Questions and Answers of Economics For Healthcare Managers

Which of the following is a game theory strategy for oligopolists to avoid a low-price outcome?a. Tit-for-tatb. Price leadershipc. Carteld. All of the above
Which of the following is a game theory strategy for oligopolists to avoid a low-price outcome?a. Tit-for-tatb. Win-winc. Last-in fi rst-outd. Second best
Suppose costs are identical for the two fi rms in Exhibit 10. Each fi rm assumes without formal agreement that if it sets the high price, its rival will not charge a lower price. Under
Suppose costs are identical for the two fi rms in Exhibit 10. If both fi rms assume the other will compete and charge a lower price, equilibrium will be established bya. Zeba Oil charging $100 and
Assume costs are identical for the two fi rms in Exhibit 10. If both fi rms were allowed to form a cartel and agree on their prices, equilibrium would be established bya. Zeba Oil charging $100 and
Which of the following is evidence that OPEC is a cartel?a. Agreement on price and output quotas by oil ministriesb. Ability to raise prices regardless of demandc. Mutual interdependence in pricing
According to the kinked demand curve theory, when one fi rm raises its price, other fi rms willa. also raise their prices.b. refuse to follow.c. increase their advertising expenditures.d. exit the
The kinked demand curve theory attempts to explain why an oligopolistic fi rma. has relatively large advertising expenditures.b. fails to invest in research and development(R&D).c. infrequently
A characteristic of an oligopoly isa. mutual interdependence in pricing decisions.b. easy market entry.c. both (a) and (b).d. neither (a) nor (b).
The cigarette industry in the United States is described asa. a monopoly.b. perfect competition.c. monopolistic competition.d. an oligopoly.
The “Big Three” U.S. automobile industry is described asa. a monopoly.b. perfect competition.c. monopolistic competition.d. an oligopoly.
Monopolistic competition is an ineffi cient market structure becausea. fi rms earn zero profi t in the long run.b. marginal cost is less than price in the long run.c. a wider variety of products is
One possible effect of advertising on a fi rm’s long-run average cost curve is toa. raise the curve.b. lower the curve.c. shift the curve rightward.d. shift the curve leftward.
A monopolistically competitive fi rm in the long run earns the same economic profi t as aa. perfectly competitive fi rm.b. monopolist.c. cartel.d. none of the above.
A monopolistically competitive fi rm is ineffi cient because the fi rma. earns positive economic profi t in the long run.b. is producing at an output where marginal cost equals price.c. is not
The theory of monopolistic competition predicts that in long-run equilibrium, a monopolistically competitive fi rm willa. produce the output level at which price equals long-run marginal cost.b.
A monopolistically competitive fi rm willa. maximize profi ts by producing where MR 5 MC.b. not earn an economic profi t in the long run.c. shut down if price is less than average variable cost.d. do
Which of the following is not a characteristic of monopolistic competition?a. A large number of small fi rmsb. A differentiated productc. Easy market entryd. A homogeneous product
Which of the following industries is the best example of monopolistic competition?a. Wheatb. Restaurantc. Automobiled. Water service
An industry with many small sellers, a differentiated product, and easy entry would best be described as which of the following?a. Oligopolyb. Monopolistic competitionc. Perfect competitiond. Monopoly
The monopolist, unlike the perfectly competitive fi rm, can continue to earn an economic profi t in the long run because ofa. collusive agreements with competitors.b. price leadership.c. cartels.d. a
In contrast to a perfectly competitive fi rm, a monopolist operates in the long run at a quantity of output at whicha. P 5 MC.b. MR 5 MC.c. P 5 ATC.d. P . MR.
Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost
At any point where a monopolist’s marginal revenue is positive, the downward-sloping straight-line demand curve isa. perfectly elastic.b. elastic, but not perfectly elastic.c. unit elastic.d.
