Home » Exams Overview » Advanced Micro I – Williams Final Edition
1. True or false: Cost curves are monetized reciprocals of product curves? Explain.
(#76, #104, 2014 2.b)
2. Give a brief answer to the following:
Collusions have the natural tendency to break down.
Firms have an incentive to cheat to gain extra profits and market share. Collusions are difficult to monitor. Can’t prevent firms outside the cartel from competing, and can’t compel them to join the cartel. Small and large firms have different cost structures making quantity agreement difficult.
3. Atomistic markets are supposed to permit the achievement of Pareto optimality where externalities are absent.
Explain the meaning of this statement.
(#44, part 1)
4. State whether the following is true or false and explain your response:
Existing firms in a cartelized industry prefer to be regulated by government.
5. Is the following statement true or false? Explain.
Price discrimination tends to be more common in the sale of services than in the sale of manufactured goods.
6. Is the following statement true, false, or uncertain? Explain.
A monopolist will never set price and quantity at a point where the demand is price-inelastic.
7. Is the following statement true or false? Explain your answer.
If you were a visitor in some underdeveloped country in which all lending and borrowing are effectively prohibited there would be no way to tell whether there were changes in the interest rate.
(#92, 2014 #2.c)
8. Some discount stores advertise that they can sell for less because they buy directly from the factory and sell to the consumer, thus eliminating middlemen. What is the flaw in that reasoning?
9. Which of the following images is a graph of the standard intertemporal 2-period model?
Enter your answer as a single capitalized letter.
10. The literature on the behavior of the firm poses it as a profit maximizer, a wealth maximizer, a growth maximizer, a sales maximizer, a sales maximizer subject to a prescribed profit rate.
Which of these do you use, why, and how do you manage to allow for these other assertions of firm behavior?
Investors consider corporations to be more valuable when they have high assets and low liabilities, and when corporations get more investors they can grow faster and earn larger profits.
Profit maximization is the most general criterion of efficiency because it compares the value of what is produced with its cost, rather than merely minimizing the cost of what may or may no be worth its costs. It is feasible for a firm to maximize sales, wealth or growth and still operate at a loss. Ideally, it should maximize these things while at the same time maximizing profit.