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Eco550 Assignment 3 and final exam




Question;Assignment 3: Long-Term Investment Decisions;Due Week 9 and worth 300 points;Assume that the low-calorie microwavable food company from Assignments 1 and 2 wants to expand and;has to make some long-term capital budgeting decisions.;Use the Internet and Strayer databases to research government policies and regulation.;Write a six to eight (6-8) page paper in which you;1. Outline a plan that managers in the low-calorie microwaveable food company could follow when;selecting pricing strategies for making their products as inelastic as possible. Provide a rationale;for your response.;2. Examine the major effects that government policies have on production and employment. Predict;the potential effects that government policies could have on your company.;3. Determine whether or not government regulation to ensure fairness in the low-calorie;microwavable food industry is needed. Cite the major reasons for government involvement in a;market economy. Provide two (2) examples of government involvement in a similar market;economy to support your response.;4. Examine the major complexities that would arise under expansion via capital projects. Propose;key actions that the company could take in order to prevent or address these complexities.;5. Suggest the substantive manner in which the company could create a convergence between the;interests of stockholders and managers. Indicate the most likely impact to profitability of such a;convergence. Provide two (2) examples of instances that support your response.;6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not;qualify as an academic resource.Final examEco550 final exam part 1;Question 1;A ____ total cost function implies that marginal costs ____ as output is;increased.;Answer;linear, increase linearly;quadratic, are constant;cubic, increase linearly;linear;are constant;Question 2;Which of the following is not an assumption of the linear breakeven;model;Answer;constant selling price per unit;decreasing;variable cost per unit;fixed costs are independent of the output level;a single product (or a constant mix of products);is being produced and sold;Question 3;Break-even analysis usually assumes all of the following except;Answer;in the short run, there is no distinction between variable and fixed;costs.;revenue and cost curves are straight-lines;throughout the analysis.;there appears to be perfect competition since the;price is considered to remain the same regardless of quantity.;the straight-line cost curve implies that;marginal cost is constant.;Question 4;George Webb Restaurant collects on the average $5 per customer at its;breakfast & lunch diner. Its variable cost per customer averages $3, and;its annual fixed cost is $40,000. If George Webb wants to make a profit;of $20,000 per year at the diner, it will have to serve__________ customers per;year.;Answer;10,000 customers;20,000 customers;30,000 customers;40,000 customers;50,000 customers;Question 5;The degree of operating leverage is equal to the ____ change in;divided by the ____ change in ____.;Answer;percentage, sales, percentage, EBIT;unit, sales, unit, EBIT;percentage;EBIT, percentage, sales;unit, EBIT, unit, sales;Question 6;In the linear breakeven model, the breakeven sales volume (in dollars);can be found by multiplying the breakeven sales volume (in units) by;Answer;one minus the variable cost ratio;contribution margin per unit;selling;price per unit;standard deviation of unit sales;Question 7;Long distance telephone service has become a competitive market. The;average cost per call is $0.05 a minute, and it?s declining. The likely;reason for the declining price for long distance service is;Answer;Governmental pressure to lower the price;Reduced demand for long distance service;Entry into this industry pushes prices down;Lower price for a barrel of crude oil;Increased cost of providing long distance service;Question 8;In the long-run, firms in a monopolistically competitive industry will;Answer;earn substantial economic profits;tend to just cover costs, including normal;profits;seek to increase the scale of operations;seek to reduce the scale of operations;Question 9;In the purely competitive case, marginal revenue (MR) is equal to;Answer;cost;profit;price;total revenue;Question 10;An "experience good" is one that;Answer;Only an expert can use;Has undetectable quality when purchased;Can be readily experienced simply by touching or;tasting;Improves with age, like a fine wine;Question 11;Buyers anticipate that the temporary warehouse seller of unbranded;computer equipment will;Answer;deliver high quality products consistent with;expectations;not attempt to establish any warranty enforcement;mechanisms;offer several prices and qualities;produce only one quality;Question 12;Asset specificity is largest when;Answer;value in first best use is large;value in second best use is large;customers choose their supplier at random;very valuable assets are