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Eco550 exam questions




Question;Eco550;Review;1.;The short-run cost function is;a.;Where all inputs to the production process area;variable;b.;Relevant;to decisions in which one or more inputs to the production process are fixed;c.;Not relevant to optimal pricing and production;output decisions;d.;Crucial in making optimal investment decisions;in new production facilities;2.;In a study of banking by assets size over time;we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is;presumed to be least cost. This is;called;a.;Regression to the mean analysis;b.;Breakeven analysis;c.;Survivorship;analysis;d.;Engineering cost analysis;e.;A Willie Sutton analysis;3.;Which of the following is not an assumption of;the linear breakeven model;a.;Constant selling price unit per price;b.;Decreasing variable cost per unit;c.;Fixed costs are independent of the output level;d.;A single product (or a constant mix of products);is being produced and sold;e.;All cost;can be classified as fixed variable;4.;A ______ total cost function implies that;marginal costs_____ as output is increased;a.;Linear, increase linearly;b.;Quadratic, are constant;c.;Cubic, increase linearly;d.;Linear;are constant;5.;Long distance telephone service became 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 I;a.;Governmental pressure to lower price;b.;Reduced demand for long distance service;c.;Entry;into this industry pushes prices down;d.;Lower price for a barrel of crude oil;e.;Increased cost of providing long distance;service;6.;What is another term meaning the degree of;operating leverage?;a.;The measure of the importance of fixed cost;b.;The operating profit elasticity;c.;The measure of business risk;d.;D.O.L;e.;All of;the above;7.;Theoretically, in a long-run cost function;a.;All inputs are fixed;b.;All;inputs are considered variable;c.;Some inputs are always fixed;d.;Capital and labor are always combined in fixed;proportions;e.;B and D;8.;In determining the shape of the cost-output;relationship only____ depreciation is relevant;a.;Direct;b.;Indirect;c.;Usage;d.;Time;e.;Scheduled;9.;A____ total cost function yields a U-shaped;average total cost functions;a.;Cubic;b.;Quadratic;c.;Linear;d.;A and B;only;e.;A, B and C;10. In the linear breakeven;model, the difference between selling per unit and variable cost per unit is referred;to as;a.;Variable margin per unit;b.;Variable cost per unit;c.;Contribution;margin per unit;d.;Target margin per unit;e.;None of the above;11. In the linear breakeven;model, the breakeven sales volume (in dollars) is equal to fixed costs divided;by;a.;Unit selling price less unit variable cost;b.;Contribution margin per unit;c.;One minus the variable cost ratio;d.;a and b;only;e.;a, b, and c;12. The degree of operating leverage is equal to;the ____ change in ____ divided by the ____change in;a.;Percentage, sales, percentage, EBIT;b.;Unit, sales, unit, EBIT;c.;Percentage, EBIT, percentage, sales;d.;Unit, EBIT, unit, sales;e.;None of the above.;13. In the linear breakeven;model, the breakeven sales volume (in dollars) can be found by multiplying the;breakeven sales volume (in units) by;a.;One minus the variable cost ration;b.;Contribution margin per unit;c.;Selling price per unit;d.;Standard deviation of unit sales;e.;None of the above;14. The main difference between perfect;competition and monopolistic competition is;a.;The number of sellers in market;b.;The ease of entry and exit in the industry;c.;The degree of information about market price;d.;The;degree of product differentiation;e.;Whether it is the short run or the long run;15. Long distance telephone service has become a;competitive market. The average cost per;call is $0.05 a minute, and its decline.;The likely reason for the declining price for long distance service is;a.;Governmental pressure to lower the price;b.;Reduced demand for long distance service;c.;Entry;into this industry pushes prices down;d.;Lower price for a barrel of crude oil.;e.;Increase cost of providing long distance service;16. What is the profit;maximization point for a firm in a purely competitive environment?;a.;The;output where P =MC;b.;The output where P MC;d.;The;output where MR = MC;e.;The output where AVC < P;17. All of the following are;true for both competition and monopolistic competition in the long run, except;one of them. Which is it?;a.;P = MC;b.;P = AC;c.;Economic profits become zero in the long-run;d.;The barriers to entry and exit are relatively;easy;e.;None of;the above;18. Which of