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Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
Eco 550 entire course
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Eco 550 entire course

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  • 1. ECO 550 Entire Course: Strayer UniversityClick this link to get the tutorial:http://homeworkfox.com/questions/economics/4333/eco-550-entire-course-strayer-university/ECO 550 Week 1 DQ1Week 1 DQ1From the e-Activity, explain the most important information you would require on which to basesound economic judgments. Explain your rationale.Assess the various forms of organizing andprocessing information to determine which is the most difficult to get correct. Explain yourrationaleECO 550 Week 1 DQ2Week 1 DQ2Analyze the characteristics that make any transaction possible and justify the importance of eachof the characteristics.Evaluate the role institutions play in transactions and discuss the likely economic impact ifinstitutions did not exist. Provide specific examples to support your response.ECO 550 Week 1 Chapter QuestionsWeek 1 Chapter 1 Question 17People join tennis clubs for a fixed fee per year, which entitles them to play as much as theywant without charge. Because people who pay these fees play more tennis than others (who canuse free public courts), this means sunk costs matter for decisions. Right?Week 1 Chapter 1 Question 2
  • 2. When discussing the maximization of utility, regardless of whether you chose to work morehours or fewer when offered a higher hourly wage, you could not be worse off than you were at alower hourly wage. Can you show this?Week 1 Chapter 2 Question 1How does the existence of money reduce the costs of making transactions, relative to a societybased entirely on barter? English is becoming the usual language for international transactions,even if the language of neither country is English. How does this reduce the costs of transacting?ECO 550 Week 2 DQ1Week 2 DQ1Analyze how markets work and make recommendations for or against any form of price control.Explain your rationaleECO 550 Week 2 DQ2Week 2 DQ2Make at least one recommendation concerning U.S. government regulation that would make theeconomy strongerECO 550 Week 2 Chapter QuestionsWeek 2 Chapter 3 Question 2Advertising can inform buyers, but sellers must incur cost to advertise. If so, advertising canresult in higher prices to consumers. Does this mean advertising is economically inefficient? Ifnot, explain how it can simultaneously create value and increase market prices.Week 2 Chapter 3 Question 16Following are observations on the market price and the quantity of good X produced andconsumed in three different years: $10 and 100 units, $4 and 57 units, and $8 and 88 units. Canwe conclude that the market demand for X slopes upward?Week 2 Chapter 5 Question 1A firm in a perfectly competitive market invents a new method of production that lowersits marginal costs. What happens to its output? What happens to the price it charges?
  • 3. a. The firm has an employee who threatens to tell all other firms in the industry abouthow to implement this new technique. Will it be possible to bribe the employee not to do this?Explain why or why not.b. Why should this employee probably choose to tell only some of the other firms rather than allof them?c. What factors will determine the best number of firms to sell the secret to? (Assume that thosewho get the information keep the secret instead of selling it to still others.)ECO 550 Week 2 Quiz 1Economics - General EconomicsQuestion 11. When multiple facts about a sample set are known, a(n) _____ heuristic makes the choice onthe basis of the first category of facts in which the samples differ.eliminationrepresentativerecognitionavailabilityQuestion 21. Which of the following products can be sold through mass advertising?A new electrocardiogram machine to be used by medical examinersA mainframe computer installationA new health insurance policyA new brand of baby diapersQuestion 31. A model of choice in economics starts by assuming that:people try to minimize their losses.
  • 4. people try to maximize their consumption.people try to minimize their costs.people try to maximize their utility.Question 41. _____ is an online venue where businesses and individuals can hedge their uncertainty aboutwhether legislation that affects them will be enacted.The American Civics ExchangeTradesportsThe Iowa Electronic MarketsThe Gallup and Roper surveysQuestion 51. _____ have the ability to recognize constraints and may choose to incur the costs of alteringthem.EconomistsRational peopleEntrepreneursResearch groupsQuestion 61. Assume that a cargo ship carrying the merchandise of a cloth merchant has been wrecked.Such a setback will be accounted as the merchant’s:sunk cost.deadweight loss.marginal cost.opportunity cost.Question 7
  • 5. 1. Publicly available data on production costs and box office revenues reflect that:R-rated movies on an average collect higher revenues than G-rated movies.revenue collected by PG-rated movies donot cover the production and distribution costs.G-rates movies help investors to make artistic or polictical statements.family-rated movies are on average profitable.Question 81. The different methods by which the sellers inform their potential buyers about the product iscalled:knowledge transfer.advertising.product offering.information dissemination.Question 91. The math and graphics used in economics help us better understand the logic of:verbal reasoning.rational choice.hypothesis testing.business forecasting.Question 101. The assumption of rationality in economics implies that:people perfectly understand their own preferences.people can overcome economic obstacles in the best possible way.people can make accurate calculations and they have a perfect foresight.people make choices with an eye toward attaining objectives they have chosen.
  • 6. Question 111. Which of the following is a root cause behind competition inherent in every society?Unlimited wants of the peoplePeople’s desire to acquire goods and services for freeScarcity of goods and servicesGenetic makeup of peopleQuestion 121. The costs which can be avoided if we alter our decisions or choices are referred to as:average costs.opportunity costs.marginal costs.sunk costs.Question 131. When a researcher evaluates the probability of an event by looking at how representative thesample is of the population of interest instead of the entire population, he is using:an elimination heuristic.an availability heuristic.a representative heuristic.a recognition heuristic.Question 141. Utility is a(n) _____ measure of wellbeing of a person.objectivesubjectiveordinal
  • 7. cardinalQuestion 151. Since people’s incomes are limited and their abilities to borrow differ they face _____constraints.psychologicalfinancialsocietalcontractualQuestion 162. Which of the following is an example of market governance?A firm vertically integrating backward to own the necessary inputsA firm entering into a contract with input suppliers.A school recruiting a part-time teacher to cover for a permanent employee who falls very ill.A school requesting its permanent employees to cover for a teacher who suddenly falls ill.Question 172. The economic value which can be created by a transaction between two people, Ed (seller)and Luis (buyer), is $50 as Ed’s opportunity cost of selling is $135 and Luis’ valuation of thegood is $185. If each gains $25 from this transaction, which of the following conclusions can bedrawn?Transaction costs are zero.Luis has higher bargaining power than Ed.Ed has higher bargaining power than Luis.Transaction costs are positive.Question 182. In the example of Ireland described in the text, the country’s production set shifted outwardover time because:
  • 8. of technological advancements which improved its potato cultivation and overall agriculturalproduction.it gained new resources over time which enabled it to specialize and gain comparative advantagein 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 192. When the slope of a country’s production set declines, it implies:Answerthe 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 202. _____ determine the efficient pattern of specialization in production.AnswerTotal costsOpportunity costsMarginal costsSunk costsQuestion 212. Megan, an analyst in Ronald’s team called in sick on a day when 4 projects were due forcompletion. Ronald divided Megan’s work between the remaining six team-members. Whichform of governance is being used here?EtiquetteHierarchyContract
  • 9. MarketQuestion 222. Prices play a smaller role in _____, in contrast to other modes of governance like _____ and_____.hierarchies; markets; contractscontracts; hierarchies; marketsmarkets; hierarchies; contractsetiquette; markets; contractsQuestion 232. If the production of 2,000 cars and 500 tons of corn during a year is economically efficient fora country which produces only these two products, which of the following conclusions can bedrawn?It satisfies domestic demand completely.The production of cars cannot be increased without reducing the production of corn.The reallocation of resources to change the production level must reduce production of bothgoods.It is possible to increase the production of both if resources can be reallocated.Question 242. If the transaction between you and the seller takes place at a price that equals your valuationof the product, then:you realize all the gains from this transaction.the gains from this transaction are equally divided between the two of you.the entire economic value created by the transaction goes to the seller.the economic value created by this transaction is sub-optimal.Question 25
  • 10. 2. The main reason Sears Roebuck became the largest retailer in the United States during thelate nineteenth century was that:it reduced a host of transaction costs which allowed higher profits to shareholders and lowerprices to customers.the railroad network improved substantially and charged higher rates for transporting goods.the lack of competition lowered the cost of advertising and increased profits for shareholders.his organization only interacted with the best wholesalers, distributors, and shippers in thebusiness.Question 262. Trade between two parties is beneficial because:it ensures that the standard of living in the poorer country matches its trading partner eventually.it enables each to consume a bundle of goods that it cannot produced domestically.it has an immediate effect on an economy by increasing its production set.it allows the economy of both trading partners to grow equally.Question 272. The function of economic institutions is to:determine the profit margin of producers.determine how much an economy benefits from trade.define the environment in which we can trade.define the terms of trade between nations.Question 282. Fiona and Alicia divide their time equally between ironing shirts and cooking meals. Fionacan iron 5 shirts and cook 2 meals in an hour. Alicia can iron 6 shirts and cook 1 meal in an hour.If they have to iron 15 shirts and cook 5 meals, who should specialize in which activity?Fiona should do all the work.Alicia should do all the work.
  • 11. Fiona should specialize in cooking meals and Alicia should specialize in ironing shirts.Alicia should specialize in cooking meals and Fiona should specialize in ironing shirts.Question 292. Reducing _____ the benefits available to the buyer and seller and might also enable them tomake exchanges that were previously impossible.transaction costs decreasestransaction costs increasesmarginal costs decreasesmarginal costs increasesQuestion 302. The shares of the economic value of a particular transaction that accrues to the seller and thebuyer depend on:the buyer’s opportunity cost.the relative bargaining powers of the two parties.the cost of production incurred by the seller while producing the good.the lobbying techniques adopted by the two parties.ECO 550 Week 3 Assignment 1 OperationsDecisionAssignment 1: Operations DecisionAssume you have been hired as a managing consultant by a company to offer some advice thatwill help it make a decision as to whether it should shut down completely or continue itsoperations. It currently uses 100 workers to produce 6,000 units of output per month (working 20days / month). The daily wage (per worker) is $70, and the price of the firms output is $32. Thecost of other variable inputs is $2,000 per day. You are told that the firms fixed cost is “highenough” so that the firms total costs exceed its total revenue. The marginal cost of the last unit is$30.
