ECO 550 Week 8 Assignment 3 – Market Model Patterns of Change

ECO 550 Week 8 Assignment 3 – Market Model Patterns of Change

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Assignment 3 “Market Model Patterns of Change”

Choose and research a specific business that is publicly traded where there has been a pattern of change in a particular market model (monopoly, oligopoly, etc.).

Write a  five (5) page paper in which you:

Describe the business and explain the general pattern of change of the particular market model indicating how this change is likely to impact business operations. Hypothesize the basic short-run and long-run behaviors of the model in the business you have chosen in a “market economy.” Provide support for your assumptions and conclusions. Researching the company, collect costs, revenue data, other data from the business or that you deem relevant. Explain how you would modify the data in order to make it relevant to decisions a manager must make.  Explain the major factors that affect the degree of competitiveness in your business. Use the data to develop at least three (3) measures (e.g., productivity measures) to show how the industry is evolving. Provide evidence supporting your rationale.  Research two of the business’ closest competitors to determine the pricing strategy for each business indicating how knowledge of this information may influence pricing decisions in your business. Provide support for your rationale.  Recommend a pricing policy for the business you chose. Assess how your pricing policy maximizes profits for the business. Provide support for your rationale. Use at least Four(4) high-quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

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ECO 550 Week 6 Assignment 2 – Operations Decision

ECO 550 Week 6 Assignment 2 – Operations Decision

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Assignment 2 “Operations Decision”

Assume you have been hired as a managing consultant by a company to offer some advice that will help it make a decision as to whether it should shut down completely or continue its operations. It currently uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm’s output is $32. The cost of other variable inputs is $2,000 per day. You are told that the firm’s fixed cost is “high enough” so that the firm’s total costs exceed its total revenue. The marginal cost of the last unit is $30.  (Ch 7 & 8 to solve)

This assignment allows you to determine the specific details about this fictitious company in order to conduct an environmental scan of this company.

Write a three to four (4-5) page paper in which you:

Briefly describe the details of the fictitious business that you created for this assignment. Assess the current environmental scan factors that are relevant to the decision making process. Determine the factors that will have the greatest impact on plant operations and management’s decision to continue or discontinue operations. Provide a rationale for your determination. Evaluate the financial performance of the company using the information provided in the scenario. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term and how each factor influences managerial decisions. Be sure to show the calculations that helped you reach your conclusions.  Recommend how the company can improve its profitability to deliver more value to its stakeholders. Then, develop a brief plan to implement the recommendations.  Assess the circumstances in which the company should discontinue operations and how management should react when confronted with these circumstances. Provide a rationale with your response.  Use at least (4) high-quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:

Be typed, double-spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

ECO 550 Week 5 Midterm Quiz 2

ECO 550 Week 5 Midterm Quiz 2

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1). The different methods by which the sellers inform their potential buyers about the product is called:

2). Jane regularly sends funds to organizations seeking to save endangered animal species. This is an example of:

3). Carla had received very low annual return from her investment portfolio comprising of stocks of five companies for two years. Her decision to continue holding the same portfolio of assets will be an example of:

4). In the example of Ireland described in the text, the country’s production set shifted outward over time because:

5). Suppose Zia spends her time picking berries and apples. Her production set is described by the equation , where is the number of berries and y the number of apples. Which of the following statements will be true?

6). When the slope of a country’s production set declines, it implies:

7). Bankers supported the Federal Reserve Board’s Regulation Q because:

8). Suppose the adoption of a new software reduces the marginal cost of publishing books. For a given demand curve for books, this will be represented by:

9). Starting from a pure exchange equilibrium, an increase in the demand for a commodity will result in:

10). Let the marginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be 2; the price of labor is given by $10. What will be the price of capital such that the isocost and the isoquant are tangent to each other?

11). Which of the following is a property of an isoquant?

12). Refer to Figure 4-1. If the firm produces 2,000 dolls per month when the market price is $4: Figure 4-1 The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children. The market price for a doll is $4 per unit.

13). Refer to Figure 5-1. Which of the following points represents the long-run equilibrium price-output combination? In the figure given below MC denotes the marginal cost and AC denotes the average cost of a firm under perfect competition. Figure 5-1

14). Which of the following conditions define the short-run for any industry?

15). Suppose beer producers in Munich became aware of the low price of one barrel of beer in the domestic market relative to that in the United States. What will be the impact of this price difference?