the following;statements is (are) true concerning a pure competition situation?;a.;Its demand curve is represented by a vertical;line;b.;Firms must sell at or below market;c.;Both b and c;d.;Both a and b;Some option is missing in this;19. In the short-run for a purely competitive;market, a manufacturer will stop production when;a.;The total revenue is less than total costs;b.;The;contribution to fixed costs is zero or less;c.;The price is greater than AVC;d.;Operating at a loss;e.;a and b;20. In the purely competitive case, marginal;revenue (MR) is equal to;a.;Cost;b.;Profit;c.;Price;d.;Total revenue;e.;None of the above;21. If price exceeds average;costs under pure competition, ____firms will enter the industry, supply;will_____, and price will be driven;a.;More, decrease, down;b.;More, increase, up;c.;More;increase, down;d.;More, increase, up;e.;None of the above;22. A firm in pure competition would shut down;when;a.;Price is less than average total cost;b.;Price is less than average fixed cost;c.;Price is less than marginal cost;d.;Price is;less than average variable cost;23. In the long-run, firms in a monopolistically;competitive industry will;a.;Earn substantial economic profits;b.;Tend to;just cover costs, including normal profits;c.;Seek to increase the scale of operations;d.;Seek to reduce the scale of operations;24. Uncertainty includes all of the following;except_____.;a.;Unknown effects of deliberates actions;b.;Incomplete;information as to the type of competitor;c.;Random disturbances;d.;Unverified claims;e.;Accidents due to weather hazards;25. Experience goods are;products or service;a.;That the customer already knows;b.;Whose performance is highly unusual;c.;Whole;quality is undetectable when purchased;d.;Not likely to cause repeat purchases;e.;All of the above;26. All of the following are mechanisms which;reduce the adverse selection problem except___.;a.;Warranties from established enterprises with;non-redeployed assets;b.;High interest rates;c.;Large;collateral requirements;d.;Brand names and products-specific promotions and;retail displays;e.;Higher;prices in repeat customer transactions;27. Assets specificity is;largest when;a.;Value in first best use is large;b.;Value in second best use is large;c.;Customers choose their supplier at random;d.;Very;valuable assets are non-redeployable;e.;Customers are loyal to a particular seller;28. Under asymmetric;information;a.;You never get what you pay for;b.;You;sometimes get cheated;c.;You always get cheated;d.;At best you get what you pay for;e.;Sellers make profits in excess of competitive;returns;29. To escape adverse selection and elicit high;quality experience goods buyers can;a.;Offer price premiums to new firms in the market;b.;Seek out unbranded goods;c.;Buy from generic storefronts that have leased;temporary space;d.;Secure;warranties from warehouse retailers;e.;None of the above;30. The problems of;asymmetric information exchange arise ultimately because;a.;One party to the exchange possess different;information than another;b.;One party;has more information than another;c.;One party knows nothing;d.;One party cannot independently verify the;information of another;e.;Information is scarce;31. The market for ?lemons? is one which;a.;The rational buyer discounts;b.;The seller?s product claims are unverified at;the point of purchase;c.;?the bad;apples drive out the good?;d.;The problem of adverse selection is rampant;e.;All of the above;32. The fraudulent delivery of low quality experience;goods at high prices is more likely if;a.;Interest rates decline;b.;Information;about notorious firms is speedily disseminated;c.;Price premiums for allegedly high quality;increase;d.;Sellers invest in non-transferable reputation;e.;None of the above;33. An ?experience good? is;one that;a.;Only an expert can use;b.;Has;undetectable quality when purchased;c.;Can be readily experienced simply by touching or;tasting;d.;Improves with age, like a fine wine;e.;All of the above;34. A ?search good? is;a.;One that depends on how the product behaves over;time;b.;A product whose quality is only found out over;time by finding how durable it is;c.;Like a peach that can be examined for flaws;d.;Like a used car, since it is easy to determine;its inherent quality;e.;None of the;above;35. The price for used for cars is well below the;price of new cars of the same general quality.;This is an example of;a.;The Degree of Operating leverage;b.;A lemon?s;market;c.;Redeployment;assets;d.;Cyclical competition;e.;The unemployment rate;36. Unique