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Economics Final Exam
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1. In the absence of worker incentives:
A. everyone always gives maximum effort.
B. there is a natural tendency for workers to not give their maximum effort.
C. managers have little or no control.
D. None of the statements is correct.
2. The optimal bid in a first-price, sealed-bid auction with independent private values is to bid:
A.
B.
C.
D.
the true value of the item.
more than the true value of the item.
less than the true value of the item.
the true value of the item and more than the true value of the item, depending upon
whether value estimates are affiliated.
3. Which of the following statements is true?
A. A mineral rights auction is not the same as a common-value auction.
B. An auctioneer is always indifferent between different kinds of auctions.
C. The Dutch and first-price, sealed-bid auctions are strategically equivalent.
D. An English auction always yields lower expected revenues than a second-price,
sealed-bid auction
4. The figure below presents information for a one-shot game.
What are the Nash equilibrium strategies for firm A and B respectively?
A.
B.
C.
D.
(low price, high price)
(high price, low price)
(high price, high price)
(low price, low price)
5. Fixed costs exist only in:
A. the long run.
B. capital-intensive markets.
C. the short run.
D. labor-intensive markets.
6. Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage,
there exist:
A. economies of scope
B. diseconomies of scope.
C. economies of scale.
D. diseconomies of scale.
7. Which of the following pricing strategies is NOT used in markets characterized by intense price
competition?
A. Price matching
B. Transfer pricing
C. Randomized pricing
D. Inducing brand loyalty
8. Which of the following explains why big business typically spends more on rent-seeking activities
than consumers?
A. Lobbying is a public good to consumers.
B. Lobbying is a public good to businesses.
C. Labor unions in the involved firms.
D. Lobbying is a public good to businesses and labor unions in the involved firms.
9. A perfectly competitive firm faces a:
A. perfectly elastic demand function.
B. perfectly inelastic demand function.
C. demand function with unitary elasticity.
D. None of the answers is correct.
10. In order to maximize net benefits, the managerial control variable should be used up to the point
where:
A. total costs equal total benefits.
B. average costs equal marginal benefits.
C. average benefits equal marginal costs.
D. net marginal benefits equal zero.
11. Which of the following pricing strategies is NOT used in markets with special cost and demand
structures?
A. Peak-load pricing
B. Cross-subsidization
C. Transfer pricing
D. Low-price guarantees
12. Rent seeking:
A. involves resources paid to politicians to enhance one group at the expense of another.
B. results in less monopoly power.
C. results in externalities.
D. None of the statements are correct.
13. The elasticity which shows the responsiveness of the demand for a good due to changes in the
price of a related good is the:
A. own price elasticity.
B. income elasticity.
C. log-linear elasticity.
D. cross-price elasticity.
14. You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q.
Your costs are C = 5 + 30Q. The profit-maximizing price is:
A. 150
B. 90
C. 130
D. 110
15. A monopoly producing a chip at a marginal cost of $6 per unit faces a demand elasticity of −2.5.
Which price should it charge to optimize its profits?
A. $6 per unit
B. 48 per unit
C. $10 per unit
D. $12 per unit
16. In the short run, the marginal cost curve crosses the average total cost curve at:
A. a point just below the average fixed cost curve.
B. the minimum point of the average total cost curve.
C. the maximum point of the average total cost curve.
D. the point where the average total cost curve and average variable cost curve intersect.
17. Suppose the own price elasticity of market demand for retail gasoline is -0.9, the Rothschild
index is 0.6, and a typical gasoline retailer enjoys sales of $1,450,000 annually. What is the price
elasticity of demand for a representative gasoline retailer’s product?
Instruction: Round your answer to 2 decimal places.
18. Jaynet spends $40,000 per year on painting supplies and storage space. She recently received
two job offers from a famous marketing firm – one offer was for $115,000 per year, and the other
was for $85,000. However, she turned both jobs down to continue a painting career. If Jaynet
sells 30 paintings per year at a price of $6,000 each:
a. What are her accounting profits?
$
b. What are her economic profits?
$
19. You are the manager of a firm that receives revenues of $20,000 per year from product X and
$80,000 per year from product Y. The own price elasticity of demand for product X is -3, and the
cross-price elasticity of demand between product Y and X is -1.6.
How much will your firm's total revenues (revenues from both products) change if you increase
the price of good X by 2 percent?
Instructions: Round your answer to the nearest dollar. Include a minus (-) sign if applicable.
$