16). Refer to Figure 6-2. What would be the consumer surplus if this remained a perfectly competitive market? A group of firms in competitive market produced 20 units of a good when the market price was $2. They incurred no marginal cost. Eventually they realized the benefits they could get by teaming up and acting as a monopolist. The following figure shows the demand curve and marginal revenue curve for this profit maximizing monopolist. Figure 6-2

17). Refer to Figure 6-4. Calculate the profit earned by the monopolist when the marginal cost of production is $15 per unit. The following figure depicts the demand, marginal revenue (MR), and marginal cost (MC) for a monopolist. Figure 6-4

18). Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?

19). Refer to Figure 4-2. Identify the supply curve of the firm. Figure 4-2 The following figure shows the cost curves of a firm producing good X.

20). High barriers to entry protect the market power of existing firms and discourage the formation of firms which:

21). The principle of backward induction proves that in price-fixing oligopoly games:

22). Refer to Figure 7-1. What will be the dominant firm’s profit maximizing output? The figure given below represents the total output and price produced in an oligopoly market characterized by a dominant firm and a fringe. SF represents the supply curve of the fringe, D is the market demand curve, DRES represents the residual demand curve of the dominant firm, MRRES represents the residual marginal revenue curve of the dominant firm, and MCD represents the marginal cost of the dominant firm.

23). In a mixed strategy situation, like the “heads or tails” game, the players can maximize their income by randomly choosing head or tail each with a probability of:

24). Refer to Table 7-3. What will be the Nash equilibrium if there is no interaction between the two students? The following matrix represents the payoffs to two students who have been caught cheating in a class. Table 7-3

25). Which of the following games will have a solution in mixed strategies?

ECO 550 Week 5 Midterm Quiz 1

ECO 550 Week 5 Midterm Quiz 1

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This midterm exam consist of 32 multiple choice questions and covers the material in Chapters 1 through 8. There are four questions from each chapter.

1). The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?

2). To reduce Agency Problems, executive compensation should be designed to:

3). Economic profit is defined as the difference between revenue and ____.

4). Which of the following will increase (V0), the shareholder wealth maximization model of the firm:

5). A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.

6). The closest example of a risk-free security is

7). The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:

8). The ____ is the ratio of ____ to the ____.

9). If demand were inelastic, then we should immediately:

10). Producers’ goods are:

11). Marginal revenue (MR) is ____ when total revenue is maximized.

12). Suppose we estimate that the demand elasticity for fine leather jackets is ‑.7 at their current prices.  Then we know that:

13). The method which can give some information in estimating demand of a product that hasn’t yet come to market is:

14). The standard deviation of the error terms in an estimated regression equation is known as:

15). All of the following are reasons why an association relationship may not imply a causal relationship except:

16). Demand functions in the multiplicative form are most common for all of the following reasons except:

17). The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:

18). The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:

19). The type of economic indicator that can best be used for business forecasting is the:

20). An example of a time series data set is one for which the:

21). The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions.  If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:

22). Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because

23). In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will

24). Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would

25). The following is a Cobb-Douglas production function:  Q = 1.75K0.5∙L0.5.  What is correct here?

26). Which of the following is never negative?

27). If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?

28). In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:

29). What method of inventory valuation should be used for economic decision-making problems?

30). ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

31). If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:

32). According to the theory of cost, specialization in the use of variable resources in the short-run results initially in

ECO 550 Week 1 Assignment – Making Decision Based on Demand and Forecasting

ECO 550 Week 1 Assignment – Making Decision Based on Demand and Forecasting

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Assignment 1: Making Decisions Based on Demand and Forecasting

Domino’s Pizza is considering entering the marketplace in your community. Conduct research about the demographics of your community, for example the population size and average income per household and other independent variables, such as price of pizza and price of soda, for this assignment. By conducting a demand analysis and forecast for pizza, you will be able to make a decision whether Domino’s should establish a presence in your community.

  1. Report the demographic and independent variables that are relevant to complete a demand analysis providing a rationale for the selection of the variables.
  2. Using Excel or other calculation software, input the data you collected in criterion one to calculate an estimated regression. Then, from the calculation provided, interpret the coefficient of determination, indicating how it will influence your decision to open the pizza business. Explain any additional variables that may improve the coefficient of determination.
  3. Test the statistical significance of the variables and the regression equation, indicating how it will impact your decision to open the pizza business.
  4. Forecast the demand for pizza in your community for the next four (4) months using the regression equation, including the assumptions that were used to create the demand. Justify the assumptions made related to the forecast.
  5. Based on the forecasting demand, determine whether Dominos should establish a restaurant in your community. Provide a rationale and support for the decision.
  6. Cite at least two (2) different government sources for the demographic information you collected.