creations has;monopoly position in magnometers. If the;marginal cost for a magnometer is $50 and the price elasticity for magnometers;is -4, what is the optimal monopoly price?;Hint: P (1+1/E) = MC;a.;$37.50;b.;$41.25;c.;$66.67;d.;$75.00;e.;$82.50;37. Land?s End estimates a demand curve for;turtleneck sweaters to be: Log Q =.41 + 2.3 Log Y-3 Log P;Where Q=quantity, P=price and Y=measure on;national income. If the marginal cost of;imported turtleneck sweaters is $9.00 (Hint: P (1 + 1/E) = MC. The optimal monopoly price would be;a.;P = $13.50;b.;P =$26.50;c.;P = $27.50;d.;P = $34.50;e.;P =$56.22;38. Declining cost industries;a.;Have upward rising AC curves;b.;Have upward rising demand curves;c.;Have diseconomies of scale;d.;Have marginal cost curves below their average;cost curve;Option is missing;39. A monopolist seller of;Irish ceramics faces the following demand function for its product;P=62-3Q. The fixed cost is $10 and the;variable cost per unit is $2. What is;the maximizing quantity for this monopoly? Hint: MR is twice as steep as the;inverse demand curve: MR=62-6Q (Pick closet answer);a.;Q = 10;b.;Q = 15;c.;Q = 22;d.;Q = 37;e.;Q = 41;40. A monopolist faces the following;demand curve: P = 12 -.3Q with marginal costs of $3. What is the monopolistic PRICE?;a.;P = $5.50;b.;P = $6.50;c.;P =$ 7.50;d.;P = $8.50;e.;P = $9.50;41. In natural monopoly, AC continuously declines;due to economics in distribution or in production, which tends to found in;industries which face increasing returns to scale. If price were set equal to marginal cost;then;a.;Price would equal average cost.;b.;Price;would exceed average cost.;c.;Price would be below average cost.;d.;Price would be at the profit maximizing level;for natural monopoly;e.;All of the above;42. The;profit-maximizing monopolist, faced with a negative-sloping demand curve, will;always produce;a.;at an output greater than the output where average costs are minimized;b.;at an output short of that output where average costs are minimized;c.;at an output equal to industry output under pure competition;d.;a and c;e. none of the above;43. In case of pure;monopoly;a.;one firm is the sole producer of a good or service which has no close;substitutes;b. the firms profit is maximized at the price;and output combination where marginal cost;equals marginal revenue.;c. the demand curve is always elastic;d. a and;b only;e. a, b and c;44. The demand curve facing the firm in____ is;the same as the industry demand curve.;a. pure competition;b. monopolistic competition;c. oligopoly;d. pure monopoly;e. none of the above;45. When cross;elasticity of demand between one product and all other products is low, one is generally referring to a(n)_____ situation;a. production process exhibiting increasing;returns to scale;b. constant cost industry;c. avoidance of duplication of facilities;d. protection of consumers from price;discrimination;e. none of the above;46. The practice by;telephone companies of charging lower long-distance rates at night than during;the day is an example of;a. inverted block pricing;b. second-degree price discrimination;c. peak-load pricing;d. first-degree price discrimination;e. none of the above;47. 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;a. similar, similar;b. elastic, lower;c. elastic, higher;d. inelastic, lower;e. inelastic, higher;48. Regulatory agencies engage in all of the;following activities except ______.;a. controlling entry;into the regulated industries;b. overseeing the;quality of service provided by the firms;c. setting federal and state income;tax rates on regulated firms;d. setting prices that;consumers will pay.;e. none of the above;49. ?Conscious parallelism of action? among oligopolistic;firms is an example of;a. intense rivalry;b. a formal collusive;agreement;c. informal, or tacit, cooperation;d. a cartel;e. none of the above.;50. The kinked demand curve model was developed;to help explain;a. fluctuations of;prices in pure competition;b. rigidities observed in prices in oligopolistic;products;c. fluctuations observed;in prices in oligopolistic industries;d. all of the above;e. none of the above;51. An oligopoly is;characterized by;a. a relatively small;number of firms;b. either differentiated;or undifferentiated products;c. actions of any;individual firm will affect sales of other firms in the industry;d. a and b;e. a, b and c;52. Which of the;following is an example of an oligopolistic market structure?;a. public utilities;b. air transport;c. liquor retailers;d. wheat farmers;e. none of the above;53. 