ECON/625 ECON625 ECON 625 WEEK 1 QUIZ 1

ECON 625 WEEK 1 QUIZ 1

  • Question 1
   
 

What is the Nash Equilibrium Strategy (dominant strategy) for Alpha in the following matrix?

                                                                                                Beta:

 

    

Alpha:   Enter Market

    

               Do Not Enter Market

    
     
   

Answers:

A. 

Enter Market with pay off $10M
 

B. 

Enter Market with pay off $25M
 

C. 

Do Not Enter Market with pay off $8M
 

D. 

Do Not Enter Market with pay off $20M
 

E. 

There is no Nash Equilibrium for Alpha
     
  • Question 2
   
 

Suppose a factory is producing 80 units and the price of each unit is $10. If raising the price to $15 per unit results in sales of 50 units, what is the price elasticity of demand?

      
   

Answers:

A. 

0.6
 

B. 

1.3
 

C. 

6
 

D. 

13
 

E. 

0.75
     
  • Question 3
   
 

Matchmakers between manufacturers and sellers are called

      
   

Answers:

A. 

Agents
 

B. 

Factors
 

C. 

Brokers
 

D. 

Merchants
 

E. 

None of the Above
     
  • Question 4
   
 

At what point can a firm achieve a profit maximizing quantity?

      
   

Answers:

A. 

MR<MC
 

B. 

MR>MC
 

C. 

MC=D
 

D. 

MR=D
 

E. 

MR=MC
     
  • Question 5
   
 

What is a sunk cost?

      
   

Answers:

A. 

The “lower envelope” of short-run average cost functions
 

B. 

The average cost of operating a plant
 

C. 

A cost that always varies with the output of a factory
 

D. 

A cost that can be avoided if certain choices are made
 

E. 

A cost incurred no matter what the decision is and cannot be avoided
     
  • Question 6
   
 

Which one of the following best describes economies of scale?

      
   

Answers:

A. 

As output decreases, average cost rises
 

B. 

As output increases, average cost declines
 

C. 

As output decreases, average cost declines
 

D. 

As output increase, average cost remains the same
 

E. 

As output increases, average cost rises
     
  • Question 7
   
 

What is Nash equilibrium?

      
   

Answers:

A. 

A state where the sum of all payoffs is maximized
 

B. 

A state where each player always must play a dominant strategy
 

C. 

A state where the players always have achieved their best possible result
 

D. 

A state where each player is doing the best it can, given the strategies of all other players
 

E. 

A state at which the MR=MC for a firm
     
  • Question 8
   
 

Which of the following statements is true regarding the relationship between average and marginal cost functions?

      
   

Answers:

A. 

When average cost is an increasing function of output, marginal cost is less than average cost
 

B. 

The average cost function is always greater than the marginal cost function
 

C. 

When average cost is a decreasing function of output, marginal cost is greater than average cost.
 

D.

When average cost neither increases or decreases (because it is constant or at a minimum point), marginal cost is equal to average cost
 

E. 

The average cost function is always smaller than the marginal cost function
     
  • Question 9
 

Which of the following cost line items would be a fixed cost?

      
   

Answers:

A. 

Shipping/Delivery Charges
 

B. 

Packaging
 

C. 

Commissions to Salespeople
 

D. 

Rent
 

E. 

Raw Materials
     
  • Question 10
   
 

Which of the following best describes marginal cost?

      
   
   
   
   
   
   
     

 

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