1. What will happen to the equilibrium price and quantity for jelly when the price of peanut butter increases? (Assume that peanut butter and jelly are typically consumed together).
A) We expect equilibrium price and quantity to decrease
B) We expect equilibrium price to decrease and equilibrium quantity to increase
C) We expect equilibrium price to increase and equilibrium quantity to decrease
D) We expect equilibrium price and quantity to decrease
2) When the price elasticity of demand is larger than 1 in absolute value, demand is:
A) elastic
B) inelastic
C) unit elastic
D) perfectly elastic
3. You are hired as an economic consultant for an online store that sells music downloads. Currently each download costs $.98. Your assignment is to increase the firm's total revenue. Your research indicates that the industry wide price elasticity of demand for music downloads is equal to 2.6 in absolute value. You recommend that the firm change the price per download to:
A) $1.05 since demand is elastic
B) $.95 since demand is inelastic
C) $1.05 since demand is inelastic
D) $.95 since demand is elastic
4. Diseconomies of scale occur:
A) When long run ATC decreases as output expands
B) when long run ATC increases as output expands
C) when long run ATC is constant as output is varied
D) when short run ATC decreases as output expands
5) Your bagel shop uses both capital and labor in the production of bagels. In this production process, capital and labor are substitutes. If you install a new oven and the marginal product of capital increases, you will:
A)not make any changes since you are already maximizing profit
B) increase the number of workers you employ
C)reduce the number of workers you employ
D)reduce the amount of capital you are using
6) Which of the following is not true int he long run for a perfectly competitive firm?
A) P*=LRAC
B) P*=SRAVC
C) P*=SRMC
D) P*=SRAC
7) In long run equilibrium, a monopolistically competitive firm will produce a quantity:
A) that is more than the quantity where average total cost is at minimum
B) where marginal cost intersects average total cost
C) that is less thant he quantity where average total cost is at a minimum
D) where average total cost is at a minimum
8) Informative advertising
A) is designed to describe a products characteristics and is usually associated with experience goods.
B) is designed to change a consumers preferences and is usually associated with experience goods.
C) is designed to change a consumers preferences and is usually associated with search goods
D) is designed to describe a products characteristics and is usually associated with search goods
9) Price discrimination that substantially reduces competition is outlawed by the
A) Clayton Act
B) Sherman Act
C) Federal Trade Commission Act
D) None of these
10) Suppose an industry has 5 firms each with 12% of sales, and 8 firms each with 5% of sales. The HHI for this industry is :
A) None of these
B) 100
C) 1400
D) 800
E) 1000
11) A profit maximizing firm in a competitive market with a negative production externality will produce the quantity of output where:
A) marginal revenue=marginal private cost
B) marginal revenue=marginal social cost
C) price=marginal private cost
D) price=marginal damage cost
12) The Coase theorem states that when externalities are present, under certain conditions:
A)private parties can achieve the efficient outcome without government intervention
B)private parties will hold out for a better deal, making achieving the efficient outcome impossible
C)private parties can never achieve an efficient outcome
D) private parties can achieve an efficient outcome if there is government intervention.
13) When a good is "nonexcludable" it means that:
A)The owner of the good cannot prevent others from consuming the good
B) one person's use of a good does not diminish the amount available for others to consume
C) the owner of the good can prevent others from consuming the good
D) one person's use of a good diminishes the amount available for others to consume.
14) Dexter lives in New Hampshire where automobile insurance is not required, so Dexter has no car insurance. Dexter is a careful driver and always follows the posted speed limit. Dexter then takes a new job in Pennsylvania where car insurance is required, so Dexter pruchases full coverage auto insurance. Now Dexter speeds all the time. Dexter's behavior is an example of
A) The Tiebout hypothesis
B) moral hazard
C) adverse selection
D) the Coase theorem