BUSI 620 Week 8 Test 2

100 % Score

 

 

Question 1

A movie theater that charges a lower price for matinees than for evening showings is

engaging in

 

 

Question 2

The market demand curve for a perfectly competitive industry is QD=122P.

 

Question 3

An individual is indifferent between a certain payment of 20 and a game that will pay 50

or nothing with equal probabilities. The individual has a certainty equivalent coefficient of

 

Question 4

A market is comprised of five firms and their market shares are 30%, 25%, 20%, 15%, and

10%. What is the Herfindahl index for the industry?

 

Question 5

An investment opportunity will pay 10 with a 20% probability, 20 with a 40% probability,

30 with a 30% probability, and 40 with a 10% probability. What is the standard deviation

of the investment?

 

 

Question 6

The fully allocated cost of a product is 45. If the firm wants to use a markup of 30%, then it

should charge a unit price of

 

 

Question 7

Investment A has an expected value of 5 and a standard deviation of 2. Investment B has an

expected value of 10 and a standard deviation of 5. Using the coefficient of variation

approach to comparing these two investments,

 

 

 

 

Question 8

Suppose that the firms in an oligopolistic market engage in a price war and, as a result, all

firms earn lower profits. Game theory would describe this as

 

 

 

Question 9

Identify the Nash equilibrium in the following game.

 

 

Question 10

The fully allocated cost of a product is 10. If the price elasticity of demand for the product

is 2,

then the firm’s optimal markup is

 

 

Question 11

A firm plans to raise 4 million by borrowing at an interest rate of 16% and to raise 1

million by issuing common stock. The firm’s stock has a beta coefficient of 2, the risk free

interest rate is 6%, the average rate of return on stocks is 9%, and the marginal tax rate is

25%. What is the firm’s composite cost of capital?

 

 

Question 12

 

 

A firm that uses profits earned in one market to sell a product or service below its average

variable cost in another market is engaged in

 

 

Question 13

In game theory, a dominant strategy refers to a choice

 

 

Question 14

Which of the following is a device that controls imports and generates government

revenue?

 

Question 15

There are two U.S. locations where your company is currently the only producer of soda.

You currently make 40 in each location, but Pepsi is entering the markets. What decision

should you make? (the chart applies to each location)

 

 

 

Question 16

A firm that is considering one independent project should accept it if

Selected Answer: the internal rate of return on the project exceeds the firm’s cost of capital

 

 

Question 17

A monopolist faces a marginal revenue function of MR = 20 Q.

The monopolist’s

marginal cost is 15 at all levels of output. How many units of output should the firm

produce in order to maximize profits?

 

 

Question 18

Which of the following is always illegal in the U.S.?

 

 

Question 19

The restaurant industry has a market structure that comes closest to

 

 

Question 20

Which of these deals with asymmetry of information?

 

 

Question 21

If an increase in output by a firm imposes uncompensated costs on other firms, these costs

are referred to as

 

Question 22

A firm can borrow at an interest rate of 5%. Its marginal tax rate is 40%. What is its cost of

 

debt?

 

Question 23

Which of the following is a condition required for the practice of price discrimination?

 

Question 24

In the short run, a monoplist will shut down if it is producing a level of output where

marginal revenue is equal to shortrun

marginal cost, but price is

 

Question 25

An individual has a certainty equivalent coefficient equal to 0.4. What is the most this

individual would pay to play a game that pays 50 or 30 with equal probability?

 

 

Question 26

In repeated games, a strategy that involves attacking players that attack you and

cooperating with players that cooperate with you is a

 

Question 27

One difference between the public interest theory and the economic theory of regulation is

that the former

 

 

Question 28

The prisoners’ dilemma explains why

 

Question 29

A strategy that is best regardless of what rival players do is called

 

Question 30

An investment opportunity will pay 50 with a 10% probability, 20 with a 40%

probability, and will result in a loss of 20 with a 50% probability. What is the expected

value of the investment?

 

 

Question 31

When several independent firms form a temporary network to take advantage of a shortterm

business opportunity, the result is called a

 

Question 32

The threat of new entrants would be higher under which of the following conditions?

 

Question 33

Which of the following made monopolization and restraint of trade illegal?

Selected Answer: Sherman Act

 

Question 34

Which of the following is a characteristic of both monopolistic competition and perfect

competition?

 

Question 35

Antilock brakes, airbags, and seatbelts increased the number of accidents while

simultaneously decreasing the number of fatal accidents. Why does this happen?

 

Question 36

An individual must decide whether or not to pursue a business opportunity. If he does

pursue the opportunity, then he will get a 20 profit if the business is successful and a 10

loss if the business fails. Apply the maximin and minimax regret criteria to this decision.

 

Question 37

Which of the following is an example of the prisoners’ dilemma?

 

Question 38

Which of the following defines a zerosum game?

 

Question 39

The breakup of AT&T in 1984 separated the poduction of long distance and local

telephone service and sacrificed beneftis from

 

Question 40

In a twoplayer game, which of the following is a Nash equilibrium?