Directions: This quiz contains 15 multiple choice questions. Select the correct answer by clicking on the appropriate button. After you have finished the quiz, click on the Grade my Quiz button at the bottom of the page.

1. The demand curve facing Why Toupee? Inc. (Hair Replacement Solutions for a New Millennium™) is described by the accompanying table. The firm's marginal revenue from the 14th unit is: Price Quantity 11 11 10 12 9 13 8 14 7 15 6 16

(a)    8 (b)    5 (c)    - 5 (d)    - 7

 

2. The profit-maximizing price and output choices for Allmart, Inc., are illustrated correctly in which diagram?

(a) (b) (c) (d)

 

3. Sooey Generis Corp. produces pigskin executive gifts in three plants. At its current output levels, marginal costs in the three plants are as follows: MC1(Q1) = $7, MC2(Q2) = $9, and MC3(Q3) = $12. Its marginal revenue equals $8. It could increase its profit by:

(a) decreasing Q1 and increasing Q2. (b) increasing Q1 and decreasing Q2 (c) decreasing Q1 and increasing Q3 (d) increasing Q2 and increasing Q3.

 

4. Danker Tanker Ltd. sells fresh water to the residents of two desert islands, Soif and Polydipsia. Demand on the two islands is described by the tables at right. The firm's marginal cost to deliver water to either island is $4. No other supplier can serve the islands and the islanders have no boats. What prices should DT charge on the two islands? Polydipsia Price Quantity 21 5 19 6 17 7 15 8 13 9 11 10 Soif Price Quantity 11 5 10 6 9 7 8 8 7 9 6 10

(a) It should charge $4 on Polydipsia and $4 on Soif.
(b) It should charge $21 on Polydipsia and $11 on Soif.
(c) It should charge $11 on Polydipsia and $11 on Soif.
(d) It should charge $17 on Polydipsia and $10 on Soif.

 

5. Cartel agreements often break down because:

(a) they are prosecuted by the Department of Justice under the Sherman Act. (b) it is hard for firms to agree on output levels. (c) firms have an incentive to exceed their agreed-upon outputs. (d) a cartel's restriction of industry output creates a shortage.

 

6. A set of strategies is a Nash equilibrium if:

(a) no player can gain by changing strategy on his or her own (that is, assuming that no other player changes strategy). (b) no player has an alternative strategy that is superior, regardless of what strategies other players choose. (c) every player is maximizing profit. (d) every player is maximizing utility.

 

7. A player's strategy is dominant if:

(a) it gives the player a greater utility or profit level than any other player receives. (b) the player cannot gain by changing strategy on his or her own (that is, assuming that no other player changes strategy). (c) it yields a payoff to the player that is at least as large as that obtained from any other strategy choice, regardless of the actions of other players. (d) it is part of a Nash equilibrium.

 

8. Payoffs to participants in a two-person game are described by the accompanying table. The first number in each cell is Frederic's payoff; the second is Mabel's payoff. (Top, Left) is:   Mabel Left Right Frederic Top  5, 6   0, 0  Bottom  1, 2   4, 3

(a) a Nash equilibrium but not a dominant strategy equilibrium. (b) a Nash equilibrium and a dominant strategy equilibrium. (c) a dominant strategy equilibrium but not a Nash equilibrium. (d) neither a Nash equilibrium nor a dominant strategy equilibrium.

 

9. Payoffs to participants in a two-person game are described by the accompanying table. The first number in each cell is Frederic's payoff; the second is Mabel's payoff. (Bottom, Right) is:   Mabel Left Right Frederic Top  5, 6   0, 0  Bottom  1, 2   4, 3

(a) a Nash equilibrium but not a dominant strategy equilibrium. (b) a Nash equilibrium and a dominant strategy equilibrium. (c) a dominant strategy equilibrium but not a Nash equilibrium. (d) neither a Nash equilibrium nor a dominant strategy equilibrium.

 

10. The autopsies-by-mail market is monopolistically competitive. A possible demand curve facing a firm in this industry when the industry is in long-run equilibrium is:

(a) D1. (b) D2. (c) D3. (d) D4.

 

11. Herring Ade® is a delicious new beverage produced by a single supplier whose cost and revenue functions are illustrated at right. The allocatively efficient quantity of this commodity is:

(a)     a. (b)     b. (c)     c. (d)     d.

 

12. The lunch-meat industry has eight firms. Their market shares are given in the table at right. The Herfindahl-Hirschman Index for this industry is: Firm Market Share Des Moines Sirloin 25% Pittsburgh Burger 20% Labrador Abbatoir 20% Bauhaus Slaughterhouse 15% Abercrombie Pastrami 9% New York Pork 6% Happaugue Hot Dog 3% Macon Bacon 2%

(a) 80. (b) 1780. (c) 1650. (d) 920.

 

13. Under the current Merger Guidelines, antitrust authorities would likely approve a merger involving Abercrombie Pastrami and: Firm Market Share Des Moines Sirloin 25% Pittsburgh Burger 20% Labrador Abbatoir 20% Bauhaus Slaughterhouse 15% Abercrombie Pastrami 9% New York Pork 6% Happaugue Hot Dog 3% Macon Bacon 2%

(a) neither New York Pork nor Happaugue Hot Dog. (b) either New York Pork or Happaugue Hot Dog. (c) New York Pork but not Happaugue Hot Dog. (d) Happaugue Hot Dog but not New York Pork.

 

14. Indy Pendants, Inc., is the monopoly supplier of exhaust-manifold-theme jewelry. The deadweight loss due to monopoly in this industry is the area of region:

(a)     aeb. (b)     aeh. (c)     aedc. (d)     aegf.

 

15. Gasco is a regulated public utility whose cost and revenue functions are shown at right. The most likely price that regulators would seek to impose on this firm is:

(a)     a. (b)     b. (c)     c. (d)     d.