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ECO 550 Final Exam A+ Complete Solution ALL VERSION

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  • Subjects: Economics | Stellar Atmospheres |
  • Due on 03 Apr, 2018 09:16:38
  • Asked on 03 Apr, 2018 09:16:38
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ECO 550 Final Exam A+ Complete Solution ALL VERSION

PART 1
Question 1 
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 2 
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 3 
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 4 
The short-run cost function is:
Answer 
where all inputs to the production process are variable
relevant to decisions in which one or more inputs to the production process are fixed
not relevant to optimal pricing and production output decisions
crucial in making optimal investment decisions in new production facilities
Question 5 
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:
Answer 
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
Question 6 
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 7 
If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.
Answer 
more; decrease; down
more; decrease; up
more; increase; down
more; increase; up
Question 8 
The problems of asymmetric information exchange arise ultimately because
Answer 
one party to the exchange possesses different information than another
one party has more information than another
one party knows nothing
one party cannot independently verify the information of another
information is scarce
Question 9 
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 10 
What is the profit maximization point for a firm in a purely competitive environment?
Answer 
The output where P = MC
The output where P < MC
The output where P > MC
The output where MR = MC
The output where AVC < P
Question 11 
In the purely competitive case, marginal revenue (MR) is equal to:
Answer 
cost
profit
price
total revenue
Question 12 
The price for used cars is well below the price of new cars of the same general quality. This is an example of:
Answer 
The Degree of Operating Leverage
A Lemon's Market
Redeployment Assets
Cyclical Competition
The Unemployment Rate
Question 13 
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 14 
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 15 
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 16 
The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer 
pure competition
monopolistic competition
oligopoly
pure monopoly
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 
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 
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:
Answer 
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
Question 20 
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 21 
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 22 
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 23 
Some industries that have rigid prices. In those industries, we tend to
Answer 
find that output is also rigid over the business cycle
find that output varies greatly over the business cycle
find the employment in these industries is quite stable over the business cycle
find that the rate of return is negative in boom times
Question 24 
Which of the following is an example of an oligopolistic market structure?
Answer 
public utilities
air transport industry
liquor retailers
wheat farmers
Question 25 
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.
ECO 550 FINAL EXAM PART 1 SECOND VERSION
Question 1 
The short-run cost function is:
Answer 
where all inputs to the production process are variable
relevant to decisions in which one or more inputs to the production process are fixed
not relevant to optimal pricing and production output decisions
crucial in making optimal investment decisions in new production facilities
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 
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 
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 5 
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:
Answer 
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
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 
A firm in pure competition would shut down when:
Answer 
price is less than average total cost
price is less than average fixed cost
price is less than marginal cost
price is less than average variable cost
Question 8 
Under asymmetric information,
Answer 
you never get what you pay for
you sometimes get cheated
you always get cheated
at best you get what you pay for
sellers make profits in excess of competitive returns
Question 9 
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 10 
A "search good" is:
Answer 
One that depends on how the product behaves over time
A product whose quality is only found out over time by finding how durable it is
Like a peach that can be examined for flaws
Like a used car, since it is easy to determine its inherent quality
Question 11 
All of the following are mechanisms which reduce the adverse selection problem except ____.
Answer 
warranties from established enterprises with non-redeployable assets
high interest rates
large collateral requirements
brand names and product-specific promotions and retail displays
higher prices in repeat customer transactions
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 purely competitive case, marginal revenue (MR) is equal to:
Answer 
cost
profit
price
total revenue
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 
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 16 
The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer 
pure competition
monopolistic competition
oligopoly
pure monopoly
Question 17 
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 18
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:
Answer 
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
Question 19 
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 20 
The existence of a kinked demand curve under oligopoly conditions may result in
Answer 
volatile prices
competitive pricing.
prices above the monopoly price.
an increase in the coefficient of variation of prices.
price rigidity
Question 21 
A(n) ____ is characterized by a relatively small number of firms producing a product.
Answer 
monopoly
syndicate
cooperative
oligopoly
Question 22 
Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?
Answer 
The products are heterogeneous
The orders are small and frequent
The firms are all about the same size
Costs differ across the firms
Firms are geographically widely scattered
Question 23 
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 24 
Which of the following is an example of an oligopolistic market structure?
Answer 
public utilities
air transport industry
liquor retailers
wheat farmers
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

