and $150,000 a year to convert its plant, and increase profits between $0 and $50,000. 
A)  Yes, since there is no alternative that would make CleanAir better off without hurting Pollutex, and vice versa. 
B)  No, as Pollutex could convert its plant and make CleanAir better off by $150,000. 
C)  No. In fact, CleanAir owners could pay Pollutex a sum between $100,000 and $150,000 a year to convert its plant, and increase profits between $0 and $50,000. 
D)  No. In fact, Pollutex owners could pay CleanAir a sum between $100,000 and $150,000 a year to convert its plant, and increase profits between $0 and $50,000.

Question 20

Many products come with a warning about how to use the product without harming other people. Why?

Accepted Answer

The information about how to use this pa

Based on the following diagram if there were a $3.00 price floor:

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product. Explain.

If demand is represented by Qd = 50 -.5P +.005I where I=$50,000 and supply is represented by Qs = 100 +.4P - 2W where wages=W=$15.00, compute the equilibrium price and quantity. where wages=W=$15.00, compute the equilibrium price and quantity. What happens if income falls to I=$40,000?

Assume the market for pencils is competitive, and originally in equilibrium. As a result of increases in the price of graphite, the supply of pencils decreases. What is true in the new equilibrium?

The demand and supply curves in the market for gasoline are illustrated in the graph. Starting at the equilibrium point, if the government then imposes a price ceiling of $10, consumer surplus will then be given by the area:

According to Ronald Coase, allocation of resources in a free-market economy will be efficient as long as:

Price controls on gasoline:

What are externalities and why is Ronald Coase an important figure in economics?

Consumer surplus is:

Suppose Sam and Kevin can produce pens and pencils in the times that follows:

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point, if the government then imposes a price ceiling of $10, the deadweight loss will be the area:

Based on the following diagram if there were a $1.50 price ceiling:

Assume the government introduces a $0.50 per gallon tax on gasoline. Which of the following is true?

According to Ronald Coase, for a free-market economy to work efficiently, there needs to be:

Many products come with a warning about how to use the product without harming other people. Why?

Introduction

Economists View of Behavior

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters

Exam 3: Markets, Organizations, and the Role of Knowledge

Based on the following diagram if there were a $3.00 price floor:

Markets can give a buyer everything a buyer needs to know about a product even though the buyer does not have the training to understand the specific knowledge needed to build or distribute the product. Explain.

If demand is represented by Qd = 50 -.5P +.005I where I=$50,000 and supply is represented by Qs = 100 +.4P - 2W where wages=W=$15.00, compute the equilibrium price and quantity. where wages=W=$15.00, compute the equilibrium price and quantity. What happens if income falls to I=$40,000?

Assume the market for pencils is competitive, and originally in equilibrium. As a result of increases in the price of graphite, the supply of pencils decreases. What is true in the new equilibrium?

The demand and supply curves in the market for gasoline are illustrated in the graph. Starting at the equilibrium point, if the government then imposes a price ceiling of $10, consumer surplus will then be given by the area:

According to Ronald Coase, allocation of resources in a free-market economy will be efficient as long as:

Price controls on gasoline:

What are externalities and why is Ronald Coase an important figure in economics?

Consumer surplus is:

Suppose Sam and Kevin can produce pens and pencils in the times that follows:

The demand and supply curves in the market for gasoline are illustrated in the graph below. Starting at the equilibrium point, if the government then imposes a price ceiling of $10, the deadweight loss will be the area:

Based on the following diagram if there were a $1.50 price ceiling:

Assume the government introduces a $0.50 per gallon tax on gasoline. Which of the following is true?

According to Ronald Coase, for a free-market economy to work efficiently, there needs to be:

Many products come with a warning about how to use the product without harming other people. Why?

Introduction

Economists View of Behavior

Demand

Production and Cost

Market Structure

Pricing With Market Power

Economics of Strategy: Creating and Capturing Value

Economics of Strategy: Game Theory

Incentive Conflicts and Contracts

Organizational Architecture

Decision Rights: The Level of Empowerment

Decision Rights: Bundling Tasks Into Jobs and Subunits

Attracting and Retaining Qualified Employees

Incentive Compensation

Individual Performance Evaluation

Divisional Performance Evaluation

Corporate Governance

Vertical Integration and Outsourcing

Leadership: Motivating Change Within Organizations

Understanding the Business Environment: The Economics of Regulation

Ethics and Organizational Architecture

Organizational Architecture and the Process of Management Innovation

Filters