1. Which of the following is true of a second-price sealed-bid auction? A. Bidde
ID: 1157468 • Letter: 1
Question
1. Which of the following is true of a second-price sealed-bid auction?
A. Bidders directly compete with each other.
B. Bidders know each other's bids.
C. Bidders submit their bids simultaneously.
D. Bidders always bid above their willingness to pay.
2. A ________person is indifferent to a bet that has zero expected value.
A. rent-seeking
B. risk-averse
C.risk-loving
D.risk-neutral
3. The profit earned by a monopolistic competitor after the entry of new firms is ________.
A. lower than the profit earned by the firm before the entry of new firms
B. higher than the profit earned by a perfect competitor in the long run
C.equal to the profit earned by a monopolist in the long run
D.higher than the profit earned by the firm before the entry of new firms
4. The fixed cost of producing 500 units of Good Y is $25,000while the variable cost of producing 500 units of Good Y is $60,000.
Refer to the scenario above. If the equilibrium price charged by the firm in the short run is $170,the firm will earn ________.
A. a profit of $30 per unit
B.a profit of $25 per unit
C.a profit of $10 per unit
D.a profit of $0 per unit
Explanation / Answer
1. C. Bidders submit their bids simultaneously.
2. D. A risk neutral person is indifferent to a bet that has zero expected value. A risk neutral person is always neutral to risk.
3. A. The profit earned by a monopolistic competitor after the entry of new firms is lower than the profit earned by the firm before the entry of new firms. This is because the new entering firms increase the supply of the commodity in the market reducing the demand for the incumbent firm's products.
4. D. If the equilibrium price charged by the firm in the short run is $170,the firm will earn a profit of $0 per unit. This is so because the ATC of producing a unit of Y is $170. Hence, the profit per unit is 0.
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