  • 12. This assignment allows you to determine the specific details about this fictitious company inorder to conduct an environmental scan of this company.Write a three to four (3-4) page paper in which you:Briefly describe the details of the fictitious business that you created for this assignment. Assessthe current environmental scan factors. Determine the factors that will have the greatest impacton plant operations and management’s decision to continue or discontinue operations. Evaluatethe 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 shortterm and long term. Be sure to show the calculations that helped you reach your conclusions.Recommend how the company can improve its profitability. Then, develop a brief plan toimplement the recommendations. Assess the circumstances in which the company shoulddiscontinue operations. Provide a rationale with your response. Use at least three (3) high-qualityacademic resources in this assignment. Note: Wikipedia and other Websites do not qualify asacademic resources.Your assignment must follow these formatting requirements:Be typed, double-spaced, using Times New Roman font (size 12), with one-inch margins on allsides; citations and references must follow APA or school-specific format. Check with yourprofessor for any additional instructions. Include a cover page containing the title of theassignment, the student’s name, the professor’s name, the course title, and the date. The coverpage and the reference page are not included in the required assignment page length.The specific course learning outcomes associated with this assignment are:Apply the concepts of supply and demand to determine the impact of changes in marketconditions in the short run and long run, and the economic impact on a company’s operations.Examine the factors that affect short-term and long-term production decisions. Use short-run andlong-run firm production and cost functions to evaluate the impact on industries. Use technologyand information resources to research issues in managerial economics and globalization. Writeclearly and concisely about managerial economics and globalization using proper writingmechanics.ECO 550 Week 3 DQ1Week 3 DQ1From the e-Activity, discuss how the company you selected should increase its competitivestance in the marketplace. Provide specific examples to support your response.Determine how a perfectly competitive firm can maximize its profit by producing the output atwhich average cost is minimized.
  • 13. ECO 550 Week 3 DQ2Week 3 DQ2Imagine monopolizing a service or product of your choice. Discuss how you would go aboutsetting prices for your product or service.Select a non-monopolized product or service with which you are familiar and determine how theconsumption of that product or service would differ if it were controlled by a monopoly.ECO 550 Week 3 Chapter QuestionsWeek 3 Chapter 5 Question 1010. [Requires calculus] A perfectly competitive firm faces a market price of $10 for its output X.It owns two plants, A and B, whose total costs are+ 2X + :25X2+ :4X + :1X2.How many units should each plant produce to maximize profit at that price?Week 3 Chapter 6 Question 55. Give a numerical example to show that a monopolist’ s marginal revenue can be upward-sloping over part of its range. Hint: The price on the demand curve is the producer’saverage revenue. Think of the graphic in Chapter 4 that showed the possibility ofdeclining average costs while marginal costs were increasing.Week 3 Chapter 6 Question 1414. A monopolist has two types of customers. There are 100 of Type A, who will each payup to $10 for a single unit of the good, and 50 of Type B, who will each pay up to $8. Neither iswilling to purchase additional units at any price. If it must charge a uniform price, find that price.ECO 550 Week 3 Quiz 2Economics - General Economics1. For an inferior good:the income elasticity is positive.
  • 14. the income elasticity if negative.the income elasticity is zero.the income elasticity is unity.Question 21. If cheese spreads and butter are substitutes, an increase in the price of butter will:shift the demand curve for cheese spreads upward.shift the demand curve for cheese spreads downward.shift the demand curve for butter upwards.shift the demand curve for butter downward.Question 31. As observed in China’s steel appliance market, the rise in the price of refrigerators resulted:solely from an increase in the demand for refrigerators.from an increase in the demand for steel from all appliance industries.from a shortage of steel in the world markets.from an increase in the price of steel that was the result of increased demand for refrigerators.Question 41. 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 51. The own-price elasticity of demand is defined as:
  • 15. the ratio of a change in quantity demanded and the change in price.the ratio of the percentage change in quantity demanded to the percentage change in price.the ratio of the percentage change in quantity demanded to the percentage change in input prices.the ratio of a change in output and the change in input usage.Question 61. A tradesman who purchases diamonds in a country where the price is low and sells them inanother country where the price is high, can be said to be practicing:arbitrage.speculation.derivatives trading.forecasting.Question 71. An affordable housing law will affect a city’s housing prices only if:the demand for houses in the city is downward sloping.the demand for houses in the city is almost horizontal.the demand for houses in the city is almost vertical.the demand for houses in the city is backward bending.Question 81. The area above the supply curve and below the market price represents:the consumer surplusthe producer surplus.the deadweight loss of the producer.the deadweight loss of the consumer.Question 9
  • 16. 1. A perfectly elastic demand curve will:be a vertical straight line.be a downward sloping straight line.be a horizontal straight line.be an upward sloping straight line.Question 101. The contact points where the terms of forward contracts are set are known as:the underlying markets.the derivative markets.the over-the-counter markets.the futures exchange.Question 111. Suppose a commodity market is initially in equilibrium. An increase in the nation’s skilledlabor force then lowers the marginal cost of producing each unit of output. Which of thefollowing changes will be observed?The demand curve will shift upwardThe supply curve will shift downwardThe demand curve will shift downwardThe supply curve will shift upwardQuestion 121. An increase in the price of sodium carbonate, a chemical compound used in detergents, will:increase the quantity of detergents demanded.decrease the quantity of detergents demanded.decrease the demand for detergents.
  • 17. increase the demand for detergents.Question 131. Which of the following commodities can be considered as an inferior good?Dwelling in a small apartment located in a suburbWashing clothes in a washer at homeEating out at an upscale restaurantSpending vacations at exotic locationsQuestion 141. A demand curve is said to be inelastic if:ED = 1ED = 0ED> 1ED< 1Question 151. An increase in the supply of oranges in a town drives down its price by 5 percent. Which ofthe following changes will be observed in the market?The demand for oranges will decrease.The demand for oranges will increase.The quantity of oranges demanded will increase.The quantity of oranges demanded will decrease.Question 162. Refer to Figure 4-2. The area EFGH is:
  • 18. Figure 4-2The following figure shows the cost curves of a firm producing good X.Answerthe loss incurred by the firm when market price is $3.5.the profit earned by the firm when the market price is $3.5.the loss incurred by the firm when the market price is $5.the revenue earned by the firm when the market price is $5.Question 172. The greater the curvature of the isoquant:the greater the degree of substitutability between the inputs.the lower the possibility of substitution between inputs.the higher the impact of a change in relative prices of inputs.the lower the prices of inputs.Question 182. Investments with _____ risk usually carry a _____ return.higher; lowerlower; higherzero; highhigher; higher2 pointsQuestion 192. The introduction of new technology and changes in organization are:likely to shift the LRAC curve.
  • 19. unlikely to help in the short-run.likely to shift the SRAC upward.unlikely to affect a firm’s cost curves in the long-run.Question 202. You decide that it is time to buy a big family car. The opportunity cost you consider is:the cost of the car.the increase in comfort for your family while traveling.the return this money would have earned if it was invested otherwise.the inconvenience you and your family are bearing on account of your old car.Question 212. 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 theisoquant are tangent to each other?$30$3$60$6Question 222. _____ is the locus of the minimum points of various short-run average cost curves depictingdifferent plant sizes.Long-run marginal costExpansion pathLong-run average costIsocostQuestion 23
  • 20. 2. A manufacturer of towels finds that his returns to scale are constant. Which of the followingconclusions can be drawn?The long-run total cost curve is horizontal.The long-run average cost curve is horizontal.The long-run total cost curve is downward sloping.The long-run average cost curve is downward sloping.Question 242. The production function shows:the total cost incurred to produce a certain level of output.the changes in cost incurred as output level varies.the relationship between inputs used and output produced.the impact of a change in production on the firm’s revenues.Question 252. A firm uses two inputs, labor (L) and capital (K) in the production of umbrellas. It can invest$50,000 in the purchase of the two inputs annually. The firm hires 5 units of capital at $1,000 perunit. If the going annual wage rate is $4,500, calculate the number of workers employed by thefirm. (Assume that the firm spends the entire budget on K and L.)105159Question 262. An isocost line depicts:the minimum cost required to produce a certain level of output, given input prices.the input combination to produce a certain level of output.
  • 21. the input combinations that satisfy a budget constraint, given input prices.the maximum output that can be produced by a firm given its budget constraint.2 pointsQuestion 272. The gap between average total cost and average variable cost:is constant at all ranges of output.is high at high levels of production.declines as output expands.depends on the production technology.Question 282. Jeff owns a garage and has 3 mechanics to help him. With the tools used being fixed in theshort run, his production function is given by 5 + , where L is the number of mechanics and Y isthe number of cars they can fix. If Jeff hires a fourth mechanic, what will be the marginalproduct of the new mechanic hired?111327Question 292. At outputs less than the minimum of average variable cost:marginal cost is greater than average variable cost.marginal cost is less than average variable cost.marginal cost is equal to average variable cost.marginal cost is parallel to average variable cost.Question 30
  • 22. 2. In an industry characterized by a natural monopoly, which of the following characteristicswill be observed?The long-run average cost curve will be upward sloping.The market price of the product will be very low.Competition is both impossible and inefficient.Number of producers operating in this market will be low.ECO 550 Week 4 Assignment 2 MarketModel Patterns of ChangeChoose and research an industry where there has been a pattern of change in a particular marketmodel (monopoly, oligopoly, etc.).Describe the industry and explain the general pattern of change of the particular market model.Hypothesize the basic short-run and long-run behaviors of the model in the industry you havechosen in a “market economy.” Analyze at least three (3) possible areas for the industry thatcould lead to transaction costs, and explain each in detail. Speculate about the behavior thatcould result from these transactions and propose at least two (2) strategies for dealing with them.Collect costs, revenue data, or other data from the industry that you deem relevant. Explain howyou 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 industry. Use the datato develop at least three (3) measures (e.g., productivity measures) to show how the industry isevolving. Use at least three (3) high-quality academic resources in this assignment. Note:Wikipedia and other Websites do not qualify as academic resourcesECO 550 Week 4 DQ1Week 4 DQ1Describe an oligopoly company and explain what makes it so.ECO 550 Week 4 DQ2Week 4 DQ2Assume that a very competitive start-up enters the market in direct competition with theoligopoly you describe initially gaining a 12% market share. Discuss the steps the oligopolyshould take to address this new competition.
