LSUS MBA 701 2 CERTIFICATION
SCRIPT 2026 QUESTIONS WITH
SOLUTIONS GRADED A+
◍ 1) What is the most important characteristic of oligopoly?A) firms have
market power B) product differentiation C) low barriers to entry D)
interdependence of profits E) None of the choices are correct.
Answer: D) interdependence of profits
◍ 2) In an oligopoly market:A) a firm must lower price in order to sell more
output. B) each firm faces a demand curve that depends on how the firm’s
rivals behave. C) a few firms account for a large portion of industry sales.
D) both "firm must lower price in order to sell more output" and "each firm
faces a demand curve that depends on how the firm’s rivals behave". E) All
of the choices are correct..
Answer: E) All of the choices are correct.
◍ All of the following are anticipated effects of a proposed project. Which of
these should be considered when computing the cash flow for the final year
of a project?.
Answer: operating cash flow, net working capital recovery, salvage values
◍ Which one of these bonds is the most interest-rate sensitive?.
Answer: 10-year zero coupon bond
◍ A stop order to sell at $46 will be executed:.
Answer: as a market order once a trade occurs at a price of $46 or less.
◍ 3) Oligopolists face interdependent profits because:A) there are few firms in
the market.B) the product is differentiated.C) industry sales are large.D) All
of the choices are correct..
Answer: A) there are few firms in the market.
,◍ The internal rate of return for a project will increase if:.
Answer: the initial cost of the project can be reduced
◍ 4) In game theory, a dominant strategy is:A) a strategy used by a large firm
to compete against smaller firms. B) a strategy followed by the price leader.
C) a strategy involving a high risk but also a high return. D) a strategy that
leads to the best outcome no matter what a rival does. E) None of the
choices are correct..
Answer: D) a strategy that leads to the best outcome no matter what a rival
does.
◍ 5) In game theory, what is a dominant strategy?A) A strategy that leads to
the best possible outcome for both firms. B) Any strategy that leads to a
Nash equilibrium. C) A strategy that yields a minimax outcome. D) A
strategy that leads to the best outcome for a firm no matter what strategy the
other chooses..
Answer: D) A strategy that leads to the best outcome for a firm no matter
what strategy the other chooses.
◍ 6) Interdependence occurs when:A) firms consider the actions of other firms
when making price and output decisions. B) all firms in an industry are
affected by the same general economic conditions, like consumer incomes
and the unemployment rate. C) firms cooperate to increase profit. D) All of
the choices are correct..
Answer: A) firms consider the actions of other firms when making price and
output decisions.
◍ 7)A form of strategic entry deterrence is:A) forming a cartel. B) maintaining
excess capacity. C) limit pricing. D) both "maintaining excess capacity" and
"limit pricing"..
Answer: D) both "maintaining excess capacity" and "limit pricing".
◍ 8) One reason a firm or firms might charge a price lower than its
profit-maximizing price is:A) to discourage the entry of new firms. B) to
follow a tit-for-tat strategy. C) to erect multiproduct barriers to entry. D)
, both "to discourage the entry of new firms" and "to erect multiproduct
barriers to entry"..
Answer: A) to discourage the entry of new firms.
◍ 9) Refer to the following figure showing the reaction functions of oligopoly
firms A and
B. (See Inserted Graph)If firm A anticipates that firm B will run 3 ads, then
firm A should run _____ ads in order to maximize its own profit.A) 1 B) 2
C) 4 D) 5.
Answer: B) 2
◍ 10) Refer to the following figure. Two firms, A and B, produce similar, but
not identical, products. BRA and BRB are, respectively, the reaction
functions for firms A and B, which compete primarily by price.(See Inserted
Graph)A’s best-response curve showsA) all the Nash equilibrium prices that
firm A can charge.B) how firm B should react to any price set by
A. C) the price A should charge to maximize A’s profits given each possible
price that B might charge.D) the price A should charge to maximize joint
profits..
Answer: C) the price A should charge to maximize A’s profits given each
possible price that B might charge.
◍ You are considering two independent projects with the same discount rate of
11 percent. Project A costs $284,700 and has cash flows of $75,900,
$106,400, and $159,800 for Years 1 to 3, respectively. Project B costs
$115,000, and has a cash flow of $50,000 a year for Years 1 to 3. You have
sufficient funds to finance any decision you make. Which project or
projects, if either, should you accept and why?.
Answer: Project B; because its IRR exceeds the discount rate
◍ 11) Refer to the following figure. Two firms, A and B, produce similar, but
not identical, products. BRA and BRB are, respectively, the reaction
functions for firms A and B, which compete primarily by price.(See Inserted
Graph)If firm A is expected to charge a price of $6, B should charge a price
of ______ to maximize B’s profit.A) $4B) $7C) $12 D) $16.