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.;a. price;b. output;c. marketing strategy;d. inventory;e. none of the above;54. 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;a. average total cost;b. average profit;c. marginal profit;d. marginal cost;e. marginal revenue;55. A(n)____ is;characterized by a relatively small number of firms producing a product.;a. monopoly;b. syndicate;c. cooperative;d. oligopoly;e. none of the above;56. Factors that affect;the ability of oligopolistic firms to successfully engage in cooperation;include;a. number and size;distribution of sellers;b. size and frequency of;orders;c. product heterogeneity;d. a and b;e. a, b and c;57. Some market;conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion;more successful?;a. The products are;heterogeneous;b. the orders are small;and frequent;c. the firms are all about the same size;d. costs differ across;the firms;e. firms are;geographically widely scattered;58. Even ideal cartels;tend to be unstable because;a. Firms typically;prefer competition to collusion as competition, because it leads to more;profits;b. collusion leads to;lowest possible overall profits in the industry;c. oligopolistic;managers are extremely risk loving;d. firms can benefit by secretly selling more than they;promised the other firms;e. all of the above;59. Suppose that in a;perfectly competitive industry the equilibrium industry quantity is 10,000 units. Suppose that the monopoly output is;5,000. For a 2-firm Cournot Oligopoly (N;=2) known as a duopoly, what is a likely Cournot QUANTITY for the industry?;a. 3,000units;b. 5,000 units;c. 6,667 units;d. 10,000 units;e. 15,000 units;60. A cartel is a situation;where firms in the industry;a. Have an agreement to restrict output;b. agree to produce;identical products;c. obey the rules of;dominant firm price leadership;d. experience the pain;of kinked demand curve;e. have barometric price;leader;61. In a kinked demand;market, whenever one firm decides to lower its price;a. other firms will automatically follow;b. none of the other;firms will follow;c. one half of the firms;follow and one half of the firm don?t follow the price cut;d. other firms all decide;to exit the industry;e. all of the firms;raise their prices;62. The existence of a;kinked demand curve under oligopoly conditions may result in;a. volatile price;b. competitive pricing;c. prices above the;monopoly price;d. an increase in the;coefficient of variation of prices;e. price rigidity;63. Barometric price;leadership exists when;a. 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;b. one firm imposes its;best price on the rest of the industry;c. all firms agree to;change prices simultaneously;d. one company forms a;price umbrella for all others;e. the firms are all;colluding;64. Some industries that;have rigid prices. In those industries;we tend to;a. find that output is;also rigid over the business;b. find that output varies greatly over the business;cycle;c. find the employment;in these industries is quite stable over the business cycle;d. find that the rate of;return is negative in boom times;e. all of the above;65. In____ 2 ?person;nonzero-sum games there is no communication between the participants and no way;to enforce agreements;a. noncooperative;b. cooperative;c. a and b;d. none of the above;66. A strategy game is;a. any pricing;competition among firms;b. a situation arising;from independent decision making among economic participants;c. interdependent choice behavior by individuals or;groups who share a common goal;d. none of the above.;67. Essential components;of a game include all of the following except;a. players;b. payoffs;c. actions;d. an information set;e. cooperation;68. In a zero-sum game;a. all players receive a;$0 payoff;b. all players can;simultaneously win;c. the gains to the winners equal;the losses of the losers;d. none of the above;69. When;airlines post prices on an electronic bulletin board at 8:00 am each morning;the decision-makers are engaged in;a. a single play game;b. a sequential game;c. an entry decision;d. a simultaneous game;e. an infinite;repetition game;70. Consider the game;known as the Prisoner?s Dilemma. What?s;the dilemma?;a. By both not;confessing, both get to the cooperative solution and minimize time in prison;b. by both confessing;both get to the noncooperative solution and both serve significant time in;prison;c. as a group, they are better off cooperating by;not confessing, but each player has an incentive to be first to confess inn a;double cross;d. the problem