  • 23. ECO 550 Week 4 DQ3Week 4 DQ3Discuss a scenario where price fixing is beneficial to all parties involved – includingconsumers. Provide specific examples to support your response.ECO 550 Week 4 DQ4Week 4 DQ4Analyze the models of oligopoly and create at least one recommendation for improvement.Explain your rationale.ECO 550 Week 4 Chapter QuestionsWeek 4 Chapter 7 Question 11. In the model of a dominant firm, assume that the fringe supply curve is given by +0.2 P,where P is market price and Q is output. Demand is given by – P.What will price and output be if there is no dominant firm? Now assume there is adominant firm, whose marginal cost is constant at $6. Derive the residual demand curvethat it faces and calculate its profit-maximizing output and price.Week 4 Chapter 7 Question 10A selfless person approaches Jones and Smith with a $100 bill and offers to sell it to thehighest bidder, but both the winning and losing bidders must pay her their bids. So if Jonesbids $2 and Smith $1 they pay a total of $3, but Jones get the money, leaving him with a netgain of $98 and Smith with -$1. If both bid the same amount, the $100 is split evenlybetween them. Assume that each of them has only two $1 bills on hand, leaving threepossible bids: $0,$1,$2. Write out the payoff matrix for this game, and then find its Nashequilibrium.ECO 550 Week 4 Quiz 3Economics - General EconomicsQuestion 11. Assume that the world price of Good A is $8 per unit while its domestic price is $6, and themarginal cost incurred by domestic producers for producing one unit of Good A is $5. If the
  • 24. government imposes a tax of $3 per unit on domestic producers, which of the followingsituations will be observed?The tax will increase the price of Good A in the domestic market.The tax will increase the world price of Good A.The tax will decrease the profit earned by domestic producers.The tax will decrease the price of Good A in the domestic market.Question 21. The long-run supply curve of a perfectly competitive market is a:an upward rising step function.a downward sloping step function.a vertical line at the market price.a horizontal line at the market price.Question 31. When the existing firms in a competitive industry have different operating costs:the highest-cost firm in operation breaks even, while the low cost firms will earn profit.the highest-cost firm in operation breaks even, while the low cost firms leave the industry.the low cost firms earn a larger profit than the high-cost firms.the highest-cost firms will incur a deadweight loss.Question 41. Which of the following conditions define a perfectly competitive market?The transaction costs are very high.Information is available to participants at a high cost.The product is homogenous.There are limited number of buyers and sellers.
  • 25. Question 51. If there are only a few producers of substitutes for Good X, a merger between producers ofGood X and any one of them could significantly _____ for Good X.decrease the elasticity of demand.increase the elasticity of supply.decrease the elasticity of supply.increase the elasticity of demand.Question 61. Refer to Table 5-1. Suppose initially 3,200 units are demanded at a price of $3 per unit. Whatwill be the quantity of output supplied by each type of firm in the market?The following table gives the average cost of production for three different categories of firmsproducing the same product.Table 5-1Type of firmsNo. of firmsAverage Cost per unitEquilibrium outputA350$310 unitsB400$610 units
  • 26. C550$1010 unitsType A and Type B will jointly supply 3,000 units while Type C will supply 200 units.Type A firms will supply 3,000 units, while the remaining 200 units will be supplied by Type B.Type A firms will supply the entire 3,200 units, while Type B and Type C firms will not enterthe market.Type A and Type B will each supply 1,600 units, Type C will not enter the market.Question 71. If the long-run market supply curve is perfectly elastic, a decrease in variable cost will:shift the supply curve upward to a higher market-clearing price level.shift the supply curve downward to a lower market-clearing price level.shift the supply curve to the right to a higher market-clearing output.shift the supply curve to the left to a lower market-clearing output.Question 81. 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 91. Suppose beer producers in Munich became aware of the low price of one barrel of beer in thedomestic market relative to that in the United States. What will be the impact of this pricedifference?
  • 27. 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 101. In a perfectly competitive market, the demand curve faced by each firm is:Answerhighly inelastic.perfectly elastic.perfectly inelastic.less elastic.Question 111. Assume that the government of a nation rations the crude oil available to car owners eachmonth which reduces the overall demand for petroleum. However, the nation continues to importoil from the world market. Which of the following will be observed in the oil market?The world price of petroleum would decline.The domestic price of petroleum would decline.The domestic price of petroleum would increase.The world price of petroleum will remain unaffected.Question 121. Suppose the cost of raw materials used by the cotton industry rises to a larger extentcompared to the increase in demand in the market. Which of the following situations will arise?The incidence of the higher cost will fall completely on the consumers.The incidence of the higher cost will fall completely on the high cost firms.The incidence of the higher cost will fall completely on the low cost firms.The incidence of the higher cost will fall partially on the consumers and partially on the sellers.
  • 28. Question 131. Which of the following situations resulted from the North American Free Trade Agreement(NAFTA)?The cost of tortillas in Mexico decreased.Corn export to the U.S. from Mexico declined.Corn export to the U.S. from Mexico increased.The cost of tortillas in the U.S. increased.Question 141. Refer to Figure 5-3. What will be the shape of the long-run supply curve of land suitable forcorn farming?In the figure given below, D1 and D2 represent the demand curves for land before and after theethanol program respectively. SRS is the short-run supply curve of land.Figure 5-3AnswerThe long-run supply curve of land suitable for corn farming will be perfectly inelastic.The long-run supply curve of land suitable for corn farming will be perfectly elastic.The long-run supply curve of land suitable for corn farming will be less elastic than the short-runsupply curve.The long-run supply curve of land suitable for corn farming will be more elastic than the short-run supply curve.Question 151. The short-run supply curve of a perfectly competitive industry with firms having identicalcosts is:a horizontal line at the market price.a vertical line at the equilibrium output.an upward rising curve.a downward sloping step function.
  • 29. Question 162. The demand curve faced by a perfectly competitive firm is:downward sloping.the same as the market demand curve.horizontal.perfectly inelastic.Question 172. Refer to Table 6-2. Assume that the monopolist sells only health drinks to Group 1 and onlyfruit juices to Group 2. What profit will the monopolist earn?The following table gives the valuations of fruit juices and health drinks by two groups ofconsumers in the city of Vanilla. A single producer of both products controls the entire marketfor beverages in this city and is considering strategies to bundle one bottle of health drink withone bottle of fruit juice. Assume that the marginal cost of supplying both varieties is $2 each.Table 6-2$35$10$31$14Question 182. A monopolist can:produce as much or as little as it wants without affecting price.decide the price that will be charged in the market.provide discounts below market price to attract more customers.price its products by considering the possible reactions of future competitorsor firms that produce close substitutes for its output.Question 19
  • 30. 2. In the small country of Talisman, the liquor industry is monopolized by a single producerBest Drinks Inc. Best Drinks charges high end customers like 5-star hotels a much higher pricethan it charges local pubs. Identify the correct statement from the following.Best Drinks is aware of the variations in the valuation of its products by different consumersegments.Best Drinks minimizes cost by charging different consumers different prices.Charging different prices for different consumers increases consumer surplus.Best Drinks charges different prices because its sole objective is sales maximization.Question 202. Which of the following statements is true regarding the difference between a monopolist anda perfectly competitive firm?Competitive price is higher than the price charged by a monopolist.Supply of output is higher in case of a monopoly than if the market is competitive.A monopoly can choose its price while a competitive firm is a price taker.A market characterized by competition has a higher deadweight loss.Question 212. Which of the following is a possible explanation for the fall in prices after an industry ismonopolized by combining a group of competitors?A monopolist faces a downward sloping demand curve. Hence, output expansion leads to lowerprices.A reduction in price increases producer surplus. Hence a monopolist may reduce the price of hisproduct.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 toincreased size of the new firm. The fall in price is less than the decline in cost.Question 222. The practice of charging different prices on the basis of varying customer preferences isknown as:
  • 31. arbitrage.discounting.price discrimination.rationing.Question 232. Tying products can be a profitable strategy for facilitating price discrimination only when:the demands for the goods are unrelated.the supply of one of the tied products is low.the demands for the goods are related.the market for one of the goods is competitive.Question 242. The peak of the total revenue curve is achieved at the point where:Answermarginal revenue is the highest.price is the highest.marginal revenue is zero.marginal cost is zero.Question 252. Refer to Figure 6-4. What price will the monopolist charge when its marginal cost shifts fromC to C’?The following figure depicts the demand, marginal revenue (MR), and marginal cost (MC) for amonopolist.Figure 6-4$20$16$15
  • 32. $9Question 262. Refer to Figure 6-1. Which of the following conclusions can be drawn from this figure?The following figure shows the demand, marginal revenue, and marginal cost curves for a profitmaximizing monopolist.Figure 6-1The monopolist produces at the point where marginal cost is zero.The monopolist incurs a fixed marginal cost of OC’.The monopolist charges a price of OP’ and total revenue is OP’D’Q’.The consumer surplus enjoyed by customers is PC’D”.Question 272. Refer to Figure 6-2. What is the consumer surplus under monopoly?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 byteaming up and acting as a monopolist. The following figure shows the demand curve andmarginal revenue curve for this profit maximizing monopolist.Figure 6-2$96$48$36$72ANS: B PTS: 1 DIF: Easy NAT: AnalyticQuestion 282. Monopolies exist for each of the following reasons, EXCEPT:competitors are legally unable to challenge them.
