ECO 550 Final Exam Part 1 & 2 Spring 2016 - €17,51   In winkelwagen

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ECO 550 Final Exam Part 1 & 2 Spring 2016

PART 1 1. Which of the following is not an assumption of the linear breakeven model: a. constant selling price per unit 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 costs can be classified as fixed or variable 2. 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 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. a. 10,000 customers b. 20,000 customers c. 30,000 customers d. 40,000 customers e. 50,000 customers 4. In a study of banking by asset 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 5. In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as: a. variable margin per unit b. variable cost ratio c. contribution margin per unit d. target margin per unit e. None of the above 6. 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 ratio b. contribution margin per unit c. selling price per unit d. standard deviation of unit sales e. none of the above 7. 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 8. 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 9. “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 10. 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 11. Which of the following is an example of an oligopolistic market structure? a. public utilities b. air transport industry c. liquor retailers d. wheat farmers e. none of the above 12. 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 firms don't follow the price cut. d. other firms all decide to exit the industry e. all of the other firms raise their prices. 13. Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will a. deliver high quality products consistent with expectations b. not attempt to establish any warranty enforcement mechanisms c. offer several prices and qualities d. produce only one quality e. none of the above 14. 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. seller make profits in excess of competitive returns 15. All of the following are mechanisms which reduce the adverse selection problem except ____. a. warranties from established enterprises with non-redeployable assets b. high interest rates c. large collateral requirements d. brand names and product-specific promotions and retail displays e. higher prices in repeat customer transactions 16. The price for used 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 17. 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 18. 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; decrease; up c. more; increase; down d. more; increase; up e. none of the above 19. 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 20. In natural monopoly, AC continuously declines due to economies 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 21. When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation. a. oligopoly b. monopoly c. pure competition d. substitution e. monopolistic competition 22. ____ 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. a. Peak load pricing b. Inverted block pricing c. Block pricing d. First degree price discrimination e. none of the above 23. 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, simila b. elastic, lower c. elastic, higher d. inelastic, lower e. inelastic, higher 24. Declining cost industries a. have upward rising AC curves. b. have upward rising demand curves. c. have -shaped total costs. d. have diseconomies of scale. e. have marginal cost curves below their average cost curve 25. 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 PART 2 1. 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 2. A key to analyzing subgame perfect equilibrium strategy in sequential games is a. predictable behavior b. an explicit order of play for at least some participants c. information sets that are known with certainty d. creditable threats clearly communicated e. randomness 3. 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 4. 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 in a double cross. d. The problem is that the spies should never have been caught; they should move to Rio. 5. 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 6. ___ is the price at which an 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 7. 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 to marginal utility c. ratio of price to elasticity d. marginal revenue e. none of the above 8. 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: a. first-degree price discrimination. b. market penetration. c. third-degree price discrimination. d. second-degree price discrimination. e. none of the above 9. 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: a. the preference rankings of vacationers travelling together are negatively correlated. b. a preference for cities is always higher than preferences for mountain vistas. c. preference rankings of vacationers travelling together are positively correlated. d. preference for the seaside is always higher than preferences for city excursions. e. no one wants to take a European vacation package to cities, mountains, and the seaside 10. Third-degree price discrimination exists whenever: a. the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. b. different prices are charged by blocks of services. c. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. d. the seller will bargain with buyers in each of the markets to obtain the best possible price. 11. 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 mechanisms 12. 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 13. 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 14. 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 directors 15. 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. meet either the participation or the incentive compatibility constraint d. establish a separate equilibrium e. not realign incentives 16. ____ occurs whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant. a. Pecuniary benefits and costs b. Externalities c. Intangibles d. Monopoly costs and benefits e. none of the above 17. The sentiment for increased deregulation in the late 1970’s and early 1980’s has been felt most significantly in the price regulation of a. coal b. grain c. transportation d. automobiles e. electric power generation 18. ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model. a. Baumol’s sales maximization hypothesis b. The Pareto optimality condition c. The Cournot model d. The theory of contestable markets e. none of the above 19. The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model. a. monopolistic competition b. perfectly contestable c. oligopoly d. monopoly e. none of the above 20. The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____. a. market concentration b. income distribution c. technological progressiveness d. price discrimination e. none of the above 21. Any current outlay that is expected to yield a flow of benefits beyond one year in the future is: a. a capital gain b. a wealth maximizing factor c. a capital expenditure d. a cost of capital e. a dividend reinvestment 22. Which of the following would not be classified as a capital expenditure for decision-making purposes? a. purchase of a building b. investment in a new milling machine c. purchase of 90-day Treasury Bills d. investment in a management training program e. all of the above are capital expenditures 23. The social rate of discount is best approximated by: a. the cost of government borrowing b. the opportunity cost of resources taken from the private sector c. 3 percent d. 30 percent e. none of the above 24. If the acceptance of Project A makes it impossible to accept Project B, these projects are: a. contingent projects b. complementary projects c. mutually inclusive projects d. mutually exclusive projects e. none of the above 25. The ____ method assumes that the cash flows over the life of the project are reinvested at the a. net present value; computed internal rate of return b. internal rate of return; firm's cost of capital c. net present value; firm's cost of capital d. net present value; risk-free rate of return e. none of the above

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