is that;the spies should have been caught, they should move to Rio;71. When there is an;Equilibrium (or a Nash Equilibrium), we expect that;a. once the firm?s get there, no;one will change their strategy;b. firms will tend to;select a randomized strategy;c. neither firm will;care what it does.;d. this is always a;dominated strategy;72. The Prisoner?s;Dilemma involves two spies who are held in separate soundproof rooms. But even if the two spies could communicate;what makes it difficult for them to achieve the cooperative solution (both not;confessing)?;a. The problem is lack;of information;b. The problem is that;it is a nonzero sum game;c. The problem is that both spies have incentives to;double cross each other.;d. The problem is that;all the outcomes are not particularly;good for either player;73. When there is no Equilibrium (or no Nash;Equilibrium), we expect that;a. the firms end up in;the cooperative strategy;b. a firm will follow a randomized strategy;c. a firm will not care;what it does;d. a firm will very;likely have a dominant strategy;74. In a game, a dominated strategy is one where;a. It is always the best strategy;b. It is always the;worst strategy;c. It is the strategy;that is the best among the group of worst possible strategies;d. Is sometimes the best;and sometimes the worst strategy;75. If two firms operate;in a market that is characterized as being a Prisoner?s Dilemma, and the two;strategies given them are to restrict output or expand output, which of the;following strategy pairs would represent the cooperative solution in a duopoly;for firm 1 and firm 2, and firm 1 given first in each pair?;a. expand output;restrict output;b. restrict output;expand output;c. restrict output, restrict output;d. expand output, expand;output;76. A key to analyzing subgame perfect;equilibrium strategy in sequential games is;a. randomizing one?s;actions so they are unpredictable;b. explicit;communication with competitors;c. effective scenario;planning;d. analyzing best reply responses;e. none of the above;77. The difference;between cooperation and non-cooperative games is;a. cooperative games allow side payments to support;collusion;b. non-cooperative games;encourage communication of sensitive information between arms-length;competitors;c. cooperative games;involve randomized behavior;d. cooperative games necessitate an;explicit order of play;e. inconsequential;except when players have contractual relationships;78. A dominant strategy;differs from a Nash equilibrium strategy in that;a. Nash equilibrium;strategy does not assume best reply responses;b. dominant strategy;assumes best reply responses;c. only Nash strategy;applies to simultaneous games;d. one dominant strategy is sufficient to predict;behavior in a multi-person game;e. Nash strategy is;often unique;79. An illustration of a;non-credible commitment is the promise;a. to not increase capacity in a declining industry;b. to match a new;entrant?s discount price;c. to enter a profitable;industry;d. to restrain output to;the quota assigned by a cartel;e. Nash strategy is;often unique;80. In adopting mixed;Nash equilibrium strategy, a player is attempting to;a. randomize his or her;own behavior;b. make the opponent;favor a course of action preferred by the first player;c. randomize the outcome;of actions;d. make the opponent indifferent between one action;and another;e. none of the above;81. To trust a potential cooperator until the first defection and then never cooperate thereafter;is;a. a dominant strategy;b. an irrational;strategy;c. a grim trigger strategy;d. a non-cooperative;finite game strategy;e. a subgame imperfect;strategy;82. 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;a.;The Folk Theorem;b.;The law of large numbers;c.;The Prisoner?s dilemma;d.;The paradox of large numbers;e.;The;strategy of recusal;83. The chain store paradox;of an incumbent who accommodates a finite stream of potential entrants;threatening to enter sequentially numerous markets illustrates;a. backwards induction;b. the unraveling;problem;c. subgame perfect;equilibrium;d. best reply response;e. all of the above;84. Cooperation in;repeated Prisoner?s dilemma situations seems to be enhanced by all of the;following except;a. Limited punishment schemes;b. clarity of conditional;rewards;c. grim trigger strategy;d. provocability i.e.;credible threats of punishment;e. tit for tat strategy;85. Credible promises and hostage mechanisms can;support a continuous stream of cooperative exchanges except when;a. the promisor is;better off fulfilling