  • 33. they have control over resources with very few good substitutes.it is sometimes inefficient to have competition in certain markets.it increases both producer and consumer surplus.Question 292. X-inefficiency implies:the practice of using less than the optimal amount of inputs for production.the practice of using the lowest quantity of input to produce maximum output.always producing less than the optimal amount of output.excessive use of inputs relative to best-practice methods.Question 302. When a monopolist’s marginal cost of production is zero:the deadweight loss is reduced.production is lower than if marginal cost were positive.the price charged is higher than if marginal cost were positive.maximizing profit is same as maximizing revenue.ECO 550 Week 5 DQ1Economics - General EconomicsWeek 5 DQ1From the e-Activity, explicate the five competitive forces that shape strategy. Then,determine which of the five competitive forces has the most significant impact on strategyin general. Support your response with evidence or examples.ECO 550 Week 5 DQ2Economics - General Economics
  • 34. Week 5 DQ2With the same small business from the first discussion in mind, describe the best possiblemerger or agreement to grow your company and maximize profits. Explain your rationale.Again, with the same company in mind, discuss the most effective way to sustain andextend a competitive advantage. Provide specific examples to support your response.ECO 550 Week 5 Chapter QuestionsEconomics - General EconomicsWeek 5 Chapter 8 Question 22. Like supermarkets, full-service department stores like Macy’s are generally in decline. Whatfactors might these types of stores have in common behind their declines? How would youdetermine which were important and which were not?Week 5 Chapter 8 Question 16For Figure 8-9, demand with zero transaction costs is and supply to 7 + 2p. a.Verify all ofthe prices and quantities calculated in the discussion b. Now assume that intermediariescome from a competitive market with an equilibrium price of $8 per unit for their services,that is, any buyer or seller who wants an intermediary’s services must pay $8 for them.What is the maximum per unit that sellers are willing to pay intermediaries if hiring themsaves buyers $8 in transaction costs? c. Does your answer to Question 16a change if buyerspay $8 per unit to the intermediary but sellers offer to rebate part of that expense tobuyers?ECO 550 Week 5 Midterm QuizEconomics - General EconomicsThe different methods by which the sellers inform their potential buyers about the product iscalled Jane regularly sends funds to organizations seeking to save endangered animal species.This is an example of: Carla had received very low annual return from her investment portfoliocomprising of stocks of five companies for two years. Her decision to continue holding the sameportfolio of assets will be an example of In the example of Ireland described in the text, thecountry’s production set shifted outward over time because Suppose Zia spends her time pickingberries and apples. Her production set is described by the equation , where is the number ofberries and ythe number of apples. Which of the following statements will be true? When the slope of acountry’s production set declines, it implies: Bankers supported the Federal Reserve Board’s
  • 35. Regulation Q because Suppose the adoption of a new software reduces the marginal cost ofpublishing books. For a given demand curve for books, this will be represented by Starting froma pure exchange equilibrium, an increase in the demand for a commodity will result in Let themarginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be 2; the price oflabor is given by $10. What will be the price of capital such that the isocost and the isoquant aretangent to each other Which of the following is a property of an isoquant? Refer to Figure 4-1. Ifthe firm produces 2,000 dolls per month when the market price is $4:Figure 4-1The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls forchildren. The market price for a doll is $4 per unit. Refer to Figure 5-1. Which of the followingpoints 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 afirm under perfect competition.Figure 5-1 Which of the following conditions define the short-run for any industry Suppose beerproducers in Munich became aware of the low price of one barrel of beer in the domestic marketrelative to that in the United States. What will be the impact of this price difference? Refer toFigure 6-2. What would be the consumer surplus if this remained a perfectly competitivemarket?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 byteaming up and acting as a monopolist. The following figure shows the demand curve andmarginal revenue curve for this profit maximizing monopolist.Figure 6-2 Refer to Figure 6-4. Calculate the profit earned by the monopolist when the marginalcost of production is $15 per unit.The following figure depicts the demand, marginal revenue (MR), and marginal cost (MC) for amonopolist.Figure 6-4 Which of the following is a possible explanation for the fall in prices after an industryis monopolized by combining a group of competitors Refer to Figure 4-2. Identify the supplycurve of the firm.Figure 4-2The following figure shows the cost curves of a firm producing good X. High barriers to entryprotect the market power of existing firms and discourage the formation of firms which Theprinciple of backward induction proves that in price-fixing oligopoly games 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 marketcharacterized by a dominant firm and a fringe. SF represents the supply curve of the fringe, D isthe 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 MCDrepresents the marginal cost of the dominant firm.Figure 7-1 In a mixed strategy situation, like the “heads or tails” game, the players can maximize
  • 36. their income by randomly choosing head or tail each with a probability of: 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 aclass. Which of the following games will have a solution in mixed strategiesECO 550 Week 6 DQ1Economics - General EconomicsWeek 6 DQ 1"The Economics of Contracts"Please respond to the following:From the e-Activity, discuss ways that one party or the other could leverage a specific“opportunism.” Provide specific examples to support your response.Discuss a situation in which both parties entering into a contract could benefit from slightlyambiguous language contained in the contract. Provide specific examples to support yourresponse.ECO 550 Week 6 DQ2Economics - General EconomicsWeek 6 DQ 2"Property and Contracts"Please respond to the following:Analyze the various ways in which property rights encourage economic development andmake at least one recommendation for improving current laws. Explain your rationale.Based on the possible beneficial externalities from college education, argue for whether ornot a case exists for public funding of college education. Explain your rationale.ECO 550 Week 6 Chapter Questions
  • 37. Economics - General EconomicsWeek 6 chapter 9 question 6What are the highest and lowest payments from the writer that the beekeeper–farmer team will accept for the sixth day? Assuming that the farmer can dispose of$7 from the writer as she wishes, what range of payments will the beekeeperaccept? Assuming that the beekeeper gets that amount, what range of paymentswill the farmer accept? (Remember that negative payments are also possible.)Week 6 Chapter 9 Question 1313. Some fields have large enough quantities of both oil and natural gas thatcoordination must be achieved for the production of both, rather than oil alone as inour examples. Will fields with both oil and gas have greater difficulties in unitizationthan fields with oil or gas alone? Explain. (Hint: Look closely at Figure 9-2.)Week 6 Chapter 10 Question 22. Why might a parent company like McDonalds or Hilton choose to franchise its localoutlets rather than own them and staff them with employees? In many smaller cities allMcDonald’s outlets are owned by the same franchisee. Why is (or isn’t) this fact consistentwith our discussion of specific investments?Week 6 Chapter 10 Question 1111. Every so often, a disgruntled college graduate sues her school on grounds that hertuition payments did not land her the good job she was expecting when she started there.Courts invariably throw out cases like hers. They are, however, willing to entertain suitsagainst trade schools (those that teach skills such as welding and computer repair) bygraduates who make the same claims about inability to qualify for jobs that use the skillsthey learned in them. Why the difference?ECO 550 Week 6 Quiz
  • 38. Economics - General EconomicsQuestion 11. In a market characterized by many sellers, if an outsider devises a way to reduce transactioncosts it will:benefit both buyers and sellers.cause both buyers and sellers to lose.benefit the buyers but cause the sellers to lose.benefit the sellers but cause the buyers to lose.Question 21. If two small perfectly competitive firms merge, the merged firm will be:a price-taker.a market leader.a price-discriminator.an oligopoly.Question 31. Refer to Figure 8-2. Suppose the adoption of a new technology lowers the cost of productionwhile the buyer’s valuation remains unchanged. Which of the following changes will beobserved by the firm?The figure given below represents a firm in a market characterized by many buyers and oneseller. MC represents the marginal cost, MR the marginal revenue, and D the demand curve of afirm. The firm is initially in equilibrium producing 6 units of output at a price of $10 per unit.Figure 8-2The demand curve for its product will shift to the left.The marginal cost curve will shift downward.The equilibrium output of the firm will fall below 6 units.The marginal revenue curve will shift downward.
  • 39. Question 41. Under which of the following situations would a seller prefer to incur the cost of improvingthe product quality?If the increase in buyer’s valuation for the improved product is higher than the cost of improvingit.If the increase in the seller’s opportunity cost of improving the product is higher than the price ofthe product.If the product improvement lowers the producer surplus.If the product improvement allows the seller to a break even.Question 51. A firm’s resource at a given point in time can be defined as:those investments made by it in profitable organizations.those tangible and intangible assets attached to it semi permanently.its ability to control the market price.its lobbying ability built over years of experience.Question 61. Refer to Figure 8-3. Suppose the seller incurs an additional cost of $1 per unit of output toreduce the transaction costs of the buyers to zero. How will the profit earned by the sellerchange?The figure given below represents a firm in a market characterized by many buyers and oneseller. MC is the initial marginal cost of the seller. MC denotes the marginal cost inclusive of the$1 transaction cost. On the other hand, buyers incur a transaction cost worth $2 represented bythe vertical distance between D and D. MR and MR represent the marginal revenue curvecorresponding to the demand curves D and D respectively.Figure 8-3The firm’s profit will increase by $0.62.The firm’s profit will increase by $2.6.The firm’s profit will remain unchanged.
