ECO 550 MIDTERM EXAM

•    Question 1
4 out of 4 points
    
In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except
Answer            
            
•    Question 2

    
    Essential components of a game include all of the following except:
Answer            
                
•    Question 3

    
    A key to analyzing subgame perfect equilibrium strategy in sequential games is
Answer            
                
•    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            
                
•    Question 5
4 out of 4 points
    
    Credible promises and hostage mechanisms can support a continuous stream of cooperative exchanges except when
Answer            
                
•    Question 6
4 out of 4 points
    
    Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting
Answer            
                
•    Question 7
4 out of 4 points
    
    The segmenting of customers into several small groups such as household, institutional, commercial, and industrial users, and establishing a different rate schedule for each group is known as:
Answer            
                
•    Question 8
4 out of 4 points
    
    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            
                
•    Question 9
4 out of 4 points
    
    Which of the following pricing policies best identifies when a product should be expanded, maintained, or discontinued?
Answer            
                
•    Question 10
4 out of 4 points
    
    ____ 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            
                
•    Question 11
4 out of 4 points
    
    Which of the following is not among the functions of contract?
Answer            
                
•    Question 12
4 out of 4 points
    
    Mac trucks and their dealers would likely have an organizational form of
Answer            
                
•    Question 13
4 out of 4 points
    
    Contracts are distinguished from tactical alliances by which of the following characteristics:
Answer            
                
•    Question 14
4 out of 4 points
    
    Which of the following are not approaches to resolving the principal-agent problem?
Answer            
                
•    Question 15
4 out of 4 points
    
    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            
                
•    Question 16
4 out of 4 points
    
    ____ 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            
                
•    Question 17
4 out of 4 points
    
    The antitrust laws regulate all of the following business decisions except ____.
Answer            
                
•    Question 18
4 out of 4 points
    
    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            
                
•    Question 19
4 out of 4 points
    
    The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
Answer            
                
•    Question 20
4 out of 4 points
    
    The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
Answer            
                
•    Question 21
4 out of 4 points
    
    If the acceptance of Project A makes it impossible to accept Project B, these projects are:
Answer            
                
•    Question 22
4 out of 4 points
    
    Cost-benefit analysis is the public sector counterpart to ____ used in private, profit-oriented firms.
Answer            
                
•    Question 23
4 out of 4 points
    
    The weights used in calculating the firm's weighted-average cost of capital are equal to the proportion of debt and equity ____.
Answer            
                
•    Question 24
4 out of 4 points
    
    In order to help assure that all relevant factors will be considered, the capital-expenditure selection process should include the following steps except:
Answer            
                
•    Question 25
4 out of 4 points
    
    The social rate of discount is best approximated by:
Answer            
                

•    Question 1
4 out of 4 points
    
    The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
Answer            
                
•    Question 2
4 out of 4 points
    
    The short-run cost function is:
Answer            
                
•    Question 3
4 out of 4 points
    
    Theoretically, in a long-run cost function:
Answer            
                
•    Question 4
4 out of 4 points
    
    Evidence from empirical studies of long-run cost-output relationships lends support to the:
Answer            
                
•    Question 5
4 out of 4 points
    
    In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer            
                
•    Question 6
4 out of 4 points
    
    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            
                
•    Question 7
4 out of 4 points
    
    Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
Answer            
                
•    Question 8
4 out of 4 points
    
    In the long-run, firms in a monopolistically competitive industry will
Answer            
                
•    Question 9
4 out of 4 points
    
    In the short-run for a purely competitive market, a manufacturer will stop production when:
Answer            
                
•    Question 10
4 out of 4 points
    
    A firm in pure competition would shut down when:
Answer            
                
•    Question 11
4 out of 4 points
    
    Asset specificity is largest when
Answer            
                
•    Question 12
4 out of 4 points
    
    Uncertainty includes all of the following except ____.
Answer            
                
•    Question 13
4 out of 4 points
    
    Experience goods are products or services
Answer            
                
•    Question 14
4 out of 4 points
    
    Declining cost industries
Answer            
                
•    Question 15
4 out of 4 points
    
    Of the following, which is not an economic rationale for public utility regulation?
Answer            
                
