In the short run, a sales tax is:
a. wholly absorbed by the producer.
b. shared between the consumer and the producer.
c. deferred until the market is able to re-establish an equilibrium price.
d. wholly absorbed by the consumer.
QUESTION 2Appendix: Incentive-compatible revelation mechanisms attempt to
a. induce an employee to reject the next best alternative employment opportunity
b. elicit privately-held information
c. secure enforcement primarily by third parties
d. reject voluntary contracting with third parties
e. impose similar risk premiums on all employees
QUESTION 3If the bidders at an oral auction have true values of 8, 7, 6, and 5, the item will sell for
a. 8
b. 7
c. just over 7
d. just under 7
QUESTION 4A market for a product for which demanders are willing to pay more than costs of production may not arise because of:
a. high transactions costs.
b. strict price controls.
c. the inability of producers to gain economies of scale.
d. foreign countries dominating a domestic market for a product.
QUESTION 5Appendix: An incentive-compatible revelation mechanism is
a. self-enforcing
b. always multi-period
c. too complicated to influence decisions
d. prevalent in vertically integrated businesses
e. not adopted by franchise businesses
QUESTION 6The optimal bidding strategy for a second-price auction is
a. To bid your true value
b. To shade your bid well below your true value
c. To shade your bid just a little below your true value
d. To size up your competition to determine how much to shade your bid
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