  • 40. The firm’s profit will decrease by $6.2.Question 71. Which of the following activities undertaken by a competitive firm can improve its publicrelations?Investing in assets that cannot easily be redeployed to other uses or locations.Donating a portion of its annual profit to hurricane affected familiesProviding good quality products at a high price.Investing in in-house researchQuestion 81. Refer to Figure 8-5. Calculate the value of the deadweight loss resulting from the horizontalmerger?The figure given below represents a perfectly competitive market in long-run equilibrium. LRSrepresents the long-run supply curve of this market with demand (D) and price $50. When twolarge firms merge, output declines to 400 units and per unit production cost drops to $30.Figure 8-5$800$600$400$300Question 91. Suppose the cost of producing cellular phones declines from $25 to $20. If buyers’ valuationsremain fixed at $30, the transaction would create _____ more economic value.$10$5$2$15
  • 41. Question 101. Which of the following is an example of a one-time investment made by a seller to reduce thetransaction cost on all units of output?Providing customers a wide range of productsHiring a distribution agencyMerging with its rival brandCreating a brand name which signals qualityQuestion 111. Temporary discounts offered to customers by competitive retailers usually reflect:output rationing.a rise in market demand.price discrimination.a fall in input prices.Question 121. Refer to Figure 8-6. Determine the profit earned by the perfume monopolist if it chooses tohire a retailer for selling its product.The figure given below represents a monopoly firm producing perfume with downward slopingdemand and marginal revenue (MR) curves. The products of this firm are sold in the competitivemarket by a retailer. Among the horizontal lines in the figure:A - represents the marginal cost of per unit perfume productionB - represents the marginal cost of an independent perfume retailerC - represents the sum of A and BD - represents the marginal cost of the perfume monopolist for retailing its own outputE - represents the sum of A and D.Figure 8-6$2.7$6.5$5.5
  • 42. $2.4Question 131. Under a _____, the assets of two firms that operate in the same market are put under a singleownership.vertical mergerhorizontal mergervertical acquisitionhorizontal acquisitionQuestion 141. Wal-Mart’s store managers have the authority to stock items and price them to satisfylocalized demand. Which of the following properties of this retail store is illustrated here?Relationship with employeesRegional relationshipsCentralized decision makingDecentralized decision makingQuestion 151. Which of the following industries can create barriers to the entry of new firms due to size andspecificity?A hydroelectric power plantA garment manufacturer exporting apparelsAn owner of a retail chainAn automobile manufacturing companyECO 550 Week 7 DQ1Economics - General Economics
  • 43. Week 7 DQ1From the e-Activity, propose a methodology for assessing the risk in business contractsECO 550 Week 7 DQ2Economics - General EconomicsWeek 7 DQ2Analyze the potential downfalls of any team effort (e.g., free riders) and make at least onerecommendation for minimizing risk. Provide specific examples to support your response.Describe a company you would like to start and determine which form of ownership wouldbe most appropriate given your current financial status. Explain your rationale.ECO 550 Week 7 Chapter QuestionsEconomics - General EconomicsWeek 7 Chapter 11 Question 11. Why does the assumption of independence of risks matter in the examples of insurance?What would happen to premiums if the probabilities of houses burning were positivelycorrelated? Can you think of a situation where they might be negatively correlated?Week 7 Chapter 11 Question 14Small firms can discover the abilities of their workers more quickly than large onesbecause they can observe the workers more closely at a variety of tasks. Does it then makesense for people with high abilities to go to small firms? Give some reasons why and somereasons why not.Week 7 Chapter 12 Question 44. In some ways monitoring is easier in a partnership than a corporation, whereshareholders monitor directors. In what ways is monitoring easier? In what ways is itnot?Week 7 Chapter 12 Question 1111. A friend convinces you that she has a great idea for a business, and the two of youincorporate. You supply her with funds and let her make all of the executive decisions.Under the agreement you hold 30 percent of the firm’s stock and your friend holds 70
  • 44. percent. Why should you ever put yourself into a position where your friend’s decision willcarry the day, whether you agree with her or not? What does this tell you about problemsthat allegedly stem from separation of ownership and control?ECO 550 Week 7 QuizEconomics - General EconomicsQuestion 11. Which of the following remedies can be used to prevent the beekeeper and the farmer frombreaking the contract?Separating the ownership and management of the bees and trees.Merging the ownership and management of the bees and the trees.Providing the farmer a larger share of the net benefit received from the contract.Providing the bee keeper a larger share of the net benefit received from the contract.Question 21. Which of the following exemplifies inefficient legal assignment of rights with hightransaction costs?Agreement between an orchard farmer and a beekeeper.LoJack installation in cars to prevent car theft.The Huntington Beach oil wells.Installation of smog control in cars.Question 31. Which of the following is an aim of a price-fixing agreement?Reducing entry barriersIncreasing profitReducing price
  • 45. Increasing demandQuestion 41. How can the government cut the cost of negotiation among car owners regarding LoJackinstallation?The government can impose a quota on the import of LoJacks.The government can invite public opinion on LoJacks.The government can limit the number of companies producing LoJacks.The government can randomly select cars to install LoJacks.Question 51. Which of the following was an outcome of uncoordinated oil drilling in Huntington Beach,California? AnswerThe entire oil present underground had been extracted within few years.Underground oil pressure had increased due to excessive drilling leading to an oil spill into theadjacent sea.A majority of the oil could not be drilled out as low underground pressure prevented oil fromreaching the surface.The oil belt suffered frequent earthquakes as excessive drilling had loosened the soil bonding.Question 61. Which of the following is a new law on fishing imposed by the government to increase thetotal supply of fish?Holders of fishing rights are not allowed to resell them to others.Governments have issued licenses that limit catches and fishing seasons.Quotas have enforced higher catches in coastal areas.Governments around the world have reduced their offshore jurisdictions.Question 7
  • 46. 1. In a society, if negotiation among parties leads to a politically unsatisfactory distribution ofincome:the legislature can enact laws to redistribute this income.the society can on its own reallocate resources to bring about a politically satisfactory outcome.the parties will renegotiate until they reach a politically satisfactory outcome.the parties will refuse to carry out future transactions.Question 81. Government has the power to reduce the _____ associated with air pollution by automobilesbecause it can force changes in car design, can impose taxes on drivers, and has the power topunish those who fail to comply.Answerprivate costtransaction costopportunity costpositive externalityQuestion 91. Assume that the market for executive travel is perfectly competitive. If the availability oftime-sharing reduces transaction costs and the owner’s cost of negotiating for a single trip, whichof the following situations must occur?The hours of flight available will increase.The hours of flight available will decrease.The cost of flying will remain steady.The cost of flying will increase.Question 101. If the costs of negotiating and enforcing contracts are _____ relative to the benefits, buyersand sellers have incentives to make economically efficient arrangements that _____ value.high; increase
  • 47. low; increasehigh, decreaselow; decreaseQuestion 111. According to Coasian reasoning, if negotiation is costless:Answerirrespective of the initial distribution of rights, the efficient outcome will minimize the netbenefit of the group.the efficient outcome will minimize the net benefit of the individual who has more rightscompared to the others in the group.irrespective of the initial distribution of rights, the efficient outcome will maximize the netbenefit of the group.the efficient outcome will maximize the net benefit of the individual who has more rightscompared to the others in a group.Question 121. According to economists, an individual who tries to derive utility from the consumption of agood without paying for it is called:Answera utility maximizer.a free rider.an opportunist.a profit maximizer.Question 131. Inclusive property rights provide an investor:Answermore options and greater incentives to avoid inefficient choices.an insight to future earnings and revenue generation.a definite return on the investment.cost effective techniques of production leading to economies of scale.
  • 48. Question 141. The cash or concessions present in contract terms that parties agree to in order to share risksare called: Answerquid pro quos.property rights.flexible takes.contract prices.Question 151. Which of the following is an example of an obligation associated with a right?AnswerProviding adequate notice period to your tenants to vacate your house.Allowing your kids to play with other children in the neighborhood.Allowing neighbors to use your lawn to maintain healthy public relations.Providing proper education and adequate nutrition to your children.Top of Form 1Question 162. A travel agency enters into a contract with a hotel chain which gives it priority access to 25percent of its rooms in major tourist destinations throughout the year. The contract encouragesthe hotel chain to increase the number of rooms in each of these hotels. The investment made bythe hotel chain corresponds to which of the following aspects of specificity?Task specificityLocational specificityDedicated specificityHuman specificityQuestion 172. If parties to a contract can anticipate the court’s decision in the event of a dispute with somedegree of certainty:
  • 49. opportunistic behavior will never be detected.opportunistic behavior will be partially detected.there will be less room for opportunism.only one of the parties will be able to act opportunistically.Question 182. Refer to Table 10-1. What would be the combined gain of the two if both breach theunitization contract?The matrix given below represents the payoffs to oil well owners Mike and Frasel if they enterinto a unitization contract. Each of the owners know the exact amount of oil in the pool and themarket price of oil.Table 10-1$22$20$28$32Question 192. Fixing a payment schedule in an agreement:allows the seller to easily access loanable funds.increases the uncertainty associated with the cost of production.allows the seller to charge a high price for his product.ensures the delivery of goods at a high price.Question 202. Which of the following can be classified as a highly specific asset?A country’s soldiersA wind turbine in an installation that produces "renewable" electricity
  • 50. A cattle farmA cruise shipQuestion 212. Suppose Jonah and Carlos have a contract, which Carlos chooses to breach. Jonah sues, and acourt orders Carlos to pay him the amount he expected to gain at the time they made the contract,net of any amount he actually did receive after the breach. The form of payment which the courtspecifies in this example is called:a contingent fee.a specific performance.a capitation.expectation damages.Question 222. Which of the following is a legal remedy for a breach of the contract between parties?Liquidated damagesImprisonmentUnitizationSpecificityQuestion 232. Refer to Table 10-1. Under expectation damages, Frasel’s breach of the contract would lowerhis net payoff to:The matrix given below represents the payoffs to oil well owners Mike and Frasel if they enterinto a unitization contract. Each of the owners know the exact amount of oil in the pool and themarket price of oil.Table 10-1$6.$8.$16.