ECO 550 Mid-Term Quiz 1 and 2

ECO 550 Mid-Term Quiz 1 and 2

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MIDTERM QUIZ 1

This midterm exam consist of 32 multiple choice questions and covers the material in Chapters 1 through 8. There are four questions from each chapter.

1

The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?

2

To reduce Agency Problems, executive compensation should be designed to:

Correct Answer:    create incentives so that managers act like owners of the firm.

3

Economic profit is defined as the difference between revenue and ____.

4

Which of the following will increase (V0), the shareholder wealth maximization model of the firm:

V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t   + Real Option Value.

5

A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.

6

The closest example of a risk-free security is

7

The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:

8

The ____ is the ratio of ____ to the ____.

9

If demand were inelastic, then we should immediately:

10

Producers’ goods are:

11

Marginal revenue (MR) is ____ when total revenue is maximized.

12

Suppose we estimate that the demand elasticity for fine leather jackets is ‑.7 at their current prices.  Then we know that:

13

The method which can give some information in estimating demand of a product that hasn’t yet come to market is:

14

The standard deviation of the error terms in an estimated regression equation is known as:

15

All of the following are reasons why an association relationship may not imply a causal relationship except:

16

Demand functions in the multiplicative form are most common for all of the following reasons except:

17

The variation in an economic time-series which is caused by major expansions or contractions usually

of greater than a year in duration is known as:

18

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:

19

The type of economic indicator that can best be used for business forecasting is the:

20

An example of a time series data set is one for which the:

21

The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions.  If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:

22

Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because

23

In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will

24

Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would

25

The following is a Cobb-Douglas production function:  Q = 1.75K0.5∙L0.5.  What is correct here?

26

Which of the following is never negative?

27

If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?

28

In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:

29

What method of inventory valuation should be used for economic decision-making problems?

30

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

31

If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:

32

According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:

MIDTERM QUIZ 2

The different methods by which the sellers inform their potential buyers about the product is called:

knowledge transfer.
advertising.
product offering.
information dissemination.

Question 2

Jane regularly sends funds to organizations seeking to save endangered animal species. This is an example of:

fairness.
altruism.
selfishness.
self-interest.

Question 3

Carla had received very low annual return from her investment portfolio comprising of stocks of five companies for two years. Her decision to continue holding the same portfolio of assets will be an example of:

bounded rationality.
selfishness.
altruism.
systematically missed opportunities.

Question 4

In the example of Ireland described in the text, the country’s production set shifted outward over time because:

of technological advancements which improved its potato cultivation and overall agricultural production.
it gained new resources over time which enabled it to specialize and gain comparative advantage in software trade with the U.S. and Europe.
of new resources which allowed it to gain absolute advantage over many of its trading partners.
of reduction in trade barriers with the European Union.

Question 5

Suppose Zia spends her time picking berries and apples. Her production set is described by the equation  SHAPE  \* MERGEFORMAT , where  SHAPE  \* MERGEFORMAT  is the number of berries and y
the number of apples. Which of the following statements will be true?

25 apples and 10 berries is achievable but inefficient.
10 berries and 2 apples is efficient but unachievable.
20 apples and 5 berries is an inefficient level of production.
30 berries and 5 apples is an efficient level of production.

Question 6

When the slope of a country’s production set declines, it implies:

the production set has shrunk.
the marginal cost of producing the good measured on the Y-axis has fallen.
the marginal cost of producing the good measured on the Y-axis has increased.
the marginal cost of producing the good measured on the X-axis has fallen.

Question 7

Bankers supported the Federal Reserve Board’s Regulation Q because:

it allowed them to charge lower interest rates on loans.
it protected them from money market volatilities.
it increased the demand for loanable funds in the market.
it allowed them to borrow at a low rate of interest and lend out at a high rate of interest.

Question 8

Suppose the adoption of a new software reduces the marginal cost of publishing books. For a given demand curve for books, this will be represented by:

an upward movement along the supply curve of books.
a downward movement along the supply curve of books.
an upward shift in the supply curve of books.
a downward shift in the supply curve of books.

Question 9

Starting from a pure exchange equilibrium, an increase in the demand for a commodity will result in:

a fall in the market price.
a rise in the market price.
a rise in the equilibrium output.
a fall in the equilibrium output.

Question 10

Let the marginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be 2; the price of labor is given by $10. What will be the price of capital such that the isocost and the isoquant are tangent to each other?

$30
$3
$60
$6

Question 11

Which of the following is a property of an isoquant?

