Questions:
1. Which of the following auction examples has a common value information structure?
• Three firms bid for an oil lease
• An auction of a famous painting
• A college in need of money decides to name a building on campus after the person willing to pay the most for the privilege
• An auction of a famous painting and a college in need of money decides to name a building on campus after the person willing to pay the most for the privilege.
2. If apples have an own price elasticity of -1.2 we know the demand is:
• Unitary
• Indeterminate
• Elastic
• Inelastic
3. The elastic that measures the responsiveness of consumer demand to changes in income is the:
• Income elasticity
• Own price elasticity
• Cross-price elasticity
• Neither the income elasticity, the own price elasticity, nor the cross price elasticity
4. Which of the following pricing strategies is not used in markets with special cost and demand structures?
• Peak-load pricing
• Cross subsidization
• Transfer pricing
• Low price guarantees
5. Fixed costs exist only in:
• The long run
• Capital intensive markets
• The short run
• Labor intensive markets
6. You are the manager of a monopoly that faces a demand curve describes by P = 230 - 20Q. Your costs are C = 5 + 30Q. The profit maximizing output for your firm is:
• 4
• 5
• 6
• 7
7. The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:
• Elastic
• Unitary
• Falling
• Inelastic
8. You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 +3-Q. Your firms maximum profit are:
• 495
• 475
• 480
• 415
9. An income elasticity less than zero tells us that the good is:
• A normal good
• A Giffen good
• An inferior good
• An inelastic good
10. The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the:
• Own price elasticity
• Income elasticity
• Log-linear elasticity
• Cross-price elasticity
11. Consider a market characterized by the following demand and supply conditions Px = 50 - 5Qx and Px = 32 + Qx. The equilibrium price and quantity are, respectively,
• $35 and 3 units
• $3 and 35 units
• $82 and 50 units
• $20 and 6 units
12. Which of the following phenomena shows that risk aversion is the characteristic of many people?
• Gambling
• Looting
• Investing in one stock rather than a portfolio
• Auto insurance
13. In the absence of worker incentives:
• Everyone always gives maximum effort
• There is a natural tendency for workers to not give their maximum effort
• Managers have little or no control
• None of the statements is correct
14. The figure below presents information for a one-shot game
|
Firm A
|
Firm B
|
|
|
Low Price
|
High Price
|
|
Low Price
|
(2,2)
|
(10, -8)
|
|
High Price
|
(-8,10)
|
(6,6)
|
If this one-shot game is repeated 100 times, the Nash equilibrium payoffs of the players will be __________________ each period.
• (2,2)
• (10, -8)
• (-8, 10)
• (6,6)
15. Which of the following statements I true?
• A mineral rights auction is not the same as a common value auction
• An auctioneer is always indifferent between different kinds of auctions
• The Dutch auction and first price, sealed bid auctions are strategically equivalent
• An English auction always yields lower expected revenues than a second price, sealed bid auction.
16. Rent seeking
• Results in less market share for the rent seekers
• Involves lobbyists influencing government policies to benefit their interests
• Results in more negative externalities
• None of the statements are correct
17. Jaynet spends $35,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm - one offer was for $120,000 per year and the other was for $105,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 20 paintings per year at a price of at a price of $9,000 per year
a. What are her accounting profits? ____________________
b. What are her economic profits? _____________________
18. The manager of a local monopoly estimates that the elasticity of demand for its product is constant and equal to -3. The firm's marginal cost is constant at $30 per unit.
a. Express the firm's marginal revenue as a function of its price (round to 2 decimal places)
MR = ___________ x P
b. Determine the profit maximizing price (use the rounded value calculated above and round your response to 2 decimal places)
$_________________.
19. The demand curve for product X is given by Qxd = 480 - 2Px
a. Find the inverse demand curve
Px = __________ - ___________ Qxd
Instructions: round your answer to the nearest penny (2 decimal places)
b. How much consumer surplus do consumers receive when Px = $50?
$ _____________
c. How much consumer surplus do consumers receive when Px = $30?
$ _____________
d. In general, what happens to the level of consumer surplus as the price of a good falls?
The level of consumer surplus ______________ as the price of a good falls.