  • 51. $10.Question 242. _____ is an example of human specificity which raises the risks associated with opportunism.Car insurance purchased by an individual for his/her favorite car.Investment of an employer in company-specific skills.Purchasing immovable machines for a particular facility.Investment in research and developmentQuestion 252. Escalators present in a contract must state:at what interval the contract price should automatically change at a fixed rate.when the price will change and by what formula the new price will be calculated.when the contract should be terminated and how the cost of termination should be shared.when the contract should be renewed and the terms governing the renewal.Question 262. Which of the following will be an efficient payment scheme for a defendant’s attorney, whois experienced in handling similar cases in the past?Contingency feesCapitation feesHourly billingQuality based billingQuestion 272. A payment arrangement between an attorney and a plaintiff, in which the plaintiff agrees topay a certain lump-sum amount at the outset and no more in the future, regardless of how thecase develops is called:contingency fees.
  • 52. capitation fees.liquidation.one-time settlement.Question 282. Which of the following examples can be associated with the task specificity aspect of anasset?An employer’s investment in employee skill building.Purchasing machines which can be used to produce only a particular product.Building a facility in a low cost locality.An employer’s investment in office renovation.Question 292. _____ is a contract that specifies actions to be taken if various situations come to prevail.An insurance policyContingencyUnitizationAn escalatorQuestion 302. Which of the following may require the parties to renegotiate certain parts of a contract ifmarket conditions change drastically?AnswerTermination clauseOmnibus clauseAdjustment clauseReopener clauseBottom of Form 1
  • 53. ECO 550 Week 8 Assignment 2 Expansionand MergerEconomics - General EconomicsAssignment 2: Expansion and MergerDue Week 8 and worth 200 points This paper is a continuation of Assignment 1. Assume thatthe industry you wrote about in Assignment 1 wants to expand and that its only option is amerger. Now the industry is confronted with government regulations to oversee the merger.Write a four to five (4–5) page paper in which you:Explain why government regulation is needed, citing the major reasons for governmentinvolvement in a market economy. Justify the rationale for the intervention of government in themarket process in the U.S. Assuming that the merger faces some threats and that the industrydecides on self-expansion as an alternative strategy, describe the additional complexities thatwould arise under this new scenario of expansion via capital projects. Analyze how the differentforces will come together to create a convergence between the interests of stockholders andmanagers. Speculate about the implications for the goals of the firm as to whether to maximizethe industry’s profits or to create more value for the shareholders. Use at least three (3) high-quality academic resources in this assignment.Note: Wikipedia and other Websites do not qualify as academic resources.ECO 550 Week 8 DQ1Economics - General EconomicsWeek 8 DQ1Discuss how a company could benefit from either centralization or decentralization.Explain your rationale.ECO 550 Week 8 DQ2Economics - General EconomicsWeek 8 DQ2Select a large U-form or M-form organization and describe how it would be different if itswitched form (i.e., a U-form organization switching to an M-form, or an M-formorganization switching to a U-form).
  • 54. ECO 550 Week 8 Chapter QuestionsEconomics - General EconomicsWeek 8 Chapter 13 Question 6Even before the metals and manufacturing companies described earlier, U.S. railroads inthe nineteenth century were M-form organizations based on geography. Why might a largerailroad be better organized as M-form than U-form?Week 8 Chapter 13 Question 1111. Your university is probably an M-form organization. Its president administers schools,for example, a college of business and a college of liberal arts, the college of business. Eachof these in turn has a dean who is responsible for faculty departments such as economicsand finance. Why is an M-form more likely than a U-form to be an efficient way oforganizing a university and to organize the schools within it?In most universities faculty with specialized interests will often attempt to break off fromexisting departments and form ones devoted to their own specialties. Do you expect thatthis will produce an inefficiently large number of departments? Why do you expect thatpressure by employees to form fragmented departments will be a smaller problem in for-profit corporations than in nonprofit or governmental universities?Week 8 chapter 14 question 1212. A small-volume foreign auto maker limits the number of its franchised dealers in theUnited States and gives them exclusive territories. There are also non-dealers who have noofficial connection with the manufacturer. They buy its cars overseas and sell them in theUnited States, a phenomenon sometimes called a “gray market.”& nbsp;If you are amanufacturer do you necessarily want the gray market to cease to exist? Why or why not?How about if you are a franchised dealer?ECO 550 Week 8 QuizEconomics - General EconomicsQuestion 11. People’s abilities to bear risk increases with:their abilities to understand the market.their abilities to diversify their asset holdings.
  • 55. their abilities to invest in risky assets over a large time period.their abilities to judge the probability of outcomes.Question 21. Which of the following actions can prevent migration of individuals from one healthinsurance policy to another?Lowering the opportunity costs of switching from one policy to another.Fixing a uniform premium rate for all individuals under one type of policy.Conducting an interview of the people before placing them under different policies.Setting up a norm requiring all individuals to purchase the same coverage.Question 31. In a principal/agent relationship, _____ can help to reduce the damage caused by a winner’scurse, provided both the parties are well-informed.signalswarrantiesdisclosurerenegotiationQuestion 41. Which of following provisions in an insurance policy may be economically efficient if policyholders can control small claims but not large ones?Vigilance provisionNon-price exceptionsCo-payment provisionsLiquidated damagesQuestion 51. Which of the following is an example of a moral hazard?
  • 56. A student committing suicide after failing in an examination.A housekeeper leaving a house unlocked after insuring it against burglary.An exporter delivering faulty products after receiving a certain fraction of the total payment.A person deriving utility from a commodity without paying for it.Question 61. Which of the following is a possible result of adverse selection?Only lemons remain in the market for used cars.A store manager shirks his responsibility because his supervisor is not present at all times.A car mechanic does not bother to properly fix the customers cars when his work cannot bemonitored.Many people selling their houses at very low prices expecting prices to decline further.Question 71. Which of the following practices of insurers deter moral hazard?Setting a uniform premium structure.Requiring people to purchase the same coverage.Arranging for reinsurance to cut the risk of unexpectedly large claims.Conducting security checks without notice and terminating the policy whenever required.Question 81. Which of the following is an example of a non-price provision in an automobile insurancecontract that can reduce moral hazard?A provision specifying that coverage is limited to 75 percent of the total damages caused by anaccident.A provision that disallows medical claims by drunk drivers involved in accidents.A provision that restricts accident compensation to claims over $1,000.A provision requiring that the insured car carry certain safety devices like air bags.
  • 57. Question 91. DTC contracts which prohibit buyers from inspecting diamonds in advance help to minimize:the problem of moral hazard.the cost of gathering duplicative information.the problem of adverse selection.the winner’s curse.Question 101. Which of the following is an example of incomplete information?A seller losing out on profits because the market price rises above the pre-contracted price.An insurer refuses to bear the complete cost of a treatment.An insured car driver driving carelessly on the highway.A new household appliance starts malfunctioning after two weeks.Question 111. An insured person’s incentive to behave in ways that raise the probability of a claim is knownas:a moral hazard.the lemons problem.the problem of adverse selection.the problem of advantageous selection.Question 121. The effects of asymmetric information in the car market can be weakened by:providing a warranty for the product.purchasing business interruption insurance.inserting a “buyer beware” clause in the agreement.
  • 58. buying a “put” option.Question 131. Which of the following risks will always be insured in a business?Bad debts recorded in the company accountsVital inputs required for daily productionHigh-end technology based productsInventory stocked up in the storehouses.Question 141. ______ provisions in an insurance policy stipulate that it will pay only a certain percentage oflosses claimed by the insured.VigilanceCo-paymentNon-price exceptionDeductibleQuestion 151. If a purchase contract allows a buyer to accept less than a specified maximum "take" eachmonth, buying a _____ would allow the seller to resell the excess at a _____ price.put option; profitableput option; predictablecall option; predictablecall option; profitableQuestion 162. Independent workers using specialized capital save the costs of contracting but risk:generalization.
