1714 Words Apr 23rd, 2011 7 Pages
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
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a) Average total cost is decreasing

b) Fixed cost is decreasing

c) Average marginal cost is decreasing

d) Marginal cost is higher than average marginal cost

Question 14 (5 points)

If production exceeds the level at which marginal cost is equal to marginal revenue

a) profitability is maximized.

b) production should be reduced.

c) production is not generating profits.

d) production should be increased.

Question 15 (5 points)

If a firm 's average cost is falling (economies of scale) with output, then

a) marginal cost is less than average cost.

b) marginal cost is rising.

c) marginal cost is greater than average cost.

d) average cost is rising as a function of output.

Question 16 (5 points)

The cost of external equity (new common stock) is ----------------- the cost of internal equity (retained earnings).

a) greater than

b) equal to

c) less than

d) (a) or (b)

Question 17 (5 points)

A yo-yo manufacturer is producing 5,000 yo-yos selling them for $1.50 each. At this level of output, marginal revenue is $1.50. From this information, we can conclude that the yo-yo manufacturer

a) is a competitive firm.

b) is a monopolistic firm.

c) is an oligopolistic firm.

d) is a duopolistic firm.

Question 18 (5 points)

If a firm is earning an abnormally high rate of return on invested capital,

a) the firm is earning positive economic profits.

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