EXM - ECON

1. In the short run, the marginal cost curve crosses the average total cost curve at:
a point just below the average fixed cost curve.
the minimum point of the average total cost curve.
the maximum point of the average total cost curve.
the point where the average total cost curve and average variable cost curve intersect.

2. The change in net benefits that arises from a one-unit change in quantity is the:
marginal net benefits.
total net benefits.
variable benefits.
present value benefits.

3. The optimal amount of studying is determined by comparing:
marginal benefit and the total cost of studying.
marginal benefit and the total benefit of studying.
marginal benefit and the marginal cost of studying.
total benefit and the total cost of studying.

4. The optimal strategy for a risk-neutral bidder in a second-price, sealed-bid auction with independent private values is to bid:
slightly less than his or her valuation.
slightly higher than his or her valuation.
his or her true valuation.
None of the statements is correct.

5. Differentiated goods are a feature of a:
perfectly competitive market.
monopolistically competitive market.
monopolistic market.
monopolistically competitive market and monopolistic market.

6. The optimal bid for an individual participating in a first-price, sealed-bid auction with independent private values is to bid:
more than the individual's valuation of the item.
less than the individual's valuation of the item.
exactly the individual's valuation of the item.
There is not an optimal bid strategy for all individuals when independent private values exist.

7. You are the manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is -4, then your profit-maximizing price is:
$2.00.
$2.50.
$4.00.
$5.00.

8. If apples have an own price elasticity of -1.2 we know the demand is:
unitary.
indeterminate.
elastic.
inelastic.

9. Other things held constant, the lower the price of a good
the lower the demand.
the higher the demand.
the greater the consumer surplus.
the lower the consumer surplus.

10. The Lerner index in the paper industry is 0.58. Based on this information, a firm charging $3.25 per ream of paper should have a marginal cost of:
$0.
$1.365.
$1.885.
$3.25.

11. You are the manager of a monopoly that faces a demand curve described by P = 230 - 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are:
495.
475.
480.
415.

12. 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 output for your firm is:
4.
5.
6.
7.

13. Other things held constant, the greater the price of a good
the lower the demand.
the higher the demand.
the greater the consumer surplus.
the lower the consumer surplus.

14. Shirking can take the form of:
long lunch hours.
sleeping at work.
leaving work early.
All of the statements associated with this question are correct.

15. What is the immediate result of applying the Clean Air Act to a previously nonregulated industry?
Price decreases and production is reduced.
Price increases and production is reduced.
Price decreases and production is enlarged.
Price increases and production is enlarged.

16. 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

17. Jaynet spends $20,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm - one offer was for $85,000 per year, and the other was for $115,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 15 paintings per year at a price of $13,000 each:

a. What are her accounting profits?

$

b. What are her economic profits?

$

18. You are the manager of a firm that receives revenues of $30,000 per year from product X and $100,000 per year from product Y. The own price elasticity of demand for product X is -1, and the cross-price elasticity of demand between product Y and X is 1.2.

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.

$

19. You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1's elasticity of demand is -5, while group 2's is -2. Your marginal cost of producing the product is $30.

a. Determine your optimal markups and prices under third-degree price discrimination.

Instruction: Round your answers to two decimal places.

Markup for group 1:
Price for group 1: $

Markup for group 2:
Price for group 2: $

b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.

Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.

There are two different groups with different (and identifiable) elasticities of demand.

We are able to prevent resale between the groups.

At least one group has elasticity of demand less than one in absolute value.

At least one group has elasticity of demand greater than 1 in absolute value.