SCRIPT 2026 QUESTIONS WITH
SOLUTIONS GRADED A+
◍ 1) What is the most important characteristic of oligopoly?A) firms have
market power B) product differentiation C) low barriers to entry D)
interdependence of profits E) None of the choices are correct.
Answer: D) interdependence of profits
◍ 2) In an oligopoly market:A) a firm must lower price in order to sell more
output. B) each firm faces a demand curve that depends on how the firm’s
rivals behave. C) a few firms account for a large portion of industry sales.
D) both "firm must lower price in order to sell more output" and "each firm
faces a demand curve that depends on how the firm’s rivals behave". E) All
of the choices are correct..
Answer: E) All of the choices are correct.
◍ All of the following are anticipated effects of a proposed project. Which of
these should be considered when computing the cash flow for the final year
of a project?.
Answer: operating cash flow, net working capital recovery, salvage values
◍ Which one of these bonds is the most interest-rate sensitive?.
Answer: 10-year zero coupon bond
◍ A stop order to sell at $46 will be executed:.
Answer: as a market order once a trade occurs at a price of $46 or less.
◍ 3) Oligopolists face interdependent profits because:A) there are few firms in
the market.B) the product is differentiated.C) industry sales are large.D) All
of the choices are correct..
Answer: A) there are few firms in the market.
,◍ The internal rate of return for a project will increase if:.
Answer: the initial cost of the project can be reduced
◍ 4) In game theory, a dominant strategy is:A) a strategy used by a large firm
to compete against smaller firms. B) a strategy followed by the price leader.
C) a strategy involving a high risk but also a high return. D) a strategy that
leads to the best outcome no matter what a rival does. E) None of the
choices are correct..
Answer: D) a strategy that leads to the best outcome no matter what a rival
does.
◍ 5) In game theory, what is a dominant strategy?A) A strategy that leads to
the best possible outcome for both firms. B) Any strategy that leads to a
Nash equilibrium. C) A strategy that yields a minimax outcome. D) A
strategy that leads to the best outcome for a firm no matter what strategy the
other chooses..
Answer: D) A strategy that leads to the best outcome for a firm no matter
what strategy the other chooses.
◍ 6) Interdependence occurs when:A) firms consider the actions of other firms
when making price and output decisions. B) all firms in an industry are
affected by the same general economic conditions, like consumer incomes
and the unemployment rate. C) firms cooperate to increase profit. D) All of
the choices are correct..
Answer: A) firms consider the actions of other firms when making price and
output decisions.
◍ 7)A form of strategic entry deterrence is:A) forming a cartel. B) maintaining
excess capacity. C) limit pricing. D) both "maintaining excess capacity" and
"limit pricing"..
Answer: D) both "maintaining excess capacity" and "limit pricing".
◍ 8) One reason a firm or firms might charge a price lower than its
profit-maximizing price is:A) to discourage the entry of new firms. B) to
follow a tit-for-tat strategy. C) to erect multiproduct barriers to entry. D)
, both "to discourage the entry of new firms" and "to erect multiproduct
barriers to entry"..
Answer: A) to discourage the entry of new firms.
◍ 9) Refer to the following figure showing the reaction functions of oligopoly
firms A and
B. (See Inserted Graph)If firm A anticipates that firm B will run 3 ads, then
firm A should run _____ ads in order to maximize its own profit.A) 1 B) 2
C) 4 D) 5.
Answer: B) 2
◍ 10) Refer to the following figure. Two firms, A and B, produce similar, but
not identical, products. BRA and BRB are, respectively, the reaction
functions for firms A and B, which compete primarily by price.(See Inserted
Graph)A’s best-response curve showsA) all the Nash equilibrium prices that
firm A can charge.B) how firm B should react to any price set by
A. C) the price A should charge to maximize A’s profits given each possible
price that B might charge.D) the price A should charge to maximize joint
profits..
Answer: C) the price A should charge to maximize A’s profits given each
possible price that B might charge.
◍ You are considering two independent projects with the same discount rate of
11 percent. Project A costs $284,700 and has cash flows of $75,900,
$106,400, and $159,800 for Years 1 to 3, respectively. Project B costs
$115,000, and has a cash flow of $50,000 a year for Years 1 to 3. You have
sufficient funds to finance any decision you make. Which project or
projects, if either, should you accept and why?.
Answer: Project B; because its IRR exceeds the discount rate
◍ 11) Refer to the following figure. Two firms, A and B, produce similar, but
not identical, products. BRA and BRB are, respectively, the reaction
functions for firms A and B, which compete primarily by price.(See Inserted
Graph)If firm A is expected to charge a price of $6, B should charge a price
of ______ to maximize B’s profit.A) $4B) $7C) $12 D) $16.
