1.

The equilibrium solution for the payoff matrix below is:

A. 1, 1 B. 2, 0 C. 0, 2 D. -1, -1 2. Consider the payoff matrix below facing two criminals.

Their options are either to confess or not to confess. The payoffs represent the number of years each will spend in jail. The Nash equilibrium for the above payoff matrix is: A. A: 20 yrs, B: 20 yrs B. A: 50 yrs, B: 2 yrs C. A: 2 yrs, B: 50 yrs D. A: 10 yrs, B: 10 yrs

3.

When suspects are interviewed in different rooms they do not know what the other suspects are going to do and hence seek the best deal for themselves. This illustrates: A. that criminals are irrational. B. the idea of a cooperative game. C. the idea of a non-cooperative game. D. that the police are not taking into account the suspects' rights.

4. What is true about the payoff matrix below?

A. Only player A has a dominant strategy. B. Only player B has a dominant strategy. C. Both players A and B have dominant strategies. D. Neither player A nor B has a dominant strategy.

5. Which of the following games has a first-mover advantage? A. Tic tac toe. B. Prisoner's dilemma. C. Rock, paper, scissors. D. Vickrey auction.

6. Accounting profit is equal to: A. total revenue minus implicit costs. B. total revenue minus explicit measurable costs. C. total revenue minus implicit and explicit costs. D. implicit and explicit revenues minus implicit costs.

7. A business owner makes 50 items by hand in 6 hours. She could have earned $10 an hour working for someone else. If each item sells for $5 and the explicit costs total $14, economic profit equals: A. $0. B. $64. C. $176. D. $236.

8. Rachel left her job as a graphic artist, where she earned $42,000 per year, to open her own graphic arts firm. Her explicit costs for her new business include: A. only the expenses incurred for office space, equipment, and supplies. B. only her foregone salary of $42,000 per year. C. both the expenses incurred for office space, equipment, and supplies and her foregone salary of $42,000 per year. D. neither the expenses incurred for office space, equipment, and supplies nor her foregone salary of $42,000 per year.

9. The short run is a period during which: A. some inputs are variable and no inputs are fixed. B. some inputs are variable and some inputs are fixed. C. no inputs are variable and all inputs are fixed. D. no inputs are variable and some inputs are fixed.

10.Long run decisions are: A. constrained because all inputs are variable. B. constrained because all inputs are fixed. C. constrained because some inputs are fixed while others are variable. D. unconstrained since all inputs are variable.

11.In the long run, a firm that does not benefit from economies of scope has complete control over all of the following variables except: A. production technology. B. plant size. C. the supply of inputs. D. the demand for inputs.

12.Economic efficiency is achieved at a particular output level if: A. marginal cost is as low as possible. B. average fixed cost is as low as possible. C. average total cost is as low as possible. D. average variable cost is as low as possible.

13.To achieve technical efficiency, managers should: A. use the highest quality inputs. B. use the most sophisticated technology. C. hire the most highly skilled employees. D. produce a level of output with the fewest possible inputs.

14.Which of the following provides the best explanation for diseconomies of scale? A. Increased specialization. B. Diminishing marginal productivity. C. Monitoring costs. D. Indivisible set-up costs.

15.Using 100 workers and 10 machines, a firm can produce 10,000 units of output; using 250 workers and 25 machines, the firm produces 21,000 units of output. These facts are best explained by: A. economies of scope. B. diseconomies of scale. C. economies of scale. D. diminishing marginal productivity.

16.If a firm in a perfectly competitive market experiences a technological breakthrough: A. other firms would find out about it eventually. B. other firms would find out about it immediately. C. other firms would not find out about it. D. some firms would find out about it but others would not.

17.In a perfectly competitive market, firms set: A. prices and quantities. B. prices but not quantities. C. quantities but not prices. D. neither prices nor quantities.

18.eBay.com is a vast auction site that is similar to a competitive market in some ways but also differs from it in others. In what way does eBay differ from what economists define as a competitive market? A. Sellers in competitive markets are usually large firms, but on eBay there are a large number of sellers. B. Sellers in competitive markets want to make a profit, but sellers on eBay are small and hence are only selling for fun. C. It is easy to start selling on eBay, but to enter a competitive market one must be organized as a corporation. D. Sellers on eBay sometimes mislead customers, while in a competitive market deceit cannot take place.

19.The profit-maximizing condition for a perfectly competitive firm is: A. MR = P. B. MR = AVC. C. P = MC. D. P = AVC.

20.A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should: A. produce more widgets. B. produce fewer widgets. C. continue producing 500 widgets. D. shut down

21.The demand curve for a monopolist is: A. perfectly elastic. B. not relevant since the monopolist sets price. C. downward sloping. D. perfectly inelastic.

22.A significant difference between monopoly and perfect competition is that: A. free entry and exit is possible in a monopolized industry but impossible in a competitive industry. B. competitive firms control market supply, but monopolies do not. C. the monopolist's demand curve is the industry demand curve, while the competitive firm's demand curve is perfectly elastic. D. profits are driven to zero in a monopolized industry, but may be positive in a competitive industry.

23.Marginal revenue is not equal to price for a monopolist because: A. the monopolist's demand curve is below its marginal revenue curve. B. total revenue increases as output increases. C. the monopolist sets price equal to marginal cost. D. the monopolist must lower the price of all units in order to sell more.

24.Refer to the graph below.

If the demand curve is curve D for a monopoly, the marginal revenue curve is: A. A, which intersects the x-axis at 1/4 the quantity where the demand curve intersects the x-axis. B. B, which intersects the x-axis at 1/2 the quantity where the demand curve intersects the x-axis. C. C, which intersects the x-axis at 3/4 the quantity where the demand curve intersects the x-axis. D. D, which intersects the x-axis at the same quantity where the demand curve intersects the x-axis.