non-redeployable;customers are loyal to a particular seller;Question 13;In the short-run for a purely competitive market, a manufacturer will;stop production when;Answer;the total revenue is less than total costs;the contribution to fixed costs is zero or less;the price is greater than AVC;operating at a loss;Question 14;Regulatory agencies engage in all of the following activities except;Answer;controlling entry into the regulated industries;overseeing the quality of service provided by;the firms;setting federal and state income tax rates on;regulated firms;setting prices that consumers will pay;Question 15;Of the following, which is not an economic rationale for public utility;regulation?;Answer;production process exhibiting increasing returns;to scale;constant cost industry;avoidance of duplication of facilities;protection of consumers from price discrimination;Question 16;as practiced by public utilities is designed to encourage greater;usage and therefore spread the fixed costs of the utility's plant over a larger;number of units of output.;Answer;Peak load pricing;Inverted block pricing;Block pricing;First degree price discrimination;Question 17;In the electric power industry, residential customers have relatively;demand for electricity compared with large industrial users. But;contrary to price discrimination, large industrial users generally are charged;rates.;Answer;similar, similar;elastic, lower;elastic, higher;inelastic, lower;inelastic, higher;Question 18;The demand curve facing the firm in ____ is the same as the industry;demand curve.;Answer;pure;competition;monopolistic competition;oligopoly;pure monopoly;Question 19;The practice by telephone companies of charging lower long-distance;rates at night than during the day is an example of;Answer;inverted block pricing;second-degree price discrimination;peak-load pricing;first-degree price discrimination;none of the above;Question 20;In a kinked demand market, whenever one firm decides to lower its price;Answer;other firms will automatically follow.;none of the other firms will follow.;one half of the firms follow and one half of the;firms don't follow the price cut.;other firms all decide to exit the industry;all of the other firms raise their prices.;Question 21;In the Cournot duopoly model, each of the two firms, in determining its;profit-maximizing price-output level, assumes that the other firm's ____ will;not change.;Answer;price;output;marketing strategy;inventory;Question 22;?Conscious parallelism of action? among oligopolistic firms is an;example of ____.;Answer;intense rivalry;a formal collusive agreement;informal, or tacit, cooperation;a cartel;Question 23;If a cartel seeks to maximize profits, the market share (or quota) for;each firm should be set at a level such that the ____ of all firms is;identical.;Answer;average total cost;average profit;marginal profit;marginal cost;marginal revenue;Question 24;A cartel is a situation where firms in the industry;Answer;have an agreement to restrict output.;agree to produce identical products.;obey the rules of dominant firm price leadership.;experience the pain of a kinked demand curve.;have a barometric price leader;Question 25;Barometric price leadership exists when;Answer;one firm in the industry initiates a price change;and the others follow it as a signal of changes in cost or demand in the industry.;one firm imposes its best price on the rest of;the industry.;all firms agree to change prices simultaneously.;one company forms a price umbrella for all;others.;the firms are all colluding.;part IIQuestion 1;If one-time gains from defection are always less than the;discounted present value of an infinite time stream of cooperative payoffs at;some given discount rate, the decision-makers have escaped;Answer;the Folk;Theorem;the law of;large numbers;the Prisoner's;dilemma;the paradox of;large numbers;the strategy;of recusal;Question 2;Credibility in threats and commitments in sequential games is;based on;Answer;randomizing;one's actions so they are unpredictable;explicit communications;with competitors;effective;scenario planning;analyzing best;reply responses;Question 3;A key to analyzing subgame perfect equilibrium strategy in;sequential games is;Answer;predictable;behavior;an explicit;order of play for at least some participants;information;sets that are known with certainty;credible;threats clearly communicated;randomness;Question 4;Consider the game known as the Prisoner's Dilemma. What's;the dilemma?;Answer;By both not;confessing, both get to the cooperative solution and minimize time in prison.;By both;confessing, both get to the noncooperative solution and both serve;significant time in prison.;As a group;they are better off cooperating by not confessing, but each player has an;incentive to be first to confess in a double cross.;The problem is;that the spies should never have been caught, they should move to Rio.;Question 5;Non-cooperative sequential games can incorporate all the;following features except;Answer;a