Under both perfect competition and monopoly, a fi rma. is a price taker.b. is a price maker.c. will shut down in the short run if price falls short of average total cost.d. always earns a pure
What is the act of buying a commodity at a lower price and selling it at a higher price?a. Buying shortb. Discountingc. Tariffi ngd. Arbitrage
For a monopolist to practice effective price discrimination, one necessary condition isa. identical demand curves among groups of buyers.b. differences in the price elasticity of demand among groups
If the monopolist in Exhibit 11 operates at the profi t-maximizing output, it will earn total revenue to pay about what portion of its total fi xed cost?a. Noneb. One-halfc. Two-thirdsd. All total fi
To maximize profi t or minimize loss, the monopolist in Exhibit 11 should set its price ata. $30 per unit.b. $25 per unit.c. $20 per unit.d. $10 per unit.e. $40 per unit. Exhibit 11 Profit Maximizing
As shown in Exhibit 11, this monopolista. should shut down in the short run.b. should shut down in the long run.c. earns zero economic profi t.d. earns positive economic profi t. Exhibit 11 Profit
As shown in Exhibit 11, the profi t-maximizing or loss-minimizing output for this monopolist isa. 100 units per day.b. 200 units per day.c. 300 units per day.d. 400 units per day. Exhibit 11 Profit
Which of the following is true for the monopolist?a. Economic profi t is possible in the long run.b. Marginal revenue is less than the price charged.c. Profi t maximizing or loss minimizing occurs
A monopolist setsa. the highest possible price.b. a price corresponding to minimum average total cost.c. a price equal to marginal revenue.d. a price determined by the point on the demand curve
A monopolist sets thea. price at which marginal revenue equals zero.b. price that maximizes total revenue.c. highest possible price on its demand curve.d. price at which marginal revenue equals
A monopolist always faces a demand curve that isa. perfectly inelastic.b. perfectly elastic.c. unit elastic.d. the same as the market demand curve.
The long-run supply curve for a competitive constant-cost industry isa. horizontal.b. vertical.c. upward sloping.d. downward sloping.
Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve willa. have a positive
Suppose that in a perfectly competitive market, fi rms are making economic profi ts. In the long run, we can expect to seea. some fi rms leave.b. the market price rise.c. market supply shift to the
Which of the following is true of a perfectly competitive market?a. If economic profi ts are earned, then the price will fall over time.b. In long-run equilibrium, P 5 MR 5 SRMC 5 SRATC 5 LRAC.c. A
Suppose that, in the long run, the price of feature fi lms rises as the movie production industry expands. We can conclude that movie production is a (an)a. increasing-cost industry.b. constant-cost
In a constant-cost industry, input prices remain constant asa. the supply of inputs fl uctuates.b. fi rms encounter diseconomies of scale.c. workers become more experienced.d. fi rms enter and exit
In long-run equilibrium, the perfectly competitive fi rm’s price is equal to which of the following?a. Short-run marginal costb. Minimum short-run average total costc. Marginal revenued. All of the
As shown in Exhibit 15, the short-run supply curve for this fi rm corresponds to which segment of its marginal cost curve?a. A to D and all points aboveb. B to D and all points abovec. C to D and all
In Exhibit 15, the fi rm’s total revenue at a price of $10 per unit pays fora. a portion of total variable costs.b. a portion of total fi xed costs.c. none of the total fi xed costs.d. all of the
Assume the price of the fi rm’s product in Exhibit 15 is $10 per unit. The maximum profi t the fi rm earns isa. zero.b. $5,000 per week.c. $1,500 per week.d. $10,500 per week.
Assume the price of the fi rm’s product in Exhibit 15 is $6 per unit. The fi rm shoulda. continue to operate because it is earning an economic profi t.b. stay in operation for the time being even
In Exhibit 15, the lowest price at which the fi rm earns zero economic profi t in the short run isa. $5 per unit.b. $10 per unit.c. $20 per unit.d. $30 per unit.
Assume the price of the fi rm’s product in Exhibit 15 is $15 per unit. The fi rm will producea. 500 units per week.b. 1,000 units per week.c. 1,500 units per week.d. 2,000 units per week.e. 2,500
A perfectly competitive fi rm’s supply curve follows the upward-sloping segment of its marginal cost curve above thea. average total cost curve.b. average variable cost curve.c. average fi xed cost
A perfectly competitive fi rm sells its output for$100 per unit, and the minimum average variable cost is $150 per unit. The fi rm shoulda. increase output.b. decrease output, but not shut down.c.
