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Question
Table 14-4
Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 14-4 shows the payoff matrix for this advertising game.
Refer to Table 14-4. If Alistair assumes that Baine would increase its advertising budget, what should it do?
A) Alistair should keep its own budget the same and allow Baine to incur the higher cost.
B) Alistair should also increase its advertising spending.
C) Alistair should reduce its advertising spending.
D) Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 percent market share.
Answer
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Related questions
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Perfectly competitive industries tend to produce low-priced, low-technology products.
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The market demand curve for a perfectly competitive industry is the horizontal summation of each individual firm's demand curve.
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If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.
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Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?
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B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run.
C) Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run.
D) Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.
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New York Times writer Michael Lewis wrote that "The sad truth, for investors, seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?
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If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?
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A firm's expansion path
A) is the same thing as its long-run average cost curve.
B) is a curve that shows a firm's cost-minimizing combination of inputs for every level of output, holding input prices constant.
C) shows the targeted growth rate in sales over the long run.
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Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies all of the following except that
A) the two countries use different technologies to produce the product.
B) the inputs are not equally productive in the two countries.
C) the prices of the inputs are not the same in the countries.
D) one country is more efficient in the production of the good than the other.
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In the long run which of the following is true?
A) Total cost = fixed cost + variable cost.
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D) The firm can vary its explicit costs but not its implicit costs.
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As a firm moves to higher isocost lines
A) its profits increase.
B) its revenue increases.
C) its input price ratio increases.
D) its total cost increases.
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The marginal rate of technical substitution is measured by
A) the slope of the isoquant.
B) the relative input prices.
C) the slope of the isocost line.
D) the ratio of the product's price to the product's cost of production.
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The typical shape of an isoquant is
A) convex towards the origin.
B) concave towards the origin.
C) linear and downward sloping.
D) linear and upward sloping.
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An expansion path shows
A) the level of sales necessary for a firm if it wants to expand.
B) the level of long-run average cost at different scales of operation.
C) the least-cost combination of inputs for each level of output.
D) the returns to scale at each level of output.
Q:
Maximizing the level of output for a given total cost of production
A) is equivalent to producing the profit maximizing output level.
B) is equivalent to minimizing cost for a given level of output.
C) necessitates using only relatively low-priced inputs.
D) will maximize total revenue.
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Golda Rush quit her job as a manager for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?
A) $80,000
B) $70,000
C) $42,000
D) $41,500
Q:
Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above