than ignoring his promise;b. neither party has a;prior dominant strategy;c. the hostage can be;revoked for just causes;d. the hostage is more valuable than any given exchange;e. the hostage is;difficult to replace;86. In deciding whether;to invest in excess in order to deter entry, incumbents should consider all of;the following except;a. the order of play in;pricing and capacity choice decisions;b. the customer sorting pattern;c. the sunk cost;required to achieve excess capacity;d. the joint-profit;?maximizing cartel output;87. An inverse intensity;customer sorting rule is one in which;a. customers with high;willingness to pay secure the discounted goods;b. customers are;rationed randomly between the discounted and full price goods;c. no customers purchase;below their willingness to pay.;d. customers with the lowest;willingness to pay secure the discounted goods;e. brand loyalty allows;the incumbent to retain its regular customers;88. An efficient;customer sorting rule is one in which;a. customers with high;willingness to pay secure the discounted goods;b. customers are;rationed randomly between the discounted and full price goods;c. no customers purchase;below their willingness to pay.;d. customers with the lowest willingness to pay secure;the discounted goods;e. brand loyalty allows;the incumbent to retain its regular customers;89. All of the;following are sunk cost investments that;precommit an incumbent to aggressively defend market share and the cash flow;prior to threatened entry except;a. reputational;investments in company logos (e.g. Beatrice);b. automobile showrooms;c. retail displays which;hold only L?eggs egg shaped hosiery package;d. neon signage for an;independently owned Krispy Kreme store;e. excess capacity in a declining;industry;90. The segmenting of;customers into several small groups such as household, industries institutional;commercial and industrial users, and establishing a different rate schedule for;each group is known as;a. first-degree price discrimination;b. market penetration;c. third-degree price;discrimination;d. second-degree;price discrimination;e. none of the above;91. Which of the;statements about price discrimination is (are) false?;a. It must be possible;to segment the market;b. it must be difficult;to transfer the seller?s product from one market segment to another;c. public utilities practice first-degree price;discrimination;d. there must be;differences in the elasticity of demand from one segment to another;e. c and d;92. Which of the;following pricing policies best identifies when a product should be expanded;maintained or discontinued?;a. full-cost pricing policy;b. target-pricing policy;c. marginal-pricing;policy;d. market-share pricing;policy;e. markup pricing policy;93. Second-degree price;discrimination;a. is also known as;block rate setting;b. is imperfect in the;eyes of the monopolist;c. is regularly;practiced by public utilities;d. is effective only in;the case of services or products which are sold in easily metered units;e. all of the above.;94. In______ price;discrimination, the entire surplus is captured by the producer.;a. first-degree;b. second-degree;c. third-degree;d. a and b;e. none of the above;95. In _____ price;discrimination, the monopolist charges each consumer the highest price that;purchaser is willing to pay for each unit purchased (provided that this price;exceeds the marginal cost of production).;a. first-degree;b. second-degree;c. third-degree;d. a and b.;e. none of the above;96. ______ is a new;product pricing strategy which results in a high product price. This price is reduced over time as demand at;the higher price is satisfied.;a. prestige pricing;b. price lining;c. skimming.;d. Incremental pricing;e. none of the above;97. ____is the price at which and intermediate;good or service is transferred from the selling to the buying division within;the same firm.;a. incremental price;b. marginal price;c. full-cost price;d. transfer price;e. none of the above;98. To maximize profits;a monopolist that engages in price discrimination must allocate output in such;a way as to make identical the ____ in all markets.;a. ratio of price to;marginal cost;b. ratio of marginal;cost of marginal utility;c. ratio of price;elasticity;d. marginal revenue;e. none of the above;99. Third-degree price discrimination exists whenever;a. the seller knows;exactly how much each potential customer is willing to pay and ill charge;accordingly;b. the seller can separate markets by geography, income;age, etc., and charge different prices