If the cross elasticity of demand for good x with respect to the price of good y is positive, then goods x and y are
A) normal goods.
B) inferior goods.
C) complements.
D) substitutes.
Ques. 2Profit is the factor price for ________.
A) capital
B) land
C) entrepreneurship
D) labor
Ques. 3If the price of peanuts increases by 10 percent and the price of potato chips does not change, then the relative price of peanuts with respect to potato chips will ________ and the relative price of potato chips with respect to peanuts will ________.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
Ques. 4Game theory is most useful for analyzing
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
Ques. 5The political market place requires all EXCEPT
A) diplomats.
B) firms.
C) voters.
D) politicians.
Ques. 6When the quantity of money demanded is greater than the quantity of money supplied, people ________ bonds and the interest rate ________.
A) sell; rises
B) sell; falls
C) buy; rises
D) buy; falls
Ques. 7The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 5 to 6 units?
A) 18
B) 4
C) 3
D) -2
Ques. 8Using the above table, when Jefferson's Cleaners hires three workers
A) the average product of labor is greater than the marginal product.
B) the marginal product of labor is greater than the average product.
C) it has already experienced diminishing marginal returns.
D) Both answers A and C are correct.
Ques. 9A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its
A) total cost.
B) total variable cost.
C) total fixed cost.
D) marginal cost.
Ques. 10Which of the following compensation schemes can be explained as an attempt to solve a principal-agent problem?
A) Real estate agents are paid on a strict commission basis; if they don't sell a client's listed property they don't get paid.
B) Personal injury lawyers often work on a contingency basis. If the lawyer wins the case they receive a significant share of the award; if the lawyer doesn't win the case the lawyer doesn't get paid.
C) Traveling sales people, who are costly and difficult to monitor, generally receive a significant share of their compensation in the form of commissions or bonuses for meeting sales targets.
D) All of the above compensation schemes attempt to solve a principal-agent problem.
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