•    Question 16
4 out of 4 points
    
    ____ 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            
                
•    Question 17
4 out of 4 points
    
    The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
Answer            
                
•    Question 18
4 out of 4 points
    
    When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
Answer            
                
•    Question 19
4 out of 4 points
    
    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            
                
•    Question 20
4 out of 4 points
    
    A cartel is a situation where firms in the industry
Answer            
                
•    Question 21
4 out of 4 points
    
    The existence of a kinked demand curve under oligopoly conditions may result in
Answer            
                
•    Question 22
4 out of 4 points
    
    Which of the following is an example of an oligopolistic market structure?
Answer            
                
•    Question 23
4 out of 4 points
    
    Even ideal cartels tend to be unstable because
Answer            
                
•    Question 24
4 out of 4 points
    
    In a kinked demand market, whenever one firm decides to lower its price,
Answer            
                
•    Question 25
4 out of 4 points
    
    Some industries that have rigid prices.  In those industries, we tend to
Answer            
                

•    Question 1
4 out of 4 points
    
    Theoretically, in a long-run cost function:
Answer            
                
•    Question 2
4 out of 4 points
    
    The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
Answer            
                
•    Question 3
4 out of 4 points
    
    Which of the following is not an assumption of the linear breakeven model:
Answer            
                
•    Question 4
4 out of 4 points
    
    In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer            
                
•    Question 5
4 out of 4 points
    
    In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
Answer            
                
•    Question 6
4 out of 4 points
    
    The short-run cost function is:
Answer            
                
•    Question 7
4 out of 4 points
    
    The problems of asymmetric information exchange arise ultimately because
Answer            
                
•    Question 8
4 out of 4 points
    
    A firm in pure competition would shut down when:
Answer            
                
•    Question 9
4 out of 4 points
    
    An "experience good" is one that:
Answer            
                
•    Question 10
4 out of 4 points
    
    In the purely competitive case, marginal revenue (MR) is equal to:
Answer            
                
•    Question 11
4 out of 4 points
    
    If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.
Answer            
                
•    Question 12
4 out of 4 points
    
    Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
Answer            
                
•    Question 13
4 out of 4 points
    
    What is the profit maximization point for a firm in a purely competitive environment?
Answer            
                
•    Question 14
4 out of 4 points
    
    The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
Answer            
                
•    Question 15
4 out of 4 points
    
    The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer            
                
•    Question 16
4 out of 4 points
    
    Declining cost industries
Answer            
                
•    Question 17
4 out of 4 points
    
    Of the following, which is not an economic rationale for public utility regulation?
Answer            
                
•    Question 18
4 out of 4 points
    
    When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
Answer            
                
•    Question 19
4 out of 4 points
    
    Regulatory agencies engage in all of the following activities except _______.
Answer            
                
•    Question 20
4 out of 4 points
    
    Barometric price leadership exists when
Answer            
                
•    Question 21
4 out of 4 points
    
    A cartel is a situation where firms in the industry
Answer            
                
•    Question 22
4 out of 4 points
    
    The existence of a kinked demand curve under oligopoly conditions may result in
Answer            
                
•    Question 23
4 out of 4 points
    
    Some industries that have rigid prices.  In those industries, we tend to
Answer            
                
•    Question 24
4 out of 4 points
    
    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            
                
•    Question 25
4 out of 4 points
    
    A(n) ____ is characterized by a relatively small number of firms producing a product.
Answer            

•    Question 1
4 out of 4 points
    
    The Prisoner’s Dilemma involves two spies who are held in separate soundproof rooms.  But even if the two spies could communicate, what makes it difficult for them to achieve the cooperative solution (both not confessing)?
Answer            
                
•    Question 2
4 out of 4 points
    
    A key to analyzing subgame perfect equilibrium strategy in sequential games is
Answer            
                
•    Question 3
4 out of 4 points
    
    In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except
Answer            
                
•    Question 4
4 out of 4 points
    
    The starting point of many methods for predicting equilibrium strategy in sequential games is
Answer            
                
•    Question 5
4 out of 4 points
    
    Credible promises and hostage mechanisms can support a continuous stream of cooperative exchanges except when
Answer            
                
