question

Game theory is the study of ___.

answer

strategic interactions

question

In a simultaneous move game, ___.

answer

each player has to make his choice without knowing his rival's choice

question

A dominant strategy ___.

answer

results in a higher payoff irrespective of the strategy chosen by the other player

question

In a zero-sum game, ___.

answer

one player's loss is another player's gain

question

Which of the following is true of an extensive-form game?

answer

it involves sequential decision making by the players

question

The first mover in an extensive-form game should use ________ to win the game.

answer

backward induction

question

Goods that are similar but are not perfect substitutes are called ________ goods.

answer

differentiated

question

________ is the market structure in which there are many rival firms producing differentiated products.

answer

monopolistic competition

question

Which of the following is a feature of an oligopoly market?

answer

each firm's action affects the decisions of its rival

question

In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than his rival as long as ________.

answer

the rival's price is above marginal cost

question

Firms in an oligopoly often do not collude with each other because ________.

answer

collusion is illegal

question

The price charged by a monopolistic competitor is ________.

answer

higher than the marginal cost of production

question

Total surplus is maximized in a(n) ________.

answer

perfectly competitive market

question

Oligopolists merge to ________.

answer

increase market power

question

An industry is deemed concentrated when ________.

answer

a few firms account for a large fraction of total sales in that industry

question

There are four firms in the cement industry in Richland. Firm A has a market share of 30%, Firm B has a market share of 20%, Firm C has a market share of 25%, and Firm D has a market share of 25%. The Herfindahl-Hirschman Index for the cement industry is ________.

answer

2,550

question

Which branch of economics considers that economic agents do not always act rationally?

answer

behavioral economics

question

Jack refused to contribute money for building a public park when he was contacted individually. However, he readily agreed to donate when he was asked to contribute for a similar cause in front of his neighbors. Such behavior is an example of ________.

answer

impure altruism

question

Scenario: Jack and Jill are two siblings. Jack's father asked him how much he would offer to Jill if he gives him $50 as pocket money. He also told Jack that if Jill refuses the offer Jack makes, neither of them will get any money.This is an example of a(n) ________.

answer

ultimatum game

question

The reservation value of a seller reflects her ________.

answer

marginal cost

question

When buyers and sellers optimize in a perfectly competitive market, ________.

answer

social surplus is maximized

question

The entry of new firms into a perfectly competitive market will cause:

answer

a decrease in the profitability of existing firms

question

If prices are held below the equilibrium price:

answer

there exists a shortage in the market

question

________ is concerned with the distribution of resources across society.

answer

equity

question

Which of the following best describes a command economy?

answer

an economy where strong controls are imposed by the ruling authority

question

A production possibilities curve shows the relationship between:

answer

the maximum production of one good for a given level of production of another good

question

Specialization occurs when each individual, firm, or country:

answer

produces only a few specific goods and relies on trade for the other goods and services it needs

question

Traffic congestion is an example of a ________.

answer

negative externality

question

If negative externalities are present in a market, ________.

answer

the quantity supplied in the market is larger than the socially optimal level

question

Deadweight loss refers to the loss in ________.

answer

total surplus due to a market distortion such as an externality

question

The Coase Theorem states that ________.

answer

negotiation between economic agents leads to an efficient allocation of resources

question

Public goods are ________ in consumption.

answer

non-excludable and non-rival

question

The free-rider problem exists for goods that are ________.

answer

non-excludable

question

Overfishing leading to a rapid depletion of the stock of fish is an example of ________.

answer

the tragedy of the commons

question

In a progressive tax system, ________.

answer

the marginal tax rate exceeds the average tax rate

question

The incidence of a per-unit tax on a good is identical for buyers and sellers of the good if:

answer

the buyers and sellers of the good are equally sensitive to price changes

question

Compared to a firm under perfect competition, a monopolist:

answer

charges more and produces less

question

The price effect of a price decrease by a monopolist refers to:

answer

the loss in revenue due to the price reduction.

question

Which of the following statements explains why monopolies weaken the functioning of the invisible hand?

answer

the quantity produced by a monopoly is too low

question

Randomization is the assignment of subjects by ________ to a ________.

answer

chance, rather than by choice; treatment group or into a control group

question

John has to choose between a camping holiday and a holiday in Las Vegas. If he evaluates the total net benefit of both alternatives before coming to a decision, he is using the technique of:

answer

optimization in levels

question

Gary has to decide between attending a two-day art workshop and a four-day art workshop. If he evaluates only the change in net benefit when he switches between the two options, he is using the technique of:

answer

optimization in differences

question

The techniques of optimization in levels and optimization in differences:

answer

provide identical answers when comparing the same set of alternatives

question

Total cost falls when marginal cost is ________, and total cost rises when marginal cost is ________.

answer

negative; positive

question

Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will:

answer

lose almost all of his buyers

question

The Law of Demand states that:

answer

the quantity demanded of a commodity varies inversely with the price of the commodity

question

Which of the following pairs of goods are likely to be considered complements?

answer

pens and writing pads

question

Which of the following is likely to cause the demand curve for cars to shift to the left?

answer

a rise in the price of gasoline

question

Which of the following is likely to shift the market demand curve for school textbooks to the right?

answer

an increase in the enrollment rates in high schools

question

A fall in the price of flour, used in making cakes, is likely to:

answer

increase the supply of cakes

question

Other things remaining the same, a right shift in the supply curve will lead to:

answer

a decrease in the equilibrium price and an increase in the equilibrium quantity

question

If the demand and supply curves for a commodity both shift to the left by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

answer

the same price and a lower quantity

question

A price ceiling imposed by the government:

answer

can create situations of excess demand

question

A budget constraint is a straight line because:

answer

a consumer faces a fixed price of both goods that do not change with changes in consumption

question

While making a purchase decision using marginal thinking, a buyer should buy the good that yields the:

answer

highest marginal benefit per dollar spent

question

The general rule for welfare maximization suggests that in personal equilibrium:

answer

the ratio of marginal benefits to price should be identical across all goods

question

________ is the difference between the willingness to pay and the price paid for a good.

answer

consumer surplus

question

If the price of a good increases, ________.

answer

the consumer surplus decreases

question

Elasticity is:

answer

the ratio of the percentage change in two variables

question

Negative values of the price elasticity of demand of a good can be attributed to:

answer

the Law of Demand

question

If a good has a price elasticity of demand equal to 0, ________.

answer

the quantity demanded is completely unaffected by a change in its price

question

If a good has a price elasticity of demand of -3, it implies that:

answer

if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%

question

Which of the following pairs of goods has a negative cross-price elasticity?

answer

pens and paper notebooks

question

Which of the following statements is true about the income elasticity of demand?

answer

increase in the price of the good will increase the firm's revenue

question

Which of the following examples best describes the concept of free entry?

answer

Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off

question

Net benefits of sellers represent their:

answer

profits

question

The Law of Diminishing Marginal Returns states that:

answer

successive increases in inputs eventually lead to less additional output

question

________ are costs that, once committed, can never be recovered and should not affect current and future production costs.

answer

sunk costs

question

In the long run, a firm should exit when:

answer

price is less than average total cost

question

Entry of new firms into an existing market causes:

answer

a rightward shift of the market supply curve

question

In the long run, under perfect competition:

answer

firms earn zero economic profit because of free entry and exit of firms

question

A ________ is a payment or a tax break used as an incentive for an agent to complete an activity.

answer

subsidy

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