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Eco 550 Final Exam Part 2 Latest 2015 With Four Other Versions

ECO 550 FINAL EXAM PART 2 LATEST 2015 WITH FOUR OTHER VERSIONS AS A BONUS

Question 1

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 2

Evidence from empirical studies of long-run cost-output relationships lends support to the:
Answer

existence of a non-linear cubic total cost function

hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm

hypothesis that total costs increase quadratically over the ranges of output examined

hypothesis that total costs increase linearly over some considerable range of output examined
Question 3

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 4

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 5

A ____ total cost function implies that marginal costs ____ as output is increased.
Answer

linear; increase linearly

quadratic; are constant

cubic; increase linearly

linear; are constant
Question 6

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 7

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 8

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 9

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 10

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 11

Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
Answer

deliver high quality products consistent with expectations

not attempt to establish any warranty enforcement mechanisms

offer several prices and qualities

produce only one quality
Question 12

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 13

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 14

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 15

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 16

____ 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.
Answer

Peak load pricing

Inverted block pricing

Block pricing

First degree price discrimination
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

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 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

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 21

“Conscious parallelism of action” among oligopolistic firms is an example of ____.
Answer

intense rivalry

a formal collusive agreement

informal, or tacit, cooperation

a cartel
Question 22

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 23

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
Question 24

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 25

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 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

ADDED QUESTIONS BASED ON POPULAR DEMAND

Question 1
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
Question 2
Credibility in threats and commitments in sequential games is based on
a. randomizing one’s actions so they are unpredictable
b. explicit communications with competitors
c. effective scenario planning
d. analyzing best reply responses
Question 3
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
Question 4
Non-cooperative sequential games can incorporate all the following features except
a. a single decision-maker in the endgame
b. no communication
c. finite or infinite time periods
d. third-party enforceable agreements
e. an explicit order of play
Question 5
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.
Question 6
____ 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

Question 7
Which of the following items is (are) not considered as part of the net investment calculation?
a. installation and shipping charges
b. acquisition cost of new asset
c. salvage value of old equipment that is being replaced
d. first year’s net cash flow
Question 8
Which of the following items is (are) not considered as part of the net investment calculation?
a. installation and shipping charges
b. acquisition cost of new asset
c. salvage value of old equipment that is being replaced
d. first year’s net cash flow
Question 9
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
Question 10
Which of the following is (are) a basic principle(s) when estimating a project’s cash flows?
a. cash flows should be measured on a pre-tax basis
b. cash flows should ignore depreciation since it is a non-cash charge
c. only direct effects of a project should be included in the cash flow calculations
d. cash flows should be measured on an incremental basis
Question 11
The weights used in calculating the firm’s weighted-average cost of capital are equal to the proportion of debt and equity ____.
a. used to finance the project
b. used to finance the projects undertaken last year
c. in the industry average capital structure
d. in the firm’s target capital structure

THIRD VERSION
Question 1
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.
4 points
Question 2
Essential components of a game include all of the following except:
Answer

players

payoffs

actions

an information set

cooperation
4 points
Question 3
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
4 points
Question 4
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
4 points
Question 5
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
4 points
Question 6
____ 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
4 points
Question 7
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.
4 points
Question 8
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.
4 points
Question 9
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
4 points
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
4 points
Question 11
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
4 points
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
4 points
Question 13
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.
4 points
Question 14
Governance mechanisms are designed
Answer

to increase contracting costs

to resolve post-contractual opportunism

to enhance the flexibility of restrictive covenants

to replace insurance
4 points
Question 15
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
4 points
Question 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.
Answer

Pecuniary benefits and costs

Externalities

Intangibles

Monopoly costs and benefits
4 points
Question 17
The antitrust laws regulate all of the following business decisions except ____.
Answer

collusion

mergers

monopolistic practices

price discrimination

wage levels
4 points
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
4 points
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
points
Question 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
4 points
Question 21
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
4 points
Question 22
In cost-effectiveness analysis, constant cost studies:
Answer

are rarely used

attempt to specify the output which may be achieved from a number of alternative programs, assuming all are funded at the same level

are useless because they fail to adequately evaluate program benefits

try to find the least expensive way of achieving a certain objective
4 points
Question 23
The social rate of discount is best approximated by:
Answer

the cost of government borrowing

the opportunity cost of resources taken from the private sector

3 percent

30 percent
4 points
Question 24
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
4 points
Question 25
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

LINK TO PART 1

https://studyacer.com/solution/eco-550-final-exam-part-1-latest-2015-with-four-other-versions-as-a-bonus-question-1-george-webb-restaurant-collects-on-the-average-5-per-customer-at-its-breakfast-lunch-diner-its-variable-cost-per-customer-averages-3-81795

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