Eco 550 week 11 final quiz


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Eco 550 week 11 final quiz

  1. 1. ECO 550 Week 11 Final Quiz 86/eco-550-week-11-final-quiz/Economics - General EconomicsQuestion 11.If two small perfectly competitive firms merge, the merged firm will be:Answera price-taker.a market leader.a oligopoly.10 pointsQuestion 21.In a market characterized by many buyers and one seller, investment in informative advertising by aseller can ____ the price of a commodity to customers and lower their _____ cost of acquiringinformation.Answerdecrease; sunk cost
  2. 2. increase; transaction costincrease; sunk costdecrease; transaction cost10 pointsQuestion 31.Which of the following industries can create barriers to the entry of new firms due to size andspecificity?AnswerA hydroelectric power plantA garment manufacturer exporting apparelsAn owner of a retail chainAn automobile manufacturing company10 pointsQuestion 41.Which of the following activities can create an external cost?Answer
  3. 3. Honking continuously while driving past a hospital.Reducing the use of plastic carry bags while shopping.Burying garbage under the soil and planting trees on it.Using smog controls on private cars.10 pointsQuestion 51.Which of the following is an aim of a price-fixing agreement?AnswerReducing entry barriersIncreasing profitReducing priceIncreasing demand10 pointsQuestion 61.If the costs of negotiating and enforcing contracts are _____ relative to the benefits, buyersand sellers have incentives to make economically efficient arrangements that _____ value.Answer
  4. 4. high; increaselow; increasehigh, decreaselow; decrease10 pointsQuestion 71.Refer to Table 10-1. What would be the combined gain of the two if both breach the unitizationcontract?The matrix given below represents the payoffs to oil well owners Mike and Frasel if they enter into aunitization contract. Each of the owners know the exact amount of oil in the pool and the market priceof oil.Table 10-1Answer$22$20$28$3210 points
  5. 5. Question 81.Which of the following exemplifies specific performance that a court might order from the party inbreach of a contract?AnswerA seller ordered to pay back the price of the commodity to the customer having failed to deliver it on-time.A popular singer requested to forgo the fee for her performance at a social fund raising program.The owner of a polluting factory ordered to convert his private plot into a public garden.A movie director ordered to work with an actress he had previously contracted with, instead of one helater found was available for a lower price.10 pointsQuestion 91.Parties to the contract prefer to keep the actual agreement incomplete when:Answerthey have conflicting terms and conditions.they are large in count.the economic value of the contract is low.
  6. 6. the cost of negotiation is high.10 pointsQuestion 101.Which of the following theories states that people who are highly risk-averse are less likely to engagein high-risk activities?AnswerThe theory of moral hazardThe theory of adverse selectionThe propitious selection theoryThe death spiral theory10 pointsQuestion 111.Which of the following situations can lead to a winner’s curse?AnswerA bid which is won by multiple bidders but fails to cover the expectations of the seller.A win which makes a player over-enthusiastic about further gambles.An overoptimistic bid which helps the bidder to win but fails to cover his costs.
  7. 7. A win which makes the player risk-averse toward future gambles.10 pointsQuestion 121.An individual will be considered risk neutral if:Answerhe is indifferent between taking and not taking up the gamble.he pays someone to take away the gamble from him.he pays someone to allow him to take the gamble.he takes up the gamble under any situation.10 pointsQuestion 131.Independent workers using specialized capital save the costs of contracting but risk:Answergeneralization.opportunism.
  8. 8. inefficiency.over-utilization.10 pointsQuestion 141.A corporation’s _____ can sometimes influence its decisions without making efforts to replace itsmanagement.Answerhierarchyspecialized workforcesmall shareholdersblock holders10 pointsQuestion 151.Which of the following properties is common to a partnership business?AnswerLimited liabilityCentralized ownership and management
  9. 9. Continuity and unlimited existence of the businessCo-ownership of contributed assets10 pointsQuestion 161.Which of the following is a disadvantage of the U-form structure?AnswerIn case of multiple products sold in different markets, a U-form structure is difficult to maintain.A U-form structure requires a larger staff to evaluate top-level decision making than other organizationstructures.A U-form structure necessitates a multiple-level decision-making process.The amount of information that is considered for decision-making in a U-form structure is less thanother structures.10 pointsQuestion 171._____ is the only type of firm where it is possible for a person to hold all of the information thatmatters for all types of decisions.AnswerCorporation
  10. 10. A firm where decision-making is centralizedSole proprietorshipA firm where there is separation of ownership and management10 pointsQuestion 181.Identify the correct statement about relationships depicted in an organization chart.AnswerA line that links an individual/division with the same at a lower level depicts informal authority of theformer over the latter.Equality on the chart for individuals A and B must mean they both have the same authority in practice.It shows all relations between employees of an organization.A line that links an individual/division with the same at a lower level depicts formal authority of theformer over the latter.10 pointsQuestion 191.During the peak season, when demand for pipeline transport of natural gas at the maximum legallyallowable price exceeds the available capacity:Answer
  11. 11. 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.10 pointsQuestion 201.Which of the following changes can facilitate the transfer or outsourcing of formerly internal activitiesof a firm?AnswerChanges in technology and market structureDecline in domestic input pricesDecline in net exportsRapid pace of industrialization10 pointsQuestion 211.Successive monopolies face the problem of:
  12. 12. Answerdouble marginalization.volumetric interdependence.opportunism.predatory pricing.10 pointsQuestion 221.A competitive firm hires workers as long as:Answermarginal 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.10 pointsQuestion 231.
  13. 13. The _____ of using the market for corporate control make it important to build incentives intoexecutive pay packages that can reduce _____ by better aligning the incentives of shareholders andmanagers.Answerbenefits; principal/agent problemscosts and uncertainties; principal/agent problemsbenefits; influence costscosts and uncertainties; influence costs10 pointsQuestion 241.Over the long run, migration by workers to higher-wage regions:Answerallows wages to equalize across regions.explains why wage differentials may persist.causes disequilibrium in the labor market.increases wages further in those regions.10 points
  14. 14. Question 251.If A and B are two disjoint sets, and “Pr” represents the probability, then Pr[A and B] will pointsQuestion 261.Two events A and B in a sample space are considered _____ if the probability that A will happen is thesame regardless of whether or not B has happened.Answerconditionalcorrelatedindependentexclusive
  15. 15. 10 pointsQuestion 271.If the writer of an option, holds shares of the stock or an actual quantity of the commodity when shewrites the call option on it, her position is said to pointsQuestion 281.Alex’s production is worth $60, Harry’s is worth $40, Rob’s is worth $40, and Julia’s is worth $55.They decide to combine their resources and produce together. For this to be a superadditive game,which of the following conditions must hold?AnswerThey should be able to produce more in groups of two than what they can produce together.Their combined production must exceed the total they can individually produce.Their resources must be perfect substitutes.
  16. 16. Their resources must be perfect complements.10 pointsQuestion 291.Elizabeth’s opportunity cost of selling a widget is $18, while Jess values it at $27. Identify the correctstatement from the following.AnswerJess can threaten to go to another seller if the transaction benefits Elizabeth more than her.The core is of the zone of agreement.The core consists of prices above $27, which benefits both parties.Elizabeth can threaten to go to another seller if the transaction benefits Jess more than her.10 pointsQuestion 301.A characteristic function is:Answerone that identifies negotiations which depend on the characteristics of the that gives the value each possible coalition of a group’s members can create by operatingindependently.
  17. 17. one that identifies the most beneficial price for the buyer involved in a that identifies the most beneficial price for the seller involved in a transaction.