Question 1

2.5 / 2.5 points

Game theory is concerned with

Question options:

  

   

A) 

predicting the results of bets     placed on games like roulette.

 

   

B) 

the choice of an     optimal strategy in conflict situations.

 

   

C) 

utility maximization by firms in     perfectly competitive markets.

 

   

D) 

the migration patterns of     caribou in Alaska.

 

Question 2

2.5 / 2.5 points

         

A major threat to longer-term profits exists when barriers to entry into an industry are high.

Question options:

  

True

 

False

 

Question 3

2.5 / 2.5 points

         

Which of the following is an example of a game theory strategy?

Question options:

  

   

A) 

You scratch my     back and I’ll scratch yours.

 

   

B) 

If the shoe fits, wear it.

 

   

C) 

Monkey see, monkey do.

 

   

D) 

None of the above.

 

Question 4

2.5 / 2.5 points

         

Which of the following is correct concerning opportunity cost?

Question options:

  

   

A) 

Except to the     extent that you pay more for them, opportunity costs should not include the     cost of things you would have  
    purchased anyway.

 

   

B) 

To compute opportunity costs,     you should subtract benefits from costs.

 

   

C) 

Opportunity costs and the idea     of trade-offs are not closely related.

 

   

D) 

Rational people should compare     various options without considering opportunity costs.

 

Question 5

2.5 / 2.5 points

         

To achieve more market power, firms can:

Question options:

  

   

A) 

Raise their profit margin on     prices

 

   

B) 

Differentiate their     products from the products of their rivals

 

   

C) 

Lobby the government to     eliminate barriers to entry

 

   

D) 

Reduce their costs of production

 

   

E) 

Advertise that they charge low     prices

 

Question 6

2.5 / 2.5 points

         

Carol’s Candies is producing 150 boxes of candy a day. Carol’s marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

Question options:

  

   

A) 

decrease output to     increase profit.

 

   

B) 

maintain the current level of     output to maximize profit.

 

   

C) 

increase output to increase     profit.

 

   

D) 

Not enough information is given     to determine if Carol should increase, decrease, or not change her level of     output.

 

Question 7

2.5 / 2.5 points

         

Game theory refers to

Question options:

  

   

A) 

a plan for the actions that a     player in a game will take under every conceivable circumstance that the     player might face.

 

   

B) 

a situation in which each player     chooses the strategy that yields the highest payoff, given the strategy     chosen by the other players.

 

   

C) 

optimal decision making by     microeconomic agents.

 

   

D) 

the branch of     microeconomics concerned with the analysis of optimal decision making in     competitive situations

 

Question 8

2.5 / 2.5 points

         

In perfect competition, a firm’s marginal revenue equals its:

Question options:

  

   

A) 

Price

 

   

B) 

Supply curve

 

   

C) 

Total revenue

 

   

D) 

Average revenue

 

Question 9

2.5 / 2.5 points

         

A dominant strategy

Question options:

  

   

A) 

is a strong strategy.

 

   

B) 

guarantees a Nash equilibrium.

 

   

C) 

is a strategy that     is better for a player than any other the player might choose, regardless     of the other player’s strategy.

 

   

D) 

depends on the other player’s     strategy

 

Question 10

0 / 2.5 points

         

Which one of the following would Adam Smith agree is an example of market failure requiring government interference?

Question options:

  

   

A) 

Many dot.com internet based     companies go bankrupt in 2000.

 

   

B) 

Alex Rodriguez is offered $252     million to play baseball for 10 years.

 

   

C) 

Stock values of many high tech     companies fall by more than 50% in 2000.

 

   

D) 

The production of steel pollutes     the air and endangers the environment.

 

   

E) 

The price of heating oil     continues to increase making it difficult, if not impossible, for     the poor to be able to afford to heat their homes this winter.

 

Question 11

2.5 / 2.5 points

         

In the long run, the monopolist can remain in the industry at a price that is just below long-run average costs.

Question options:

  

True

 

False

 

Question 12

2.5 / 2.5 points

         

Which of the following is the best example of a public good?

Question options:

  

   

A) 

an amusement park like Disney     World

 

   

B) 

a civic center owned and     operated by the government

 

   

C) 

a state university

 

   

D) 

a regional flood     control project

 

Question 13

2.5 / 2.5 points

         

In game theory, a choice that is optimal for a firm no matter what its competitors do is referred to as the dominant strategy.

Question options:

  

True

 

False

 

Question 14

2.5 / 2.5 points

         

The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CD’s sold by Dizzy Discs

Question options:

  

   

A) 

has positive slope.

 

   

B) 

has negative slope.