It is concave to the origin.
Its slope is given by the ratio of the marginal products, for example, (marginal product of capital) ÷ (marginal product of labor), where capital and labor are measured on the Y and X-axes respectively.
It gives the lowest-cost way of producing a certain level of output.
Isoquants cannot intersect each other.

Question 12

Refer to Figure 4-1. If the firm produces 2,000 dolls per month when the market price is $4:

it will incur a loss.
it will earn maximum profit.
it will minimize cost on inputs.
it will earn the highest revenue.

Question 13

Refer to Figure 5-1. Which of the following points represents the long-run equilibrium price-output combination?

E0
E3
E1
E2

Question 14

Which of the following conditions define the short-run for any industry?

Firms do not incur a fixed cost.
Firms incur both fixed as well as variable costs.
Firms can easily enter and leave the market.
Firms can enter but cannot leave the market.

Question 15

Suppose beer producers in Munich became aware of the low price of one barrel of beer in the domestic market relative to that in the United States. What will be the impact of this price difference?

Beer production in Munich will decline.
Price of beer in the domestic market will increase.
Beer production in the U.S. will increase.
Beer consumption in the domestic market will increase.

Question 16

$320
$160
$380
$240

Question 17

Refer to Figure 6-4. Calculate the profit earned by the monopolist when the marginal cost of production is $15 per unit.

$20
$35
$25
$45

Question 18

Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?

A monopolist faces a downward sloping demand curve. Hence, output expansion leads to lower prices.
.
A monopolist may reduce prices to make it difficult for other firms to compete.
A monopolist can increase profits by reducing price when its cost of production declines due to increased size of the new firm. The fall in price is less than the decline in cost.

Question 19

Refer to Figure 4-2. Identify the supply curve of the firm.

s

Question 20

High barriers to entry protect the market power of existing firms and discourage the formation of firms which:

invest heavily in research and development activities.
use illegal procedures to capture the market.
are inefficiently small and cannot realize economies of scale.
are large enough to dominate the existing firms.

Question 21

The principle of backward induction proves that in price-fixing oligopoly games:

the players honor the agreement if the game is repeated.
the players honor the agreement if the game is played five times.
the players dishonor the agreement if the game is not played more than twice.
the players dishonor the agreement if the game is repeated a number of times, as determined prior to the start of play.

Question 22

Refer to Figure 7-1. What will be the dominant firm’s profit maximizing output?

.
.
.
.

Question 23

In a mixed strategy situation, like the “heads or tails” game, the players can maximize their income by randomly choosing head or tail each with a probability of:

0.25
0.5
0.75
1.0

Question 24

Refer to Table 7-3. What will be the Nash equilibrium if there is no interaction between the two students?

Student A will confess while Student B will remain silent.
Student B will confess while Student A will remain silent.
Both the students will confess.
Both the students will remain silent.

Question 25

Which of the following games will have a solution in mixed strategies?

A price-fixing game
A Prisoner’s dilemma
A drafting game used by racing cars.
A product choice game with asymmetric profits

ECO 550 Final Exam Set 4

ECO 550 Final Exam Set 4

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1). In the absence of any legally binding enforcement mechanism, individual cartel producers may find it advantageous to cheat on the agreements and engage in secret price concessions.

A.true

B.false

2). When a promisor 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

A.breach of contractual obligations

B.denial of good guarantee

C.loss of reputation

D.moral hazard

3). The Herfindahl-Hirschman index is a measure of ____.

A.market concentration

B.income distribution

C.technological progressiveness

D.price discrimination

E.none of the above

4). In long-run equilibrium, all firms in a pure competition market situation operating under a condition of certainty will have identical costs even though they may use different production and operation techniques.

A.true

B.false

5). The distinctive characteristic of an oligopolistic market structure is that there are recognizable interdependencies among the decisions of the firms.

A.true

B.false

6). The Sherman Act prohibits:

A.contracts in restraint of commerce

B.monopolization of an industry

C.price discrimination

D.a and b

E.a, b, and c

7). Buying electricity off the freewheeling grid at one quarter ’til the hour for delivery on the hour illustrates:

A.relational contracts with distributors

B.vertical requirements contracts

C.spot market transactions

D.variable price agreements

8). Effective collusion generally is more difficult as the number of oligopolistic firms involved increases.