•    Question 6
4 out of 4 points
    
    Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting
Answer            
                
•    Question 7
4 out of 4 points
    
    Third-degree price discrimination exists whenever:
Answer            
                
•    Question 8
4 out of 4 points
    
    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            
                
•    Question 9
4 out of 4 points
    
    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            
                
•    Question 10
4 out of 4 points
    
    ____ 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            
                
•    Question 11
4 out of 4 points
    
    Contracts are distinguished from tactical alliances by which of the following characteristics:
Answer            
                
•    Question 12
4 out of 4 points
    
    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            
                
•    Question 13
4 out of 4 points
    
    When borrowers who do not intend to repay are able to hide their bad credit histories, a lender's well-intentioned borrowers should
Answer            
                
•    Question 14
4 out of 4 points
    
    To accomplish its purpose a linear profit-sharing contract must
Answer            
                
•    Question 15
4 out of 4 points
    
    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            
                
•    Question 16
4 out of 4 points
    
    The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
Answer            
                
•    Question 17
4 out of 4 points
    
    ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
Answer            
                
•    Question 18
4 out of 4 points
    
    ____ 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            
                
•    Question 19
4 out of 4 points
    
    The antitrust laws regulate all of the following business decisions except ____.
Answer            
                
•    Question 20
4 out of 4 points
    
    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            
                
•    Question 21
4 out of 4 points
    
    The ____ depicts the risk-return relationship in the market for all securities:
Answer            
                
•    Question 22
4 out of 4 points
    
    If the acceptance of Project A makes it impossible to accept Project B, these projects are:
Answer            
                
•    Question 23
4 out of 4 points
    
    Capital expenditures:
Answer            
                
•    Question 24
4 out of 4 points
    
    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            
                
•    Question 25
4 out of 4 points
    
    Which of the following items is (are) not considered as part of the net investment calculation?
Answer            
•    Question 1
4 out of 4 points
    
    In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
Answer            
                
•    Question 2
4 out of 4 points
    
    Evidence from empirical studies of long-run cost-output relationships lends support to the:
Answer            
                
•    Question 3
4 out of 4 points
    
    Theoretically, in a long-run cost function:
Answer            
                
•    Question 4
4 out of 4 points
    
    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            
                
•    Question 5
4 out of 4 points
    
    A ____ total cost function implies that marginal costs ____ as output is increased.
Answer            
                
•    Question 6
4 out of 4 points
    
    In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer            
                
•    Question 7
4 out of 4 points
    
    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            
                
•    Question 8
4 out of 4 points
    
    All of the following are mechanisms which reduce the adverse selection problem except ____.
Answer            
                
•    Question 9
4 out of 4 points
    
    In the long-run, firms in a monopolistically competitive industry will
Answer            
                
•    Question 10
4 out of 4 points
    
    An "experience good" is one that:
Answer            
                
•    Question 11
4 out of 4 points
    
    The price for used cars is well below the price of new cars of the same general quality.  This is an example of:
Answer            
                
•    Question 12
4 out of 4 points
    
    In the short-run for a purely competitive market, a manufacturer will stop production when:
Answer            
                
•    Question 13
4 out of 4 points
    
    Experience goods are products or services
Answer            
                
•    Question 14
4 out of 4 points
    
    Declining cost industries
Answer            
                
•    Question 15
4 out of 4 points
    
    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            
                
•    Question 16
4 out of 4 points
    
    When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
Answer            
                
•    Question 17
4 out of 4 points
    
    Regulatory agencies engage in all of the following activities except _______.
Answer            
                
•    Question 18
4 out of 4 points
    
    ____ 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            
                
•    Question 19
4 out of 4 points
    
    The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
Answer            
                
•    Question 20
4 out of 4 points
    
    Some industries that have rigid prices.  In those industries, we tend to
Answer            
                
•    Question 21
4 out of 4 points
    
    The existence of a kinked demand curve under oligopoly conditions may result in
Answer            
                
•    Question 22
4 out of 4 points
    
    Barometric price leadership exists when
Answer            
                
•    Question 23
4 out of 4 points
    
    A cartel is a situation where firms in the industry
Answer            
                
•    Question 24
4 out of 4 points
    
    Even ideal cartels tend to be unstable because
Answer            
                
•    Question 25
4 out of 4 points
    
    Some market conditions make cartels MORE likely to succeed in collusion.  Which of the following will make collusion more successful?
Answer