Question 1 
The starting point of many methods for predicting equilibrium strategy in sequential games is
Answer 
designing proactive reactions to rival actions
information sets
uncertain outcomes
backwards induction based on an explicit order of play
endgame analysis
Question 2 
When there is an Equilibrium (or a Nash Equilibrium), we expect that:
Answer 
once the firm’s get there, no one will change their strategy.
firms will tend to select a randomized strategy.
neither firm will care what it does.
this is always a dominated strategy.
Question 3 
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 4 
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 5 
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 6 
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 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 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 9 
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 10 
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 11
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 12 
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 verifiable, this lack of effort constitutes a
Answer 
breach of contractual obligations
denial of good guarantee
loss of reputation
moral hazard
Question 13 
Which of the following are not approaches to resolving the principal-agent problem?
Answer 
ex ante incentive alignment
deferred stock options
ex post governance mechanism
straight salary contracts
monitoring by independent outside directors
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 
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 antitrust laws regulate all of the following business decisions except ____.
Answer 
collusion
mergers
monopolistic practices
price discrimination
wage levels
Question 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
Answer 
coal
grain
transportation
automobiles
electric power generation
Question 18 
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 19 
The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
Answer 
market concentration
income distribution
technological progressiveness
price discrimination
Question 20 
____ 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.
Answer 
Pecuniary benefits and costs
Externalities
Intangibles
Monopoly costs and benefits
Question 21 
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
Question 22 
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 23
Capital expenditures:
Answer 
are easily reversible
are forms of operating expenditures
Affect long-run future profitability
Involve only money, not machinery
Question 24 
Which of the following would not be classified as a capital expenditure for decision-making purposes?
Answer 
purchase of a building
investment in a new milling machine
purchase of 90-day Treasury Bills
investment in a management training program
Question 25 
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
SECOND VERSION OF EXAM PART 2
Question 1 
In a game, a dominated strategy is one where:
Answer 
It is always the best strategy
It is always the worst strategy
It is the strategy that is the best among the group of worst possible strategies.
Is sometimes the best and sometimes the worst strategy
Question 2 
Cooperation in repeated prisoner's dilemma situations seems to be enhanced by all of the following except
Answer 
limited punishment schemes
clarity of conditional rewards
grim trigger strategy
provocability--i.e., credible threats of punishment
tit for tat strategy
Question 3 
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 4 
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 5 
When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the decision-makers are engaged in
Answer 
a single play game
a sequential game
an entry decision
a simultaneous game
an infinite repetition game
Question 6 
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 7 
____ 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 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 
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 10 
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.
Answer 
ratio of price to marginal cost
ratio of marginal cost to marginal utility
ratio of price to elasticity
marginal revenue
Question 11 
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 12 
Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as
Answer 
an export trading company
a spot market contract
a vertically integrated firm
an on-going relational contract
a joint stock company.
Question 13 
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 14 
Which of the following are not approaches to resolving the principal-agent problem?
Answer 
ex ante incentive alignment
deferred stock options
ex post governance mechanism
straight salary contracts
monitoring by independent outside directors
Question 15 
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 16 
The antitrust laws regulate all of the following business decisions except ____.
Answer 
collusion
mergers
monopolistic practices
price discrimination
wage levels
Question 17 
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 18 

____ 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.
Answer 
Pecuniary benefits and costs
Externalities
Intangibles
Monopoly costs and benefits
Question 19 
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 20 
The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
Answer 
market concentration
income distribution
technological progressiveness
price discrimination
Question 21 
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 22 
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
Question 23 
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
Question 24 
The decision by the Municipal Transit Authority to either refurbish existing buses, buy new large buses, or to supplement the existing fleet with mini-buses is an example of:
Answer 
independent projects
mutually exclusive projects
contingent projects
separable projects
Question 25 
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

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ECO 550 Final Exam A+ Complete Solution (ALL VERSION)

Mastermind
  • Purchased: 5 times.
  • Submitted: 03 Apr, 2018 09:16:38
PART 1 Question 1 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 2 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 3 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 4 The short-run cost function is: Answer where all inputs to the production process are variable relevant to decisions in which one or more inputs to the production process are fixed not relevant to optimal pricing and production output decisions crucial in making optimal investment decisions in new production facilities Question 5 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: Answer regression to the mean analysis. breakeven analysis. survivorship analysis. engineering cost analysis. a Willie Sutton analysis. Question 6 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 7 If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____. Answer more; decrease; down more; decrease; up more; increase; down more; increase; up Question 8 The problems of asymmetric information exchange arise ultimately because Answer one party to the exchange possesses different information than another one party has more information than another one party knows nothing one party cannot independently verify the information of another information is scarce Question 9 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 10 What is the profit maximization point for a firm in a purely competitive environment? Answer The output where P = MC The output where P < MC The output where P > MC The output where MR = MC The output where AVC < P Question 11 In the purely competitive case, marginal revenue (MR) is equal to: Answer cost profit price total revenue Question 12 The price for used cars is well below the price of new cars of the same general quality. This is an example of: Answer The Degree of Operating Leverage A Lemon's Market Redeployment Assets Cyclical Competition The Unemployment Rate Question 13 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 14 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 15 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 16 The demand curve facing the firm in ____ is the same as the industry demand curve. Answer pure competition monopolistic competition oligopoly pure monopoly 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 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 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: Answer price would equal average cost. price would exceed average cost. price would be below average cost. price would be at the profit maximizing level for natural monopoly Question 20 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 21 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 22 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 23 Some industries that have rigid prices. In those industries, we tend to Answer find that output is also rigid over the business cycle find that output varies greatly over the business cycle find the employment in these industries is quite stable over the business cycle find that the rate of return is negative in boom times Question 24 Which of the following is an example of an oligopolistic market structure? Answer public utilities air transport industry liquor retailers wheat farmers Question 25 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 oth...
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