Opportunity cost is a measure of
a. foregone opportunities.
b. value based on the alternative not chosen.
c. value in terms of the cost of production.
d. the difference between production cost and resource cost.
e. both a and b.
QUESTION 2The subgame-perfect equilibrium of a two-stage game in which firms first choose capacities and then engage in a Bertrand price setting game resembles the equilibrium in:
a. the competitive model.
b. the Cournot model.
c. the cartel model.
d. the price leadership model.
QUESTION 3Which is NOT an example of signaling high quality in a social setting
a. wearing a business suit on a job interview
b. scrimping on the tip for the waiter after a dinner date
c. offering an expensive engagement ring to your bride
d. Visiting the beauty salon before a big date
QUESTION 4A profit-maximizing firm should spend an additional dollar on advertising so long as this expenditure results in more than one dollar of:
a. additional sales.
b. reduced costs.
c. increased profits.
d. demand.
QUESTION 5Which is NOT an example of signaling high quality in a social setting
a. wearing everyday clothes to a job interview
b. leaving a big tip for the waiter after a dinner date
c. offering an expensive engagement ring to your bride
d. Visiting the beauty salon before a big date
QUESTION 6How does the leader's behavior in the quantity-leadership (Stackelberg) game compare to that in the analogous price-leadership game?
a. It behaves as a puppy dog in both.
b. It behaves as a top dog in the quantity leadership game but a puppy dog in the price leadership game.
c. It behaves as a top dog in the quantity leadership game but a puppy dog in the price leadership game.
d. It behaves as a top dog in both.
QUESTION 7Insurance companies create wealth by
a. reducing the amount of risk that the risk averse must bear
b. reducing the amount of risk that risk lovers must bear
c. increasing the amount of risk that the risk averse must bear
d. increasing the amount of risk that risk lovers must bear
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