Short-run profi t maximization for a perfectly competitive fi rm occurs where the fi rm’s marginal cost equalsa. average total cost.b. average variable cost.c. marginal revenue.d. all of the above.
If a perfectly competitive fi rm sells 100 units of output at a market price of $100 per unit, its marginal revenue per unit isa. $1.b. $100.c. more than $1, but less than $100.d. less than $100.
Which of the following are the same at all levels of output under perfect competition?a. Marginal cost and marginal revenueb. Price and marginal revenuec. Price and marginal costd. All of the above
Which of the following is a characteristic of perfect competition?a. Entry barriersb. Homogeneous productsc. Expenditures on advertisingd. Quality of service
A perfectly competitive market is not characterized bya. many small fi rms.b. a great variety of different products.c. free entry into and exit from the market.d. any of the above.
Which of the following is not a source of economies of scale?a. Division and specialization of laborb. Increase in outputc. More effi cient use of capitald. All of the abovee. Centralized marketing
Long-run constant returns to scale exist when thea. short-run average total cost curve is constant.b. long-run average cost curve rises.c. long-run average cost curve is fl at.d. long-run average
Long-run diseconomies of scale exist when thea. short-run average total cost curve falls.b. long-run marginal cost curve rises.c. long-run average total cost curve falls.d. short-run average variable
The downward-sloping segment of the long-run average cost curve corresponds toa. diseconomies of scale.b. both economies and diseconomies of scale.c. the decrease in average variable costs.d.
Suppose a typical fi rm is producing x units of output per day. Using any other plant size, the long-run average cost would increase. The fi rm is operating at a point at whicha. its long-run average
Each potential short-run average total cost curve is tangent to the long-run average cost curve ata. the level of output that minimizes short-run average total cost.b. the minimum point of the
In Exhibit 10, if the total cost of producing 99 units of output per day is $475, the marginal cost of producing the 100th unit of output per day is approximatelya. zero.b. $25.c. $475.d. $500.
As shown in Exhibit 10, the total cost of producing 100 units of output per day isa. zero.b. $250.c. $500.d. $750.e. $1,000.
As shown in Exhibit 10, total fi xed cost for the fi rm isa. zero.b. $250.c. $500.d. $750.e. $1,000.
Which of the following is true at the point where diminishing returns set in?a. Both marginal product and marginal cost are at a maximum.b. Both marginal product and marginal cost are at a minimum.c.
If both the marginal cost and the average variable cost curves are J-shaped, at the point of minimum average variable cost, the marginal cost must bea. greater than the average variable cost.b. less
Assuming the marginal cost curve is a smooth J-shaped curve, the corresponding total cost curve has a (an)a. linear shape.b. S-shape.c. U-shape.d. reverse S-shape.
The total fi xed cost curve isa. upward sloping.b. downward sloping.c. upward sloping, then downward sloping.d. unchanged with the level of output.
If the units of variable input in a production process are 1, 2, 3, 4, and 5 and the corresponding total outputs are 10, 22, 33, 42, and 48, respectively, the marginal product of the fourth unit isa.
Suppose a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day.When it adds a third station, but no more workers, it is able to wash 150 cars per day.The marginal
An example of a variable input isa. raw materials.b. energy.c. hourly labor.d. all of the above.
Fixed inputs are factors of production thata. are determined by a fi rm’s plant size.b. can be increased or decreased quickly as output changes.c. cannot be increased or decreased as output
Which of the following equalities is true?a. Economic profi t 5 total revenue 2 accounting profi tb. Economic profi t 5 total revenue 2 explicit costs 2 accounting profi tc. Economic profi t 5 total
Implicit costs are the opportunity costs of using the resources ofa. outsiders.b. owners.c. banks.d. retained earnings.
Explicit costs are payments toa. hourly employees.b. insurance companies.c. utility companies.d. all of the above.
The total utilities associated with the fi rst 5 units of consumption of good X are 15, 30, 40, 47, and 50, respectively. What is the marginal utility associated with the third unit?a. 15b. 70c. 85d.