to;these different groups.;c. different prices are;charged by blocks of services;d. the seller will;bargain with buyers in each of the markets to obtain the best possible price;100. The following are possible examples of price discrimination;EXCEPT;a. prices in export;markets are lower than for identical products in the domestic market;b. senior citizens pay;lower fares on public transportation than younger people at the same time;c. a product sells at higher price at location A;than location B, because transportation costs are higher from the factory to A;d. subscription prices;for a profession journal are higher when bought by a library than when bought;by an individual;101. Non-redeployed durable assets that are dependent upon complementary and perfectly;redeployable assets to achieve substantial value-added will typically be;organized as;a. an export trading;company;b. a spot market;c. a vertically;integrated firm;d. an on-going;relational contract;e. a joint stock company;102. Vertical;integration may be motivated by all of the following except;a. Upstream market power;b. economies of ever wider spans of managerial control;c. technological interdependencies;d. reduced search and;bargaining cost;e. the hold-up problem;103. Contracts are;distinguished from tactical alliances by;which of the following characteristics;a. involve sequential;responses;b. require third-party enforcement;c. raise shareholder;value;d. elicit diminished;reactions from competitors;104. When manufacturers;and distributors establish credible commitments to one another, they often;employ;a. vertical requirements;contracts;b. third-party;monitoring;c. credible threat;mechanisms;d. non-price tactics;105. Which of the;following is not among the functions of contract?;a. to provide incentives;for efficient reliance;b. to reduce transaction;costs;c. to discourage the;development of asymmetric information;d. to provide risk;allocation mechanism;106. Buying electricity;off the freewheeling grid at one quarter ?til the hour for delivery on the hour;illustrates;a. relational contracts with;distributors;b. vertical requirement contracts;c. spot market;transactions;d. variable price;agreements;107. When someone;contracts to do a task but fails to put full effort into the performance of an;agreement, yet the lack of effort is not independently variable, this lack of;effort constitutes a;a. breach of contractual;obligations;b. denial of good;guarantee;c. loss of reputation;d. moral hazard;108. 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;a. reliance relationships;b. uncertainty;c. moral hazard;d. creative ingenuity;e. insurance reliance;109. Which of the following are not approaches to;resolving the principal-agent problem?;a. ex ante incentive;alignment;b. deferred stock;options;c. ex post governance mechanism;d. straight salary;contracts;e. monitoring by;independent outside directions;110. To accomplish its purpose a linear;profit-sharing contract must;a. induce the employee;to moonlight;b. communicate a code of;conduct that will be monitored and enforced;c. establish a separating equilibrium;d. meet either the participation of the incentive;compatibility constraint;e. not realign;incentives;111. Mac trucks and their dealers would likely;have an organizational form of;a. fixed profit;b. spot market;recontracting;c. alliances;d. vertical integration;112. Reliant assets are always all of the;following except;a. durable;b. have substantially;less value in second best use;c. dependent on unique;complementary inputs;d. pivotal in designing;strategy;113. Governance mechanisms are designed;a. to increase contracting costs;b. to resolve;post-contractual opportunism;c. to enhance the;flexibility of restrictive covenants;d. to replace insurance;e. none of the above;114. When borrows who do not intend to repay are;able to hide their bad credit histories, a;lender?s well ?intentioned borrowers should;a. complain to;regulatory authorities;b. withdraw their loan;applications;c. offer more collateral;in exchange for lower interest charges;d. divulge still more;information on their loan applications;e. hope for a pooling;equilibrium;115. Common value auctions with open bidding;necessarily entail;a. asymmetric;information;b. ascending prices;c. more than two bidders;d. amendment of bids;e. sealed final offers;116. An;incentive-compatible mechanism for revealing true willingness to pay in a;private value auction is;a. imposs


Paper#57577 | Written in 18-Jul-2015

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