Points

Question 1 (5 points)

1. Which of the following may lead to vertical integration?

a) Technological interdependencies

b) Reduced search and bargaining cost

c) The hold-up problem

d) All of the above

Question 2 (5 points)

Effective collusion generally is more difficult when

a) the number of oligopolistic firms involved decreases

b) the number of oligopolistic firms involved increases

c) when customer orders are small, frequent, and received on a regular basis as compared with large orders that are received infrequently at irregular intervals.

d) (a) and (c)

Question 3 (5 points)

A pencil manufacturer is in a perfectly competitive market. The firm can sell as much as it wants at a price of $1.50 per pencil. At some production levels, its average variable costs are less than $1.50, but there is not production level where its average total cost is equal or less than $1.50. What would be your recommendation to the pencil manufacturer?

a) Increase production to decrease fixed costs per unit.

b) Exit the business immediately.

c) Continue production in both the short and long runs.

d) Continue production in the short run, but exit the business in the long run unless prices are expected to rise or costs to fall.

Question 4 (5 points)

A pure monopoly refers to a situation in which:

a) the firm 's profit is maximized at the price and output combination where average cost equals average revenue

b) the demand curve is always elastic

c) one firm is the only producer of a good or service which has no close substitutes

d) the demand curve facing the firm is less than the industry demand curve

Question 5 (5 points)

Cost-benefit analysis is the public sector counterpart to _______________ used in private, profit-oriented firms.

a) Cost-effectiveness analysis

b) break-even analysis

c) economic forecasting techniques

d) capital budgeting techniques

Question 6 (5 points)

Which of the following