BUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITY

BUSI 620 TEST 2 / BUSI620 TEST 2 (LATEST) : LIBERTY UNIVERSITY BUSI 620 – Test 2 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. The market supply curve is QS=3+P. The market will be in equilibrium if 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 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 monopolist will shut down if it is producing a level of output where marginal revenue is equal to short-run 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 short-term 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: 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 production of long distance and local telephone service and sacrificed benefits from Question 40 In a twoplayer game, which of the following is a Nash equilibrium? A firm that is engaging in price discrimination will A grocery store that offers one can of soup for .35 and three cans for $1.00 is engaging in A firm will realize the highest level of profit if it is able to engage in Which of the following is an example of price discrimination? The optimal output of joint products that are produced in fixed proportions is found where? The optimal combination of joint products that are produced in variable proportions in found where? The iso revenue line is tangent to the product transformation curve A single plant, multi-product firm will introduce additional products Icarus Medical Supplies produces patented adhesives that are used to reassemble broken bones. Pindrop Medical Products manufactures patented pins that are also used to reassemble broken bones. Both of these imperfectly competitive firms are maximizing profit. If Icarus merges with Pindrop, then the merged firm will maximize profits if it Tax laws require that transfer prices be established, but they have little effect on the operation of the firm. Under cost-plus pricing, the more price elastic the demand is for a product, the higher the markup should be. Incremental analysis states that a firm should take an action if the resulting change in revenue exceeds the corresponding change in cost. Prestige pricing refers to the setting a high product price in order to capitalize on snob appear. Skimming refers to the practice of introduction several variations on a basic product and charging different prices for each. Value pricing refers to price cutting. Carolina Berries manufactures many varieties of jams and jellies. An increase in the price of their strawberry jam can be expected to The Nintari Company produces video game playing machines and a second firm, Necsega owns exclusive rights to manufacture games that can be used with the Nintari game machine. Both of these imperfectly competitive firms are maximizing profits. If Nintari buys Necsega and nothing else changes, then profits will be maximized if Nintari