Eco 550 week 6 quiz 4, chapter 8


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Eco 550 week 6 quiz 4, chapter 8

  1. 1. ECO 550 Week 6 Quiz 4, Chapter 8 70/eco-550-week-6-quiz-4-chapter-8/Economics - General EconomicsQuestion 11. In a market characterized by many sellers, if an outsider devises a way to reduce transaction costs itwill:benefit both buyers and sellers.cause both buyers and sellers to lose.benefit the buyers but cause the sellers to lose.benefit the sellers but cause the buyers to lose.Question 21. If two small perfectly competitive firms merge, the merged firm will be:a price-taker.a market leader.a oligopoly.Question 31. Refer to Figure 8-2. Suppose the adoption of a new technology lowers the cost of production whilethe buyer’s valuation remains unchanged. Which of the following changes will be observed by thefirm?The figure given below represents a firm in a market characterized by many buyers and one seller. MCrepresents the marginal cost, MR the marginal revenue, and D the demand curve of a firm. The firm isinitially in equilibrium producing 6 units of output at a price of $10 per unit.Figure 8-2The demand curve for its product will shift to the left.The marginal cost curve will shift downward.
  2. 2. The equilibrium output of the firm will fall below 6 units.The marginal revenue curve will shift downward.Question 41. Under which of the following situations would a seller prefer to incur the cost of improving theproduct quality?If the increase in buyer’s valuation for the improved product is higher than the cost of improving it.If the increase in the seller’s opportunity cost of improving the product is higher than the price of theproduct.If the product improvement lowers the producer surplus.If the product improvement allows the seller to a break even.Question 51. A firm’s resource at a given point in time can be defined as:those investments made by it in profitable organizations.those tangible and intangible assets attached to it semi permanently.its ability to control the market price.its lobbying ability built over years of experience.Question 61. Refer to Figure 8-3. Suppose the seller incurs an additional cost of $1 per unit of output to reducethe transaction costs of the buyers to zero. How will the profit earned by the seller change?The figure given below represents a firm in a market characterized by many buyers and one seller. MCis the initial marginal cost of the seller. MC denotes the marginal cost inclusive of the $1 transactioncost. On the other hand, buyers incur a transaction cost worth $2 represented by the vertical distancebetween D and D. MR and MR represent the marginal revenue curve corresponding to the demandcurves D and D respectively.Figure 8-3The firm’s profit will increase by $0.62.The firm’s profit will increase by $2.6.The firm’s profit will remain unchanged.The firm’s profit will decrease by $6.2.
  3. 3. Question 71. Which of the following activities undertaken by a competitive firm can improve its public relations?Investing in assets that cannot easily be redeployed to other uses or locations.Donating a portion of its annual profit to hurricane affected familiesProviding good quality products at a high price.Investing in in-house researchQuestion 81. Refer to Figure 8-5. Calculate the value of the deadweight loss resulting from the horizontalmerger?The figure given below represents a perfectly competitive market in long-run equilibrium. LRSrepresents the long-run supply curve of this market with demand (D) and price $50. When two largefirms merge, output declines to 400 units and per unit production cost drops to $30.Figure 8-5$800$600$400$300Question 91. Suppose the cost of producing cellular phones declines from $25 to $20. If buyers’ valuationsremain fixed at $30, the transaction would create _____ more economic value.$10$5$2$15Question 101. Which of the following is an example of a one-time investment made by a seller to reduce thetransaction cost on all units of output?Providing customers a wide range of products
  4. 4. Hiring a distribution agencyMerging with its rival brandCreating a brand name which signals qualityQuestion 111. Temporary discounts offered to customers by competitive retailers usually reflect:output rationing.a rise in market demand.price discrimination.a fall in input prices.Question 121. Refer to Figure 8-6. Determine the profit earned by the perfume monopolist if it chooses to hire aretailer for selling its product.The figure given below represents a monopoly firm producing perfume with downward slopingdemand and marginal revenue (MR) curves. The products of this firm are sold in the competitivemarket by a retailer. Among the horizontal lines in the figure:A - represents the marginal cost of per unit perfume productionB - represents the marginal cost of an independent perfume retailerC - represents the sum of A and BD - represents the marginal cost of the perfume monopolist for retailing its own outputE - represents the sum of A and D.Figure 8-6$2.7$6.5$5.5$2.4Question 131. Under a _____, the assets of two firms that operate in the same market are put under a singleownership.vertical mergerhorizontal merger
  5. 5. vertical acquisitionhorizontal acquisitionQuestion 141. Wal-Mart’s store managers have the authority to stock items and price them to satisfy localizeddemand. Which of the following properties of this retail store is illustrated here?Relationship with employeesRegional relationshipsCentralized decision makingDecentralized decision makingQuestion 151. Which of the following industries can create barriers to the entry of new firms due to size andspecificity?A hydroelectric power plantA garment manufacturer exporting apparelsAn owner of a retail chainAn automobile manufacturing company