25.Refer to the table above that shows the demand schedule for a product sold by a monopolist. Marginal revenue is positive: A. when price is $10. B. when price is above $10. C. when price is below $10. D. for every price.

26.In a monopolistically competitive market: A. firms produce differentiated products. B. there are barriers to entry. C. firms produce homogeneous products. D. the demand for any firm's product is perfectly elastic.

27.Because a monopolistic competitor has some monopoly power, advertising to increase that monopoly power makes sense as long as: A. the marginal benefit of advertising is positive. B. the marginal cost of advertising is positive. C. the marginal benefit of advertising exceeds the marginal cost of advertising. D. the marginal cost of advertising exceeds the marginal benefit of advertising.

28. If a monopolistically competitive firm is earning economic profits in the short-run, then: A. these profits will persist in the long-run because of the firm's limited monopoly power. B. these profits will be eliminated in the long-run as new firms enter the industry. C. its output will increase in the long-run. D. price will be driven down to minimum average total cost in the long-run.

29.Refer to the graph above. The firm in this monopolistically competitive industry will: A. earn economic profits of $70,000 per year. B. earn economic profits of $140,000 per year. C. incur economic losses of $140,000 per year. D. incur economic losses of $70,000 per year.

30.Refer to the graph above Q29. of a monopolistically competitive firm. The graph shows that: A. the industry is in long-run equilibrium. B. new firms will enter the industry. C. some existing firms will leave the industry. D. the price of the product is $90.

31.The fact that U.S. managers' salaries are substantially greater than those of comparable managers in Japan may be related to: A. an increase in the demand for CEOs. B. an increase in the supply of CEOs. C. the comparatively greater competitive markets in Japan. D. the greater number of public goods provided in the United States.

32.Refer to the graph below.

33. Although this monopolist could technically keep average total costs down to C0, its costs are C1. This is an example of a(n): A. lazy monopolist. B. Y-inefficient firm. C. monopolistic minimizer. D. oligopolistic market.

34. Refer to the graph above. A monopolist that efficiently produces the profit-maximizing level of output would have per-unit cost equal to: A. A B. B C. C D. D

35.Refer to the graph above. The per-unit cost incurred by a monopolist that is X-inefficient but produces the profit-maximizing level of output is best illustrated by: A. A B. B C. C D. D

36.The Sherman Antitrust Act: A. explicitly prohibits monopolies. B. prohibits contracts and business combinations in restraint of trade. C. provides a clear definition of "restraint of trade." D. defines unfair business practices. 37.Which of the following is least likely to be considered an unfair trade practice? A. Pricing "too low." B. Pricing "too high". C. Price discrimination. D. Marginal cost pricing. 38.Which of the following are most likely to be in violation of the Sherman and Clayton Antitrust Acts? A. Conglomerate mergers. B. Horizontal mergers. C. Vertical mergers. D. Diagonal mergers. 39.The act that declared illegal the practice of buying stock in a competitor's company when the purpose of buying the stock is to reduce competition is the: A. Sherman Antitrust Act of 1890. B. Clayton Antitrust Act. C. Federal Trade Commission Act. D. Cellar-Kefauver Act.

40.In 1938, the FTC was given the job of: A. regulating competition. B. limiting practices of businesses. C. preventing false and deceptive advertising. D. preventing tie-in contracts.

41.The effect that explains why workers tend to supply more hours when wages increase is called the: A. income effect. B. social effect. C. substitution effect. D. work effect.

42.The effect that explains why workers might supply fewer hours when their hourly wages increase is called the: A. income effect. B. leisure effect. C. substitution effect. D. work effect.

43.An increase in the marginal income tax rate is likely to: A. increase the quantity of labor supplied. B. decrease the quantity of labor supplied. C. decrease the quantity of labor demanded. D. increase the quantity of labor demanded.

44.Suppose the government reduces marginal income tax rates and increases welfare payments. This policy combination will: A. increase the incentive to work. B. reduce the incentive to work. C. have no effect on the incentive to work. D. have an ambiguous effect on the incentive to work.

45.When the labor supply curve is inelastic: A. the percentage change in the quantity of labor supplied exceeds the percentage change in the wage. B. the percentage change in the quantity of labor supplied is less than the percentage change in the wage. C. the percentage change in the quantity of labor supplied equals the percentage change in the wage. D. employers cannot lower wages without losing all of their workers.

46.All of the following are examples of socioeconomic distribution of income except how much: A. the top 10 percent of a population gets. B. blacks get relative to whites. C. two-parent households get relative to single-parent households. D. the young get relative to the old.

47.On its horizontal axis, a Lorenz curve measures: A. cumulative percentage of family income. B. amount of family income. C. cumulative percentage of families. D. demand of families.

48.If a nation's Lorenz curve lies on the 45 degree line of income equality: A. proportionately more of the nation's income is received by the lowest 20% of families than by the highest 20%. B. income is unequally distributed. C. proportionately more of the nation's income is received by the highest 20% of families than by the lowest 20%. D. the income received by each 20% of families is 20% of the total income.

49.Other things equal, an increase in the number of single-parent families would be expected to: A. increase income inequality, causing the Lorenz curve to shift toward the diagonal line. B. decrease income inequality, causing the Lorenz curve to shift toward the diagonal line. C. increase income inequality, causing the Lorenz curve to shift away from the diagonal line. D. decrease income inequality, causing the Lorenz curve to shift away from the diagonal line.

50.Which of the following statements is true? A. Income distribution became less equal from 1929 to 1970. B. Income distribution became less equal from 1970 to today. C. The income of the bottom fifth of families rose 10 percent from 1970 to today. D. The income of the bottom fifth of families fell 10 percent from 1929 to today.