PART II

Question 1
4 out of 4 points

When there is no Equilibrium (or no Nash Equilibrium), we expect that:

Answer
Selected Answer:

a firm will follow a randomized strategy.

Correct Answer:

a firm will follow a randomized strategy.

Question 2
4 out of 4 points

The Prisoners 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
Selected
Answer:

The problem is that both spies have incentives to double cross each
other.

Correct Answer:

The problem is that both spies have incentives to double cross each
other.

Question 3
4 out of 4 points

A key to analyzing subgame perfect equilibrium strategy in sequential games is

Answer
Selected Answer:

an explicit order of play for at least some participants

Correct Answer:

an explicit order of play for at least some participants

Question 4
4 out of 4 points

An illustration of a non-credible commitment is the promise

Answer
Selected Answer:

to restrain output to the quota assigned by a cartel

Correct Answer:

to restrain output to the quota assigned by a cartel

Question 5
4 out of 4 points

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

Answer
Selected Answer:

the Prisoner's dilemma

Correct Answer:

the Prisoner's dilemma

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
Selected Answer:

two-part price discrimination.

Correct Answer:

two-part price discrimination.

Question 7
4 out of 4 points

Third-degree price discrimination exists whenever:

Answer
Selected
Answer:

Correct
Answer:

the seller can separate markets by geography, income, age, etc., and charge
different prices to these different groups.
the seller can separate markets by geography, income, age, etc., and charge
different prices to these different groups.

Question 8
4 out of 4 points

Which of the following pricing policies best identifies when a product should be
expanded, maintained, or discontinued?
Answer
Selected Answer:

marginal-pricing policy
Correct Answer:

marginal-pricing policy

Question 9
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
Selected Answer:

third-degree price discrimination

Correct Answer:

third-degree price discrimination

Question 10
4 out of 4 points

The following are possible examples of price discrimination, EXCEPT:

Answer
Selected
Answer:

Correct
Answer:

a product sells at a higher price at location A than at location B, because

transportation costs are higher from the factory to A.
a product sells at a higher price at location A than at location B, because
transportation costs are higher from the factory to A.

Question 11
4 out of 4 points

Which of the following are not approaches to resolving the principal-agent problem?
Answer
Selected Answer:

straight salary contracts

Correct Answer:

straight salary contracts

Question 12
4 out of 4 points

Vertical integration may be motivated by all of the following except:

Answer
Selected Answer:

Economies of ever wider spans of managerial control

Correct Answer:

Economies of ever wider spans of managerial control

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
Selected Answer:

offer more collateral in exchange for lower interest charges

Correct Answer:

offer more collateral in exchange for lower interest charges

Question 14
4 out of 4 points

Contracts are distinguished from tactical alliances by which of the following

characteristics:
Answer

Selected Answer:

require third-party enforcement

Correct Answer:

require third-party enforcement

Question 15
4 out of 4 points

To accomplish its purpose a linear profit-sharing contract must

Answer
Selected Answer:

establish a separating equilibrium

Correct Answer:

establish a separating equilibrium

Question 16
4 out of 4 points

The ____ is equal to the some of the squares of the market shares of all the firms in an
industry.
Answer
Selected Answer:

Herfindahl-Hirschman index
Correct Answer:

Herfindahl-Hirschman index

Question 17
0 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
Selected Answer:

automobiles
Correct Answer:

transportation

Question 18
4 out of 4 points

The lower the barriers to entry and exit, the more nearly a market structure fits the ____
market model.
Answer
Selected Answer:

perfectly contestable
Correct Answer:

perfectly contestable

Question 19
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
Selected Answer:

The theory of contestable markets

Correct Answer:

The theory of contestable markets

Question 20
4 out of 4 points

The antitrust laws regulate all of the following business decisions except ____.
Answer
Selected Answer:

wage levels
Correct Answer:

wage levels

Question 21
4 out of 4 points

In cost-effectiveness analysis, constant cost studies:

Answer
Selected
Answer:

Correct
Answer:

attempt to specify the output which may be achieved from a number of

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

Question 22
4 out of 4 points

The social rate of discount is best approximated by:

Answer
Selected Answer:

the opportunity cost of resources taken from the private sector

Correct Answer:

the opportunity cost of resources taken from the private sector

Question 23
4 out of 4 points

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
Selected Answer:

dividend growth rate

Correct Answer:

dividend growth rate

Question 24
4 out of 4 points

The ____ method assumes that the cash flows over the life of the project are reinvested
at the ____.
Answer
Selected Answer:

net present value; firm's cost of capital

Correct Answer:

net present value; firm's cost of capital

Question 25
4 out of 4 points

Which of the following should not be counted in a cost-benefit analysis?

Answer
Selected Answer:

pecuniary benefits
Correct Answer:

pecuniary benefits
Tuesday, December 9, 2014 7:25:41 PM EST