Question 1

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated

Question 2

A firm in a perfectly competitive market faces the following total cost function: $$TC = 100 + 20Q + Q^2$. What is the firm's short-run supply curve?

Accepted Answer

$$Q = P/2 - 10 if$$ $$P \geq 20$$, $$Q = 0 if$$ $$P \u003c 20$$

Question 3

In the short run, a perfectly competitive firm will shut down if:

Accepted Answer

$$P \u003c min\ AVC$$

Question 4

Suppose the market demand is $$D(P) = 25,000 - 1,000P$$ and the long-run average cost for each firm is $$AC = 40 - Q + 0.01Q^2$. Marginal cost is MC = 40 - 2Q$$ + $$0.03Q^2. $$What is the equilibrium price in the long run?

Accepted Answer

$$P^* = 15$$

Question 5

Which formula correctly expresses economic profit?

Accepted Answer

Economic profit = Revenue $$-$$ Explicit costs $$-$$ Opportunity cost

Question 6

A per-unit tax is imposed on a competitive market. Which of the following is true?

Accepted Answer

The supply curve shifts upward by the amount of the tax

Question 7

If the price elasticity of demand is $$-2$$ and marginal cost is $$50$$, what is the monopoly price using the inverse elasticity pricing rule?

Accepted Answer

$$P = 100$$

Question 8

In the Cournot model with two identical firms, market demand $$P = 100 - Q$$ and $$MC = 10. $$What is each firm's equilibrium output?

Accepted Answer

$$Q_1$$^* = $$Q_2^* = 30$

Question 9

Which of the following best describes the Bertrand Paradox?

Accepted Answer

With homogeneous products, two firms competing in prices will set $$P = MC$$ and earn zero profit

Question 10

A dominant firm faces market demand $$Q_D(P)$$ and a competitive fringe with supply $$S_{fringe}(P). $$The dominant firm's residual demand is:

Accepted Answer

$$Q_{residual}(P) = Q_{market}(P) - S_{fringe}(P)$$

Question 11

In a simultaneous-move game, a Nash equilibrium is defined as:

Accepted Answer

A set of strategies where each player's choice is a best response to the other's

Question 12

In a repeated Prisoner's Dilemma, cooperation can be sustained if the discount factor $$\delta is$$:

Accepted Answer

$$\delta \u003e (X - C)/(X - P)$$,\ where $$X is $$the one-shot cheat payoff, $$C is $$the cooperate payoff, $$P is $$the punishment payoff

Question 13

Which of the following is TRUE about the Stackelberg model compared to Cournot?

Accepted Answer

The leader produces more and earns higher profit than the follower

Question 14

A monopsonist faces a labour supply curve $$w = 4 + L$$ and marginal revenue product of labour $$MRPL = 40. $$What is the profit-maximizing quantity of labour hired?

Accepted Answer

$$L^* = 18$$

Question 15

Which of the following statements about producer surplus (PS) is correct?

Accepted Answer

In the short run, PS is greater than economic profit because PS ignores sunk costs

Question 16

If a government sets a binding price ceiling below equilibrium, what will occur?

Accepted Answer

A shortage, because quantity demanded exceeds quantity supplied

Question 17

In a mixed-strategy Nash equilibrium, what condition must hold for a player who is randomizing between two actions?

Accepted Answer

Both actions must yield the same expected payoff

Question 18

Which of the following is the correct formula for the Lerner Index?

Accepted Answer

$$L = (P - MC)/P$$

Question 19

Which of the following best explains why a monopolist never produces in the inelastic region of the demand curve?

Accepted Answer

Marginal revenue would be negative, so reducing output would increase profit

Intermediate Microeconomics: Competitive Markets, Government Intervention, Monopoly, Oligopoly, and Game Theory

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