 

   

C) 

is horizontal.

 

   

D) 

is vertical.

 

Question 15

2.5 / 2.5 points

         

In the long run, firms under monopoly or oligopoly must earn normal profits.

Question options:

  

True

 

False

 

Question 16

2.5 / 2.5 points

         

Which one of the following does not occur in perfect competition?

Question options:

  

   

A) 

Firms and buyers are completely     informed about the prices of the products of each firm in the industry

 

   

B) 

There are     significant restrictions on entry into the industry

 

   

C) 

Firms already in the industry     have no advantage over potential new entrants

 

   

D) 

There are many buyers

 

   

E) 

No single firm can exert a     significant influence on the market price of the good

 

Question 17

2.5 / 2.5 points

         

Which of the following will increase the likelihood a person will experience periods of poverty?

Question options:

  

   

A) 

completing high school rather     than dropping out

 

   

B) 

getting married before having a     child

 

   

C) 

having a child as     a teenage single parent

 

   

D) 

maintaining full-time employment

 

Question 18

2.5 / 2.5 points

         

As a firm loses its monopoly status, becoming more competitive as new firms enter the market, the ex-monopoly firm’s demand curve:

Question options:

  

   

A) 

remains the same but is now only     part of market demand

 

   

B) 

shifts to the left     and becomes more elastic

 

   

C) 

shifts to the left and becomes     more inelastic

 

   

D) 

shifts to the right and becomes     more elastic

 

   

E) 

shifts to the right and becomes     more inelastic

 

Question 19

2.5 / 2.5 points

         

According to Adam Smith’s theory of the “invisible hand,” businesses will produce the products consumers most desire because

Question options:

  

   

A) 

this will maximize consumer     satisfaction.

 

   

B) 

the government requires them to     do so.

 

   

C) 

this will maximize     business profits.

 

   

D) 

this will maximize society’s     welfare.

 

   

E) 

this will generate consumer     “good will.”

 

Question 20

2.5 / 2.5 points

         

Which one of the following characteristics does not apply to oligopoly?

Question options:

  

   

A) 

The industry is often     characterized by extensive non-price competition

 

   

B) 

A few large firms account for a     high percentage of industry output

 

   

C) 

Each firm faces a downward     sloping demand curve

 

   

D) 

Many small firms     account for a high percentage of industry output

 

Question 21

2.5 / 2.5 points

         

Externalities can be positive because

Question options:

  

   

A) 

there is no concept for marginal     benefit.

 

   

B) 

utility can be     impacted positively as well as negatively

 

   

C) 

marginal damages do not last     over time

 

   

D) 

positive externalities are     subsidies

 

Question 22

2.5 / 2.5 points

         

In oligopoly:

Question options:

  

   

A) 

firms compete with each other     only by raising and lowering quantity because prices are fixed

 

   

B) 

the fewness of     firms creates mutual interdependence in pricing among the firms

 

   

C) 

the firm is the industry

 

   

D) 

firms have no difficulty     entering and leaving the market

 

   

E) 

the firm having a natural     monopoly sets price for the others

 

Question 23

2.5 / 2.5 points

         

Perfect competition occurs in a market where there are many firms each selling:

Question options:

  

   

A) 

A similar product

 

   

B) 

A unique product

 

   

C) 

A capital intensive product

 

   

D) 

An identical     product

 

   

E) 

A competitive product

 

Question 24

2.5 / 2.5 points

         

One difference between perfect competition and monopolistic competition is that:

Question options:

  

   

A) 

In perfect competition, the     products are slightly differentiated between firms

 

   

B) 

There are a smaller number of     firms in perfectly competitive industries

 

   

C) 

Monopolistic competition has     barriers to entry, whereas perfect competition has none

 

   

D) 

Firms in     monopolistic competition have some degree of market power

 

   

E) 

There are a larger number of     firms in monopolistic competition

 

Question 25

2.5 / 2.5 points

         

Price discrimination refers to charging different products in different markets.

Question options:

  

True

 

False

 

Question 26

2.5 / 2.5 points

         

In game theory, the outcome or consequence of a strategy is referred to as the

Question options:

  

   

A) 

payoff.

 

   

B) 

penalty.

 

   

C) 

reward.

 

   

D) 

end-game strategy.

 

Question 27

2.5 / 2.5 points

         

A game that involves multiple moves in a series of identical situations is called a

Question options:

  

   

A) 

sequential game.

 

   

B) 

repeated game.

 

   

C) 

zero-sum game.

 

   

D) 

nonzero-sum game.