The demand curve is downward-sloping because of the law ofa. diminishing marginal utility.b. diminishing consumer equilibrium.c. consumer equilibrium.d. diminishing utility maximization.
The law of diminishing marginal utility exists for the fi rst four units of a good if they have marginal utilities ofa. 1, 2, 4, 8.b. 8, 4, 1, 2.c. 4, 8, 2, 1.d. 8, 4, 2, 1.
In Exhibit 4, assume the multiplex tickets cost$6 each, video rentals cost $2 each, and bags of popcorn cost $1 each. Suppose the consumer has $12 per week to spend on multiplex tickets, video
In Exhibit 4, assume multiplex tickets cost $6 each, video rentals cost $2 each, and bags of popcorn cost $1 each. Suppose the consumer has $12 per week to spend on multiplex tickets, video rentals,
In Exhibit 4, assume multiplex tickets cost $6 each, video rentals cost $2 each, and bags of popcorn cost $1 each. What is the marginal utility of renting a third video?a. 6 utilsb. 8 utilsc. 10
The change in quantity demanded resulting from a change in purchasing power is known as thea. income effect.b. substitution effect.c. law of demand.d. consumer equilibrium effect.
A state of consumer equilibrium for goods consumed prevails when thea. marginal utility of all goods is the same for the last dollar spent for each good.b. marginal utility per dollar’s worth of
Suppose an individual consumes pizza and cola.To reach consumer equilibrium, the individual must consume pizza and cola so that thea. price paid for the two goods is the same.b. marginal utility of
Assume an individual consumes only milk and doughnuts and has arranged consumption so that the last glass of milk yields 12 utils and the last doughnut 6 utils. If the price of milk is $1 per glass
Assume that a person’s consumption of just the right amounts of pork and chicken is in equilibrium.We can conclude that thea. marginal utility of pork must equal the marginal utility of chicken.b.
Rational consumers will continue to consume two goods until thea. marginal utility per dollar’s worth of the two goods is the same for the last dollar spent on each good.b. marginal utility is the
A certain consumer buys only food and compact discs. If the quantity of food bought increases, while that of compact discs remains the same, the marginal utility of food willa. fall relative to the
The amount of added utility that a consumer gains from the consumption of one more unit of a good is calleda. incremental utility.b. total utility.c. diminishing utility.d. marginal utility.
As an individual consumes more of a given good, the marginal utility of that good to the consumera. rises at an increasing rate.b. rises at a decreasing rate.c. falls.d. rises.
As shown in Exhibit 11, the $1 per pack sales tax on cigarettes raises tax revenue per day totaling:a. $5 million.b. $6 million.c. $10 million.d. $15 million. Exhibit 11 Supply and Demand Curves for
As shown in Exhibit 11, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by tobacco sellers is:a. zero.b. 50 percent.c. 75 percent.d.
As shown in Exhibit 11, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by consumers of a pack of cigarettes isa. zero.b. 25
If the government wanted to raise tax revenue and shift most of the tax burden to the sellers, it would impose a tax on a good with aa. steep (inelastic) demand curve and a steep(inelastic) supply
To determine whether two goods are substitutes or complements, an economist would estimate thea. price elasticity of demand.b. income elasticity of demand.c. cross-elasticity of demand.d. price
The income elasticity of demand for shoes is estimated to be 1.50. We can conclude that shoesa. have a relatively steep demand curve.b. have a relatively fl at demand curve.c. are a normal good.d.
The price elasticity of demand coeffi cient for a good will be lowera. if there are few or no substitutes available.b. if a small portion of the budget will be spent on the good.c. in the short run
A downward-sloping straight-line demand curve will have aa. higher price elasticity of demand coeffi cient along the top of the demand curve.b. lower price elasticity coeffi cient along the top of
A manufacturer of Beanie Babies hires an economist to study the price elasticity of demand for this product. The economist estimates that the price elasticity of demand coeffi cient for a range of
If a 5 percent reduction in the price of a good produces a 3 percent increase in the quantity demanded, the price elasticity of demand over this range of the demand curve isa. elastic.b. perfectly

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