single;decision-maker in the endgame;no;communication;finite or;infinite time periods;third-party;enforceable agreements;an explicit;order of play;Question 6;Third-degree price discrimination exists whenever;Answer;the seller;knows exactly how much each potential customer is willing to pay and will;charge accordingly.;different;prices are charged by blocks of services.;the seller can;separate markets by geography, income, age, etc., and charge different prices;to these different groups.;the seller;will bargain with buyers in each of the markets to obtain the best possible;price.;Question 7;Which of the following pricing policies best identifies when a;product should be expanded, maintained, or discontinued?;Answer;full-cost;pricing policy;target-pricing;policy;marginal-pricing;policy;market-share;pricing policy;markup pricing;policy;Question 8;is the price at which an intermediate good or service is;transferred from the selling to the buying division within the same firm.;Answer;Incremental;price;Marginal price;Full-cost;price;Transfer price;Question 9;Firms that have a cover charge for their customers and charge;for each item they purchase as well are exhibiting;Answer;universal;access price discrimination;declining;block price discrimination.;mixed bundling;price discrimination.;two-part price;discrimination.;uniform;pricing;Question 10;Electricity pricing that varies in its billing expense;throughout the day is called;Answer;full pricing;marginal cost;pricing;dynamic;pricing;variable;pricing;full cost pricing;pricing;Question 12;Which of the following is not among the functions of contract?;Answer;to provide;incentives for efficient reliance;to reduce;transaction costs;to discourage;the development of asymmetric information;to provide;risk allocation mechanisms;Question 13;Mac trucks and their dealers would likely have an organizational;form of;Answer;fixed profit;sharing franchise contracts;spot market;recontracting;alliances;vertical integration;Question 14;When manufacturers and distributors establish credible;commitments to one another, they often employ;Answer;vertical;requirements contracts;third-party;monitoring;credible;threat mechanisms;non-price;tactics;Question 15;When retail bicycle dealers advertise and perform warranty;repairs but do not deliver the personal selling message that Schwinn has;designed as part of the marketing plan but cannot observe at less than;prohibitive cost, the manufacturer has encountered a problem of ____.;Answer;reliance;relationships;uncertainty;moral hazard;creative;ingenuity;insurance;reliance;Question 16;The sentiment for increased deregulation in the late 1970's and;early 1980's has been felt most significantly in the price regulation of;Answer;coal;grain;transportation;automobiles;electric power;generation;Question 17;yields the same results as the theory of perfect;competition, but requires substantially fewer assumptions than the perfectly;competitive model.;Answer;Baumol's sales;maximization hypothesis;The Pareto;optimality condition;The Cournot;model;The theory of;contestable markets;Question 18;The lower the barriers to entry and exit, the more nearly a;market structure fits the ____ market model.;Answer;monopolistic;competition;perfectly;contestable;oligopoly;monopoly;Question 19;The antitrust laws regulate all of the following business;decisions except ____.;Answer;collusion;mergers;monopolistic;practices;price;discrimination;wage levels;Question 20;The ____ is equal to the some of the squares of the market;shares of all the firms in an industry.;Answer;market;concentration ratio;Herfindahl-Hirschman;index;correlation;coefficient;standard;deviation of concentration;Question 21;Cost-benefit analysis is the public sector counterpart to;used in private, profit-oriented firms.;Answer;ratio analysis;break-even;analysis;capital;budgeting techniques;economic;forecasting;uestion 22;Which of the following should not be counted in a cost-benefit;analysis?;Answer;direct;benefits and costs;real secondary;benefits;technological;secondary costs;pecuniary;benefits;intangibles;Question 23;In determining the optimal capital budget, one should choose;those project's whose ____ exceeds the firm's ____ cost of capital.;Answer;internal rate;of return, average;internal rate;of return, marginal;internal rate;of return, historic;average rate;of return, marginal;Question 24;In the constant-growth dividend valuation model, the required;rate of return on common stock (i.e., cost of equity capital) can be shown to;be equal to the sum of the dividend yield plus the ____.;Answer;yield-to-maturity;present value;yield;risk-free rate;dividend;growth rate;Question 25;All of the following except ____ are shortcomings of;cost-benefit analysis.;Answer;difficulty in;measuring third-party costs;difficulty in;measuring third-party benefits;failure to;consider the time value of benefits and costs;difficulty of;accounting for program interactions


Paper#57489 | Written in 18-Jul-2015

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