Question Question 1 The short-run cost function is:

Question 1

The short-run cost function is:
Answer
where all inputs to the production process are variable
relevant to decisions in which one or more inputs to the production process are fixed
not relevant to optimal pricing and production output decisions
crucial in making optimal investment decisions in new production facilities

In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called:
Answer
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.

Which of the following is not
an assumption of the linear breakeven model:
Answer
constant selling price per unit
decreasing variable cost per unit
fixed costs are independent of the output level
a single product (or a constant mix of products) is being produced and sold
all costs can be classified as fixed or variable

Question 4

A ____ total cost function implies that marginal costs ____ as output is increased.
Answer
linear; increase linearly
quadratic; are constant
cubic; increase linearly
linear; are constant

Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long distance service is:
Answer
Governmental pressure to lower the price
Reduced demand for long distance service
Entry into this industry pushes prices down
Lower price for a barrel of crude oil
Increased cost of providing long distance service

What is the profit maximization point for a firm in a purely competitive environment?
Answer
The output where P = MC
The output where P < MC
The output where P > MC
The output where MR = MC
The output where AVC < P

Question 7

The problems of asymmetric information exchange arise ultimately because
Answer
one party to the exchange possesses different information than another
one party has more information than another
one party knows nothing
one party cannot independently verify the information of another
information is scarce

Question 8

An “experience good” is one that:
Answer
Only an expert can use
Has undetectable quality when purchased
Can be readily experienced simply by touching or tasting
Improves with age, like a fine wine

Of the following, which is not
an economic rationale for public utility regulation?
Answer
production process exhibiting increasing returns to scale
constant cost industry
avoidance of duplication of facilities
protection of consumers from price discrimination

____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility’s plant over a larger number of units of output.
Answer
Peak load pricing
Inverted block pricing
Block pricing
First degree price discrimination

In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
Answer
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly

Question 12

Regulatory agencies engage in all of the following activities except _______.
Answer
controlling entry into the regulated industries
overseeing the quality of service provided by the firms
setting federal and state income tax rates on regulated firms
setting prices that consumers will pay

5 points
In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm’s ____ will not change.
Answer
price
output
marketing strategy
inventory

Barometric price leadership exists when
Answer
one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry.
one firm imposes its best price on the rest of the industry.
all firms agree to change prices simultaneously.
one company forms a price umbrella for all others.
the firms are all colluding.

Question 15

A(n) ____ is characterized by a relatively small number of firms producing a product.
Answer
monopoly
syndicate
cooperative
oligopoly

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