  • 59. opportunism.inefficiency.over-utilization.Question 172. A person acting as a supervisor as well as a residual claimant:attempts to make value-maximizing investment decisions.aims to maximize a firm’s sales.facilitates maximum investment in capital goods.reduces risk of opportunism.Question 182. Which of the following is an example of an institutional investor?A large pension fundA person who buys stocks for his portfolioA company that invests millions in a new productA dealer who buys a painting expecting huge returnsQuestion 192. If the owners of different types of resources, which are combined to produce an output, agreeon organizational relationships that define their responsibilities toward one another they haveformed a _____.groupcompanydistribution networkteamQuestion 20
  • 60. 2. Assets whose returns have a high positive correlation are considered:highly risky compared with those whose returns have lower or negative correlations..completely risk free.less risky compared to those which have a low positive correlation.partially risky.Question 212. Directors can make opportunistic choices to advance their personal interest when:they plan to sell off the corporation stocks at inflated prices.they hold majority of the stocks in the corporation.they are aware that the cost of forming a new board of directors is high.their personal returns from the well being of the corporation is high.Question 222. A sole proprietorship is characterized by:separation of ownership and management.mutual agency.existence of multiple contracts.unlimited liability.Question 232. In a _____ the outsider buys the shares with debt collateralized by its other assets, andsometimes also by the target’s assets.mergercash tenderproxy fightleveraged buyout
  • 61. Question 242. Creditors supply loans to sole proprietors at a high rate of interest because of:their low profit expectancy from this business.frequent experience of loan default.their inability to call in their loans or sell them to others.their general risk-averse nature.Question 252. A _____ requires workers to comply with orders from a boss, who need not consult themwhen making decisions, and to be paid for their cooperation.residual claimanthierarchyshareholdercooperativeQuestion 262. A _____ generally has less understanding of the firm than a manager and has little knowledgethat is likely to improve the quality of the manager’s choices.specialized residual claimantdiversified residual claimantdiversified hierarchyspecialized hierarchyQuestion 272. When a large shareholder or a group solicits vote for a slate of directors that it has proposedas an alternative to candidates endorsed by the current board, a(n) _____ takes place.acquisitionproxy fight
  • 62. mergerleveraged buyoutQuestion 282. Which of the following is an advantage of having centralized ownership and responsibility forcapital goods?It allows firms to avoid the depreciation cost of capital equipment.It increases the capital per worker ratio.It spreads the investment risk associated with acquisition of capital goods.It resolves the problem of continuity.Question 292. Which of the following could a corporation use to raise its initial operating capital?Government loans with low interest ratesMortgages from banksPublic offering of stockLoans from the informal market at a high rate of interestQuestion 302. A person who performs supervisory activities will also be a _____ if she/he is financiallyresponsible for investment and other contracted decisions.residual claimantdirectorshareholderfinancial advisorECO 550 Week 9 Chapter QuestionsEconomics - General Economics
  • 63. Week 9 Chapter 1 Question 7Devise a hypothetical business situation in which buying a lookback call option on acommodity may be a sound strategy for you. How about a down-and-out call option?Week 9 Chapter 15 Question 22. How does your VMP change if the employer is a monopolist producer of its output but aprice-taker in the labor market?Week 9 Chapter 15 Question 1919 Most restaurant customer tip according to a percentage rule-between 15 and 25 percentof the bill. Diners who have dinner and a $20 bottle of wine usually pay the samepercentage of the bottle price as diners who order a $100 bottle. Why, when the sameefforts must be made to uncork and pour both bottles?Week 9 Chapter 16 Question 3Lenders perceive that you are risky, so you must pay 12 percent annual interest to borrowfrom one of them. You only receive 6 percent on funds you have deposited in the bank. Dothe opportunity costs of borrowing and using your own funds differ in this example?Explain why or why not.ECO 550 Week 9 QuizEconomics - General EconomicsQuestion 11. The following is an organization chart depicting a single row of individuals A, B, and C.Figure 13-1Identify the statement which is true of the organization depicted in this figure? AnswerThere is a strong linkage between the individuals represented in the chart.It is a sole proprietorship firm.The above organization chart depicts a U-form firm.Team production is unimportant in this organization.Question 2
  • 64. 1. In which of the following cases will centralization of decision making be appropriate?When different departments in an organization function separately without much interrelation.When information necessary for the decision making process originates from a variety ofsources.When the organization expands in size and its activities become more complex.When all the information comes from an external source.Question 31. Refer to Figure 13-2. Identify the structure of Z Corp.The following is the organization chart of Z Corp.Figure 13-2U-formM-formMixed organizationMatrix organizationQuestion 41. When each box in an organization chart contains individuals who specialize in some field,then the activities in the organization are categorized by _____.divisionalizationfunctionalizationdecentralizationde-integrationQuestion 51. One of the disadvantages of an organization which has a matrix structure is that:each individual reports to one boss, causing excess flow of information to one individual.flow of information is difficult when operations are so highly diversified.
  • 65. each individual has two bosses whose interests may not be aligned.there are limits to the information a firm’s headquarters can use effectively in making decisions.Question 61. Which of the following was a consequence of the financial revolution which drasticallychanged risk management in the 1970s?Managements created separate categories for handling different types of risks.A group of specialists were created who handled risk assessment for the entire organization andreported only to headquarters.Risk analysis was decentralized by concentrating on risks at the division-level.It became easier to assess market risk with the introduction of various new tools of financialmanagement.Question 71. The late business historian Alfred Chandler blamed Britain’s competitive difficulties in theearly twentieth century on:the structure of the firms.the removal of trade barriers.the lack of innovation.inefficient transfer of information within firms.Question 81. Orders can lose accuracy:if they are too complicated.as they are transmitted within the organization.in organizations where decision-making is decentralized.unless they are given to the right recipient.Question 9
  • 66. 1. Joanne can choose to selectively disclose information to her superiors in an attempt to elicitdecisions in her favor if:the information is easily available to all.she is the only source of the information concerned.the information is easily verifiable.there are other sources of the same information in the firm.Question 101. The information to be gathered for a decision depends on which of the following?The current market conditions and on the expected costs and benefits of acquiring theinformation.The model that underlies a decision and on the expected costs and benefits of acquiring theinformation.The cost of the information and the current market conditions.The model that underlies a decision and the amount of information that is internally available.Question 111. Categorization of activities in an organization along product or geographic lines is called:globalization.decentralization.functionalization.divisionalization.Question 121. Axis Group has a publishing house, operates in the sports gear market, and owns a coffeeplantation. A board of directors is responsible for the overall performance of the group. Identifythe correct statement from the following.The board will be responsible for all decision-making process.The board will be in the best position to solve even a minor problem at the coffee plantation.
  • 67. The sports gear firm’s risk assessment team will also be responsible for assessing market risk forthe group’s other functional areas.Decisions for the publishing house are likely to be taken by the individuals who head it, ratherthan the board of directors heading the entire group.Question 131. _____ is the only type of firm where it is possible for a person to hold all of the informationthat matters for all types of decisions.CorporationA firm where decision-making is centralizedSole proprietorshipA firm where there is separation of ownership and managementQuestion 141. General Motors was able to gain advantage over Ford in the 1920s primarily because:the latter failed to adapt its product policy and organization structure to meet the demands of thechanging market.the former had always been an M-form and better managed organization.the latter charged higher prices for its cars than General Motors.the former was vertically integrated with better control over its input production than Ford.Question 151. The method of payment that a principal can use to elicit effort from an agent is called:a contract.an order.an incentive.garbling.Question 16
  • 68. 2. _____, uncertainty, and risk of opportunism are the three major reasons due to which U.S.Steel prefers to own its mines, enrichment facilities, and ore carriers.Involuntary transactionsTransaction costsNonspecificity of assetsTrademark and credibilityQuestion 172. If there is a low degree of uncertainty combined with a low degree of asset specificity, _____will be efficient.long-term contractsshort-term contractsmarket transactionsvertical integrationQuestion 182. Which of the following exemplifies an opportunistic behavior by a franchisor arising out ofincompleteness or ambiguity in a contract?Providing inferior service in an attempt to cut operating costs.Terminating a well-operated franchisee and converting the establishment into a profitablecompany-owned outlet.Fixing exorbitant prices for products having relatively elastic demand.Terminating a franchisee who had been using the company brand name to endorse products thatthe agreement says it cannot.Question 192. Firms generally prefer not to outsource product design and manufacturing because:these activities are common and standardized.these operations are more or less static.
  • 69. these operations involve a low investment.these operations require investment in highly specific assets.Question 202. _____ increases with the variability of outcomes and the underlying degree of randomness inthe environment that can affect a business relationship.The problem of double marginalizationAsset specificityUncertaintyVolumetric interdependenceQuestion 212. The invention of the Bessemer converter in 1856:increased the cost of continuous and coordinated operations of a steel industry.motivated downstream integration of the steel industry into coal mining.increased the efficient scale of steel production.increased volumetric interdependence between different stages of steel production.Question 222. _____ improves exchangeability, and reduces the cost of obtaining information about a goodand about the parties involved in the transaction.De-integrationOutsourcingVertical integrationStandardizationQuestion 232. During the peak season, when demand for pipeline transport of natural gas at the maximumlegally allowable price exceeds the available capacity:
  • 70. buy-sell transactions take place.pipeline owners vertically integrate into gas production.price discrimination becomes prominent.pipeline owners use discretionary powers to ration capacity to shippers.Question 242. Which of the following is an advantage of mini-mills over vertically integrated giant mills?The small size of mini-mills ensures economies of scale in steel production.The small furnaces used in mini-mills depend less on coal and more on electricity.The mini-mills do not require integration of casting and milling activities.The small furnaces used by mini-mills can be operated as per the producer’s will.Question 252. Identify the reason why U.S. Steel prefers to own iron ore mines.It helps them to coordinate iron ore transport and furnace operations.It reduces the company’s raw material costs.It helps them to inspect the quality of the ore.It reduces the competition the company faces in the world steel market.Question 262. Which of the following transactions can be categorized as outsourcing?A U.S. furniture manufacturer buying a lumber facility.A U.S. firm transferring some of its operations to its new subsidiary in India.Nike selling its sportswear to customers through its franchisees across the world.A U.S. cosmetics firm using an advertising agency to market its products.Question 27
  • 71. 2. In order to lessen the monitoring problems and opportunistic behavior of a franchisor and afranchisee, franchise contracts:create provisions for high liquidated damages.are complete in all respect.have similar fixed charge and royalty arrangements.include certain flexible clauses.Question 282. The arrival of inexpensive information technology, such as personal computers andinexpensive telecommunications:discouraged de-integration.increased the optimal size of firms.shifted the long-run average cost (LRAC) curve of firms downward.shifted the marginal cost of firms upward.Question 292. Although U.S. Steel is integrated into iron ore mining, it currently does not own any of themines that supply its coking coal because:the company has a high requirement of coking coal which cannot be supplied by a single mine.the coal prices are highly unpredictable and volatile.there are a limited number of coal suppliers.futures and options markets are available for coal.Question 302. Which of the following exemplifies a vertical restraint imposed by a franchisor in a contract?A clause prohibiting a franchisee from using the company trademark to support a politicalcandidate.A clause prohibiting a franchisee from announcing special offers during Christmas to attractcustomers.
