For an individual who consumes only two goods, x and y, the opportunity cost of consuming one more unit of x in terms of how much y must be given up is reflected by:
a. the individual's marginal rate of substitution.
b. the market prices of x and y.
c. the slope of the individual's indifference curve.
d. none of the above.
QUESTION 2A firm in pure competition would shut down when:
a. price is less than average total cost
b. price is less than average fixed cost
c. price is less than marginal cost
d. price is less than average variable cost
QUESTION 3A pharmaceutical company faces a price regulation where it cannot charge any higher than 5,000 for a lifesaving drug. The company knows that the patients put a high value on this product and are willing to pay up to 10,000 for it. The company will likely
a. Not do anything-it is prohibited by law to increase its price
b. Bundle the drug with periodic blood testing, selling the bundle for 10,000
c. Require that the patients have the drug administered by the company's medical staff, for an additional 5,000
d. Both B&C
QUESTION 4Firms tend to lower the price of their goods after acquiring a firm that sells a complementary good because
a. They gain market power
b. There is an increase in the overall demand for their products
c. The bundle has a more elastic demand than individual goods
d. The bundle has a more inelastic demand than individual goods
QUESTION 5Indifference curves:
a. may sometimes intersect.
b. are contour lines only of a linear utility function.
c. are convex if the utility function is quasi-concave.
d. shift when prices change.
QUESTION 6If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.
a. more; decrease; down
b. more; decrease; up
c. more; increase; down
d. more; increase; up
e. none of the above
QUESTION 7Vertical integration often aims to
a. Prevent the retailers from defeating upstream price discrimination through arbitrage
b. Reward the retailer for undertaking the risk inherent in introducing a new product
c. Avoid paying higher taxes
d. All of the above
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