 

Question 28

2.5 / 2.5 points

         

Game theory refers to

Question options:

  

   

A) 

a plan for the actions that a     player in a game will take under every conceivable circumstance  that     the player might face.

 

   

B) 

a situation in which each player     chooses the strategy that yields the highest payoff, given the strategy     chosen by the other players.

 

   

C) 

optimal decision making by     microeconomic agents.

 

   

D) 

the branch of     microeconomics concerned with the analysis of optimal decision making in
    competitive situations.

 

Question 29

2.5 / 2.5 points

         

Which of following is an example of a monopolistically competitive firm?

Question options:

  

   

A) 

Farmer Jones’s wheat farm.

 

   

B) 

Post Breakfast Cereals.

 

   

C) 

TCI Cablevision, a supplier of     cable T.V. services.

 

   

D) 

T.J.’s Clothes, a     local retail clothing store.

 

   

E) 

None of the above.

 

Question 30

2.5 / 2.5 points

         

A game that involves interrelated decisions that are made over time is a

Question options:

  

   

A) 

sequential game.

 

   

B) 

repeated game.

 

   

C) 

zero-sum game.

 

   

D) 

nonzero-sum game.

 

Question 31

2.5 / 2.5 points

         

A firm that considers the potential reactions of its competitors when it makes a decision is engaged in strategic behavior.

Question options:

  

True

 

False

 

Question 32

2.5 / 2.5 points

         

Public goods can be

Question options:

  

   

A) 

provided privately

 

   

B) 

provided publicly

 

   

C) 

subject to free rider problems

 

   

D) 

all of the above

 

Question 33

2.5 / 2.5 points

         

To cure the problem of externalities, such as pollution, economists recommend that government:

Question options:

  

   

A) 

regulate polluters.

 

   

B) 

pursues a policy of     laissez-faire, “hands off” businesses.

 

   

C) 

determine mandatory limits     controlling the amount of pollution which businesses may generate.

 

   

D) 

use the market     mechanism to control undesirable externalities.

 

Question 34

2.5 / 2.5 points

         

If a good is characterized by easy exclusion but many may concurrently use it without reducing the amount available for others, the good is a:

Question options:

  

   

A) 

private good

 

   

B) 

common property resource

 

   

C) 

toll goods

 

   

D) 

public good

 

Question 35

2.5 / 2.5 points

         

Extensive advertising can be a powerful barrier to entry into an industry:

Question options:

  

True

 

False

 

Question 36

2.5 / 2.5 points

         

_______, in his 1776 work _______, introduced the concept of the invisible hand.

Question options:

  

   

A) 

Eli Hecksher; The Wealth of     Nations

 

   

B) 

Adam Smith; The     Wealth of Nations

 

   

C) 

Paul Samuelson; Economics

 

   

D) 

Karl Marx; The Wealth of Nations

 

Question 37

0 / 2.5 points

         

Pure Strategy is:

Question options:

  

   

A) 

is a specific choice of a     strategy from the player’s possible strategies in the game, whereas a mixed     strategy is a choice between quantity and price optimization.

 

   

B) 

is a specific choice of a     strategy outside of the player’s possible strategies in the game, whereas a     mixed strategy is a choice among two or more pure strategies according to     pre-specified probabilities.

 

   

C) 

is a specific     choice of a strategy outside of the player’s possible strategies in the     game, whereas a mixed strategy is a choice between quantity and price     optimization.

 

   

D) 

is a specific choice of a     strategy from the player’s possible strategies in the game, whereas a mixed     strategy is a choice among two or more pure strategies according to     pre-specified probabilities

 

Question 38

2.5 / 2.5 points

         

Suppose Kevin offers to match his competitors’ price in an oligopoly market. This will have the effect of

Question options:

  

   

A) 

Eliminating his competitors’ incentive to     reduce price if his threat is credible.

 

   

B) 

Driving out his competition.

 

   

C) 

Increasing his competitors incentive to reduce price if his threat is     credible.

 

   

D) 

Triggering an antitrust investigation.

 

   

E) 

None of the above.

 

Question 39

2.5 / 2.5 points

         

Under which type of market structure is price rigidity often predicted?

Question options:

  

   

A) 

Natural monopoly

 

   

B) 

Imperfect competition

 

   

C) 

Perfect competition

 

   

D) 

Pure monopoly

 

   

E) 

Oligopoly

 

Question 40

2.5 / 2.5 points

         

Industrial policy

Question options:

  

   

A) 

is strategic behavior that takes place at the national level.

 

   

B) 

may be accomplished by protecting and subsidizing selected industries.

 

   

C) 

is intended to provide competitive advantage to selected firms.

 

   

D) 

All of the above.