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    Economics - 5 multiple choice problems

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    1. If a firm manager has a base salary of $50,000 and also gets 2% of all profits, how much will his income be if revenues are $8,000,000 and profits are $2,000,000.

    A. $250,000 B. $210,000 C. $90,000 D. $150,000

    2. The industry elasticity of demand for telephone service is -2 while the elasticity of demand for a specific phone company is -5. What is the Rothchild index?

    A. 0.2 B. 0.4 C. 0.5 D. 0.7

    3. You are the manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q(squared). What will happen in the long-run if there is no change in the demand curve?

    A. Some firms will leave the market eventually. B. Some firms will enter the market.
    C. There will be neither entry nor leave. D. None of the above

    4. 2 firms compete as a Stackelberg duopoly. The demand they face is P = 100 -3Q. The cost function for each firm is C(Q) = 4Q. The profits (X) of the 2 firms are:

    A. X L = $384; X F = $192
    B. X L = $192; X F = $91
    C. X L = $56; X F = (- $28)
    D. X L = $56; X F = $28

    5. Sue and Jane own 2 local gas stations. They have identical constant marginal costs, but earn zero economic profits. Sue and Jane constitute:

    A. A Sweezy oligopoly
    B. A Cournot oligopoly
    C. A Bertrand oligopoly
    D. None of the above

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    Economics - 5 multiple choice problems

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