A.true

B.false

9). In pure competition:

A.the optimal price-output solution occurs at the point where marginal revenue is equal to price

B.a firm’s demand curve is represented by a horizontal line

C.a firm is a price-taker since the products of every producer are perfect substitutes for the products of every other producer

D.a and b only

E.a, b, and c

10). An oligopoly is characterized by:

A.a relatively small number of firms

B.either differentiated or undifferentiated products

C.actions of any individual firm will affect sales of other firms in the industry

D.a and b

E.a, b, and c

11). The kinked demand curve model was developed to help explain:

A.fluctuations of prices in pure competition

B.rigidities observed in prices in oligopolistic industries

C.fluctuations observed in prices in oligopolistic industries

D.all of the above

E.none of the above

12). The profit-maximizing monopolist, faced with a negative-sloping demand curve, will always produce:

A.at an output greater than the output where average costs are minimized

B.at an output short of that output where average costs are minimized

C.at an output equal to industry output under pure competition

D.a and c

E.none of the above

13). Capital expenditures:

A.are easily reversible

B.are forms of operating expenditures

C.affect future profitability

D.should be evaluated on a before-tax basis

E.none of the above

14). Which of the following public policies has (have) the effect of restricting competition:

A.licensing

B.patents

C.import quotas

D.a and b only

E.a, b, and c

15). The cost of capital can be thought of as the rate of return required by investors in the firm’s securities.

Answer

A.true

B.false

16). ____ occur whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant.

A.Pecuniary benefits and costs

B.Externalities

C.Intangibles

D.Monopoly costs and benefits

E.none of the above

17). A firm in pure competition would shut down when:

A.price is less than average total cost

B.price is less than average fixed cost

C.price is less than marginal cost

D.price is less than average variable cost

18). The expected rate of return from a share of stock consists of:

A.a dividend return

B.capital appreciation (or depreciation)

C.interest

D.a and b only

a, b, and c

19). In the purely competitive case, marginal revenue (MR) is equal to

A.cost

B.profit

C.price

D.total revenue

E.none of the above

20). In the short-run for a purely competitive market, a manufacturer will stop production when:

A.the total revenue is less than total costs

B.the contribution to fixed costs is zero or less

C.the price is greater than AVC

D.operating at a loss

E.a and b

21). Patents have been defended by some on the grounds that they stimulate inventive activity. Others have argued for changes in current patent laws because:

A.resources are misallocated by the grant of a patent monopoly

B.patents may not be necessary to encourage inventive activity

C.the current patent monopoly period (17 years) is too short to encourage any inventive activity.

D.a and b only

E.all of the above

22). A monopoly will always produce less than a purely competitive industry, ceteris paribus.

A.true

B.false

23). The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:

A.inverted block pricing

B.second-degree price discrimination

C.peak-load pricing

D.first-degree price discrimination

E.none of the above

24). When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.

A.oligopoly

B.monopoly

C.pure competition

D.substitution

E.monopolistic competition

25). 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:

A.independent projects

B.mutually exclusive projects

C.contingent projects

D.separable projects

E.none of the above

26). Which of the following statements is (are) true concerning a pure competition situation?

Its demand curve is represented by a vertical line.

A.Firms must sell at or below market price.

B.Marginal revenue is equal to price.

C.both b and c

D.both a and b

27). Which of the following are not approaches to resolving the principal-agent problem:

A.ex ante incentive alignment

B.deferred stock options

C.ex post governance mechanism

D.straight salary contracts

E.monitoring by independent outside directors

28). 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.

A.average total cost

B.average profit

C.marginal profit

D.marginal cost

E.marginal revenue

29). In the electric power industry, residential customers have relatively ____ demands for electricity compared with large industrial users and generally are charged ____ rates.

A.similar, similar

B.elastic, lower

C.elastic, higher

D.inelastic, lower

E.inelastic, higher

30). The largest problem faced in cartel pricing agreements such as OPEC is:

A.detecting violations of quota barriers by cartel participants

B.arriving at a profit maximizing price

C.attracting participants in the cartel

D.none of the above

31). Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as

A.an export trading company

B.a spot market contract

C.a vertically integrated firm

D.an on-going relational contract

E.a joint stock company.

32). Governance mechanisms are designed

A.to increase contracting costs

B.to resolve post-contractual opportunism

C.to enhance the flexibility of restrictive covenants

D.to replace insurance

E.none of the above

33). A(n) ____ is characterized by a relatively small number of firms producing a product.

A.monopoly

B.syndicate

C.cooperative

D.oligopoly

E.none of the above

34). The antitrust laws regulate all of the following business decisions except ____.

A.collusion

B.mergers

C.monopolistic practices

D.price discrimination

E.wage levels

36). In the case of pure monopoly:

A.one firm is the sole producer of a good or service which has no close substitutes

B.the firm’s profit is maximized at the price and output combination where marginal cost equals marginal revenue

C.the demand curve is always elastic

D.a and b only

E.a, b, and c