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Eco550 final exam (part 1 and 2)




Question;Question 1;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 2;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 3;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 4;Theoretically, in a long-run cost function;Answer;all inputs are;fixed;all inputs are considered variable;some inputs;are always fixed;capital and;labor are always combined in fixed proportions;Question 5;In the linear breakeven model, the difference between selling;price per unit and variable cost per unit is referred to as;Answer;variable;margin per unit;variable cost;ratio;contribution margin per unit;target margin;per unit;Question 6;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 7;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 8;In the purely competitive case, marginal revenue (MR) is equal;to;Answer;cost;profit;price;total revenue;Question 9;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 10;Uncertainty includes all of the following except ____.;Answer;unknown;effects of deliberate actions;incomplete information as to the type of;competitor;random;disturbances;unverifiable;claims;accidents due;to weather hazards;Question 11;The main difference between perfect competition and monopolistic;competition is;Answer;The number of;sellers in the market;The ease of;entry and exit in the industry;The degree of;information about market price;The degree of product differentiation;Whether it is;the short run or the long run;Question 12;Experience goods are products or services;Answer;that the;customer already knows;whose performance is highly unusual;whose quality;is undetectable when purchased;not likely to;cause repeat purchases;Question 13;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 14;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 15;The demand curve facing the firm in ____ is the same as the;industry demand curve.;Answer;pure;competition;monopolistic;competition;oligopoly;pure monopoly;Question 16;When the cross elasticity of demand between one product and;all other products is low, one is generally referring to a(n);situation.;Answer;oligopoly;monopoly;pure;competition;substitution;monopolistic competition;Question 17;Declining cost industries;Answer;have upward;rising AC curves.;have upward;rising demand curves.;have?-shaped;total costs.;have;diseconomies of scale.;have marginal cost curves below their average;cost curve;Question 18;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 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;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 21;A(n) ____ is characterized by a relatively small number of firms;producing a product.;Answer;monopoly;syndicate;cooperative;oligopoly;Question 22;Even ideal cartels tend to be unstable because;Answer;firms;typically prefer competition to collusion as competition, because it leads to;more profits.;collusion;leads to lowest possible overall profits in the industry.;oligopolistic;managers are extremely risk loving.;firms can benefit by secretly selling more than;they promised the other firms;Question 23;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 24;Which of the following is an example of an oligopolistic market;structure?;Answer;public;utilities;air transport industry;liquor;retailers;wheat farmers;4 points;Question 25;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;Part 2;Question 1;To trust a potential cooperator until the first defection and;then never cooperate thereafter is;Answer;a dominant;strategy;an irrational;strategy;a grim trigger strategy;a;non-cooperative finite game strategy;a subgame;imperfect strategy;Question 2;The difference between cooperative and non-cooperative games is;Answer;cooperative games allow side payments to support;collusion;non-cooperative;games encourage communication of sensitive information between arms-length;competitors;cooperative;games involve randomized behavior;cooperative;games necessitate an explicit order of play;inconsequential;except when players have contractual relationships;Question 3;When there is no Equilibrium (or no Nash Equilibrium), we expect;that;Answer;the firms end;up in the cooperative strategy.;a firm will follow a randomized;strategy.;a firm will not;care what it does.;a firm will;very likely have a dominant strategy.;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;Question 5;An illustration of a non-credible commitment is the promise;Answer;to not;increase capacity in a declining industry;to match a new;entrant's discount price;to enter a;profitable industry;to restrain output to the quota assigned by a;cartel;to exit in the;face of projected losses.;Question 6;The segmenting of customers into several small groups such as;household, institutional, commercial, and industrial users, and establishing a;different rate schedule for each group is known as;Answer;first-degree;price discrimination;market;penetration;third-degree price discrimination;second-degree;price discrimination;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;Vacation tours to Europe invariably package visits to disparate;regions: cities, mountains, and the seaside. Bundling, a type of;second degree price discrimination, is most profitable when;Answer;the preference;rankings of vacationers travelling together are negatively correlated.;a preference;for cities is always higher than preferences for mountain vistas.;preference rankings of vacationers travelling;together are positively correlated.;preference for;the seaside is always higher than preferences for city excursions.;Question 9;The following are possible examples of price discrimination;EXCEPT;Answer;prices in;export markets are lower than for identical products in the domestic market.;senior citizens pay lower fares on public;transportation than younger people at the same time.;a product;sells at a higher price at location A than at location B, because;transportation costs are higher from the factory to A.;subscription;prices for a professional journal are higher when bought by a library than;when bought by an individual.;Question 10;is a new product pricing strategy which results in a high;initial product price. This price is reduced over time as demand at the higher;price is satisfied.;Answer;Prestige;pricing;Price lining;Skimming;Incremental;pricing;Question 11;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;uestion 12;Buying electricity off the freewheeling grid at one quarter 'til;the hour for delivery on the hour illustrates;Answer;relational;contracts with distributors;vertical;requirements contracts;spot market;transactions;variable price agreements;Question 13;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 14;To accomplish its purpose a linear profit-sharing contract must;Answer;induce the employee to moonlight;communicate a code of conduct that will be monitored and enforced;meet either the;participation or the incentive compatibility constraint;establish a separating equilibrium;not realign incentives;Question 15;Governance mechanisms are designed;Answer;to increase contracting costs;to resolve post-contractual opportunism;to enhance the flexibility of restrictive covenants;to replace insurance;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 Herfindahl-Hirschman index (also shortened to just the Herfindahl index);is a measure of ____.;Answer;market concentration;income distribution;technological progressiveness;price discrimination;uestion 19;The antitrust laws regulate all of the following business decisions except;Answer;collusion;mergers;monopolistic practices;price discrimination;wage levels;uestion 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;If the acceptance of Project A makes it impossible to accept Project B, these;projects are;Answer;contingent projects;complementary projects;mutually inclusive projects;mutually exclusive projects;Question 22;The ____ method assumes that the cash flows over the life of the project are;reinvested at the ____.;Answer;net present value, computed internal rate of return;internal rate of return, firm's cost of capital;net present value, firm's cost of capital;net present value, risk-free rate of return;Question 23;Any current outlay that is expected to yield a flow of benefits beyond one;year in the future is;Answer;a capital gain;a wealth maximizing factor;a capital expenditure;a cost of capital;a dividend reinvestment;Question 24;Which of the following items is (are) not considered as part of;the net investment calculation?;Answer;installation;and shipping charges;acquisition;cost of new asset;salvage value;of old equipment that is being replaced;first year's net cash flow;Question 25;In order to help assure that all relevant factors will be;considered, the capital-expenditure selection process should include the;following steps except;Answer;generating;alternative capital-investment project proposals;estimating;cash flows for the project proposals;reviewing the;investment projects after they have been implemented;allocate manpower to the various divisions;within the firm;4 points


Paper#57527 | Written in 18-Jul-2015

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