  • 72. A clause prohibiting a franchisee from bundling two products of the same company.A clause stating the target sales to be achieved by the company during an accounting year.ECO 550 Week 10 Assignment 4 AutomotiveProduction LevelsEconomics - General EconomicsFor this assignment, choose a major publicly traded automotive producer, such as GeneralMotors, Ford, Toyota, or Volkswagen. Then, research this company’s production and inventorylevels, and operational cost information, along with price and sales data for the most recentquarter available.Write a seven to nine (7-9) page paper in which you:Create a demand supply analysis based on the data you collected on your chosen company’sprice and sales, which demonstrates the relationship between price and quantity demanded.Determine the equilibrium price and quantity and explain its meaning to your chosen company.Indicate how your chosen company’s management should use this information to make soundstrategic decisions. Calculate the elasticity of demand for your chosen company’s automobiles(or choose a specific make / model). Interpret what the demand tells your chosen company’smanagement team. Speculate what may happen to your chosen company’s specifically if theelasticity of demand calculated above represented a competitor of your choice instead. Providesupport for your response. Create a cost analysis and graph. Include total cost, total variablecost, marginal cost, and fixed costs, along with any other costs you believe are valuable to thecost analysis. Create a total revenue schedule, marginal revenue schedule, and a graphrepresenting both. Interpret what the graph tells your chosen company’s management team.Determine the profit maximizing level of output by assessing the actions your chosen companyshould take if it is to continue to maximize profits. Assume your chosen company wants toexpand its operations which involve capital budget decisions. Recommend two (2) different andappropriate cost-related tools. Provide support for your recommendation. Now, assume yourchosen company wants to expand its operations globally into a new market. Suggest two (2)strategies the firm should consider. Provide support for your suggestions. Use at least three (3)high-quality academic resources in this assignment. Note: Wikipedia and other Websites do notqualify as academic resourcesECO 550 Week 10 DQ1Economics - General EconomicsWeek 10 DQ1
  • 73. Bargaining Outcomes and Individual PreferencesPlease respond to the following:Bargaining outcomes in a market-related situation are in general indeterminate and not obviousto the parties in the negotiation. Develop a bargaining situation from which you would concludethat access to market-related information does in fact affect the outcomes.Using specific examples, evaluate the difficulty of accurately eliciting people’s preferences forpublic goods.ECO 550 Week 10 DQ2Economics - General EconomicsWeek 10 DQ2Public versus Private GoodsPlease respond to the following:Compare the feasibility and efficiency of producing public goods by tax dollars versus producingthem jointly with private funds. Support your argument with specific examples.Speculate about why people in higher income groups vote for reasons that are borne out of asense of duty rather than from economic interests.ECO 550 Week 10 Chapter QuestionsEconomics - General EconomicsWeek 10 Chapter 17 Question 99. Is it possible that elementary education produces a public good but higher educationdoes not? ExplainWeek 10 Chapter 17 Question 1212.We said that an uncrowded country club golf course has aspects of a public good. Why?Is it still a public good if it becomes crowded and people’s games are slowed down?ECO 550 Week 10 Quiz
  • 74. Economics - General Economics1. Which of the following is a cost borne by an employee?The cost incurred in looking for alternative job opportunitiesA fall in overall productivity as a result of hiring the wrong personThe cost of training in the new firmThe cost of extra work done by existing employees due to an unfilled positionQuestion 21. An important distinction between the labor market and the market for commodities is:that contracts are arrived at more easily in the former.the individual attributes of the buyer and seller hold far more importance in the former case.that it is impossible to prevent breach of contract in the labor market.that the market for commodities is a matching market while the former is not.Question 31. A written contract between an employer and an employee creates value as long as:the benefits exceed the costs of forming and enforcing it.the productivity of the employee is equivalent to the wage.on-the-job learning is unimportant.the relationship between the employer and the employee is short-term.Question 41. Marginal product of labor is:the extra output produced by an additional worker, all else unchanged.the extra wage earned by an additional worker, all else unchanged.the total output produced when an extra worker is hired.
  • 75. the total revenue earned when an extra worker is hired.Question 51. In competitive markets, the elasticity of labor supply is:unrelated to time.inversely proportional to time elapsed since a wage change.unity.directly proportional to time elapsed since a wage change.Question 61. Opportunistic behavior on the part of the employer is possible because:contracts are often incomplete and leave room for implicit understandings between the twoparties.employees often reduce their effort level if they are important to the company.it is difficult to monitor all employees and their performances.good quality work can be easily measured.Question 71. Which of the following events will cause a downward movement along the value of marginalproduct of labor curve?An increase in wage rateAn increase in price of the productA decrease in wage rateA decrease in price of the productQuestion 81. _____ represents a firm’s demand curve for labor.The value of marginal product
  • 76. Marginal productMarginal revenue curveThe horizontal line at the market wage rateQuestion 91. Which of the following will have a downward impact on efficiency wages?Low monitoring costsExcess supply in the labor marketHigh equilibrium wage rateExcess demand in the labor marketQuestion 101. Jason is a salesman who gets 40 percent of the revenue he generates for his company. This isan example of payment by _____.piece rentfixed salaryexecutive compensationshare contractQuestion 111. In long-term job attachments, a worker’s wage:always exceeds his productivity.always falls below his productivity.is lower than his productivity at the beginning, then equals it, and then exceeds the same.is higher than his productivity at the beginning, then equals it, and then falls below the same.Question 121. A competitive firm hires workers as long as:
  • 77. marginal product of labor is positive.value of marginal product of labor is positive.marginal product of labor is greater than the wage rate.value of marginal product of labor is greater than the wage rate.Question 131. Influence cost is a type of _____ incurred while filling positions that have similarresponsibilities but carry different pay.deadweight lossopportunity costexternalitysocial costQuestion 141. Assume that a firm is operating in the short run and all resources are fixed except for labor.The total product curve for this firm will increase at a decreasing rate because:value of marginal product of labor is unchanged as more labor is hired.marginal product of labor will decline as more labor is hired.value of marginal product of labor will increase as more labor is hired.marginal product of labor is unchanged as more labor is hired.Question 151. The general health of the population of a country improves as its medical support systemimproves. Which of the following is a likely outcome of this?Marginal product of labor will increase.Value of marginal product of labor will fall.The equilibrium wage rate will decline.There will be excess supply of labor in the market.
  • 78. Question 162. A risky borrower can pay a lower interest rate if:she invests the amount in a profitable business.she can assure the lender of a low inflation rate.she makes a promise to repay within a short interval.she can arrange for a collateral.Question 172. Two events A and B in a sample space are considered _____ if the probability that A willhappen is the same regardless of whether or not B has happened.conditionalcorrelatedindependentexclusiveQuestion 182. Which of the following properties can be associated with an indifference curve of a risk-averse investor? AnswerIndifference curve for a risk-averse investor is a vertical line parallel to the variance axis.Two indifference curves can intersect at the equilibrium combination of risk and return.An indifference curve closer to the expected return axis gives a better utility than the one fartheraway.Indifference curve for a risk-averse investor is always downward sloping.Question 192. Refer to Figure 16-1. The conditional probability Pr[A/B] will be:In the figure given below A and B are two sets, such that Pr[A and B]=1/3, Pr[A]=2/4,Pr[B]=3/4.Figure 16-1
  • 79. 4/9.2/9.4/6.2/6.Question 202. Rational individuals prefer to consume goods during the current year rather than in the futurebecause of:positive time preference.positive consumption preference.high expected rate of inflation.high market rate of interest.Question 212. Individuals in favor of privatization of Social Security believe that it would allow people to:evade the exorbitant rates of Social Security taxes.substitute purchases of stocks and other financial assets for a portion of their Social Securitytaxes.lower their medical bill by taking extra precaution and care for their health.experience a lower inflation in healthcare services.Question 222. A(n) _____ is a set of equal annual payments received by an investor from the investment.perpetuityannuityinterestcapital value
  • 80. Question 232. If A and B are two disjoint sets, and “Pr” represents the probability, then Pr[A and B] will be:negative.infinity.unity.zero.Question 242. A _____ is a function that takes on a defined value for every point in the sample space.discrete variablerandom variabledependent variablecontinuous variableQuestion 252. Which of the following is a characteristic of a real option?The call option on a stock exercised if some average of the prices of its components passes acritical level.The right to postpone construction on the basis of net present value calculation.The put option on a stock that need to be paid for (at a predetermined price) if they are actuallyexercised.The right to sell an option at the strike price.Question 262. A derivative is any financial instrument whose value depends on the:extent of asset diversification.expected rate of inflation.
  • 81. purchasing power of the people.value of an underlying asset.Question 272. A loan used as an investment turns out to be profitable if the sale price of its output covers the_____ of all other inputs and interest on the funds loaned.internal costsmarginal costopportunity costaverage costQuestion 282. The value of a real option varies with all of the following, EXCEPT:the range of outcomes.the rate of interest.the rate of unemployment.the delay in resolving uncertainty.Question 292. Diversification of a portfolio leads to:a negative correlation between the investments.a lower mean of returns.a lower variance of returns.a higher standard deviation of returns.Question 302. Jeff holds $50,000 wealth which has a utility of 7.07 utils (assuming utility is the square rootof wealth in thousand dollars). He considers investing this in a gamble which has a 0.6
  • 82. probability of increasing his total wealth to $100,000 and 0.4 probability of decreasing it to$30,000. What will be Jeff’s expected utility from the gamble?15 utils8.19 utils3.2 utils12.12 utils

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