This document provides 36 multiple choice questions about economics and finance concepts along with their correct answers. The questions cover topics such as cost functions, survivorship analysis, breakeven analysis, price discrimination, game theory, contract theory, capital budgeting, and weighted average cost of capital.
This presentation by Rachel Brass, Partner, Gibson Dunn, was made during the discussion “Hub-and-spoke arrangements” held at the 132nd meeting of the OECD Competition Committee on 4 December 2019. More papers and presentations on the topic can be found at oe.cd/hsa.
This presentation by Rachel Brass, Partner, Gibson Dunn, was made during the discussion “Hub-and-spoke arrangements” held at the 132nd meeting of the OECD Competition Committee on 4 December 2019. More papers and presentations on the topic can be found at oe.cd/hsa.
Students should be able to:
Understand the characteristics of this market structure with particular reference to the interdependence of firms
Explain the behaviour of firms in this market structure
Explain reasons for collusive and non-collusive behaviour
Evaluate the reasons why firms may wish to pursue both overt and tacit collusion
A Model of Manufacturer-Driven Governing Mechanisms and Distributor PerformanceRuss Merz, Ph.D.
Drawing from relational exchange, dependence, and agency theories the authors explain that it is not only the type of governing mechanisms but also the proper sequencing of them that improves a manufacturer-distributor relationship and performance. Dependence affected relationship continuity positively. Monitoring affected the second order relational norm construct, comprising information sharing and flexibility, positively. Relational norm positively affected relationship continuity. Dependence, relationship continuity, monitoring, and relational norm affected distributor performance positively.
The Impact of Advertisement on Sales: Case Study in Some Selected Telecommuni...Liibaan Sagal
Abstract
This study was set out to establish the extent to which advertisement affects sales volume of selected
telecommunication companies in Mogadishu, Somalia; specifically the study intended to establish the (i) profile
of the respondents, (ii) extent of which advertisement, (iii) level sales volume (iii) whether there is a relationship
in the extent of which advertisement and the level of sales volume in selected telecommunication companies in
Mogadishu, Somalia. The study used a survey design; specifically descriptive correlations and descriptive
comparative; data were collected from 133 respondents using self administered questionnaires as the key data
collection instruments. The study findings revealed that there was a high level of which advertisement, there was
also high level of sales volume, the extent of advertisement and the level sales volume significantly differed
among telecommunication companies in Mogadishu city is significantly correlated with sales volume from the
above findings appropriate conclusion and recommendations include those for further research were made.
Students should be able to:
Understand the characteristics of this market structure with particular reference to the interdependence of firms
Explain the behaviour of firms in this market structure
Explain reasons for collusive and non-collusive behaviour
Evaluate the reasons why firms may wish to pursue both overt and tacit collusion
A Model of Manufacturer-Driven Governing Mechanisms and Distributor PerformanceRuss Merz, Ph.D.
Drawing from relational exchange, dependence, and agency theories the authors explain that it is not only the type of governing mechanisms but also the proper sequencing of them that improves a manufacturer-distributor relationship and performance. Dependence affected relationship continuity positively. Monitoring affected the second order relational norm construct, comprising information sharing and flexibility, positively. Relational norm positively affected relationship continuity. Dependence, relationship continuity, monitoring, and relational norm affected distributor performance positively.
The Impact of Advertisement on Sales: Case Study in Some Selected Telecommuni...Liibaan Sagal
Abstract
This study was set out to establish the extent to which advertisement affects sales volume of selected
telecommunication companies in Mogadishu, Somalia; specifically the study intended to establish the (i) profile
of the respondents, (ii) extent of which advertisement, (iii) level sales volume (iii) whether there is a relationship
in the extent of which advertisement and the level of sales volume in selected telecommunication companies in
Mogadishu, Somalia. The study used a survey design; specifically descriptive correlations and descriptive
comparative; data were collected from 133 respondents using self administered questionnaires as the key data
collection instruments. The study findings revealed that there was a high level of which advertisement, there was
also high level of sales volume, the extent of advertisement and the level sales volume significantly differed
among telecommunication companies in Mogadishu city is significantly correlated with sales volume from the
above findings appropriate conclusion and recommendations include those for further research were made.
Credibility in threats and commitments in sequential games is base.docxvanesaburnand
Credibility in threats and commitments in sequential games is based on
randomizing one's actions so they are unpredictable
explicit communications with competitors
effective scenario planning
analyzing best reply responses
In a game, a dominated strategy is one where:
It is always the best strategy
It is always the worst strategy
It is the strategy that is the best among the group of worst possible strategies.
Is sometimes the best and sometimes the worst strategy
The starting point of many methods for predicting equilibrium strategy in sequential games is
designing proactive reactions to rival actions
information sets
uncertain outcomes
backwards induction based on an explicit order of play
endgame analysis
If one-time gains from defection are always less than the discounted present value of an infinite time stream of cooperative payoffs at some given discount rate, the decision-makers have escaped
the Folk Theorem
the law of large numbers
the Prisoner's dilemma
the paradox of large numbers
the strategy of recusal
Which of the following pricing policies best identifies when a product should be expanded, maintained, or discontinued?
full-cost pricing policy
target-pricing policy
marginal-pricing policy
market-share pricing policy
markup pricing policy
To maximize profits, a monopolist that engages in price discrimination must allocate output in such a way as to make identical the ____ in all markets.
ratio of price to marginal cost
ratio of marginal cost to marginal utility
ratio of price to elasticity
marginal revenue
The following are possible examples of price discrimination, EXCEPT:
prices in export markets are lower than for identical products in the domestic market.
senior citizens pay lower fares on public transportation than younger people at the same time.
a product sells at a higher price at location A than at location B, because transportation costs are higher from the factory to A.
subscription prices for a professional journal are higher when bought by a library than when bought by an individual.
__ is a new product pricing strategy which results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied.
Prestige pricing
Price lining
Skimming
Incremental pricing
Third-degree price discrimination exists whenever:
the seller knows exactly how much each potential customer is willing to pay and will charge accordingly.
different prices are charged by blocks of services.
the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups.
the seller will bargain with buyers in each of the markets to obtain the best possible price.
Governance mechanisms are designed
to increase contracting costs
to resolve post-contractual opportunism
to enhance the flexibility of restrictive covenants
to replace insurance
When retail bicycle dealers adver.
Question 1A factor of production whose quantity can be changed d.docxmakdul
Question 1
A factor of production whose quantity can be changed during a particular period is a:
marginal factor of production.
fixed factor of production.
incremental factor of production.
variable factor of production.
Question 2
Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a 1-unit change in _______ .
total; a variable input
total; a fixed input
total; average product
per unit; a fixed input
Question 3
Average variable cost is the ratio of:
total cost to the marginal cost.
total cost to the amount of variable input.
variable cost to the quantity of output.
marginal cost to the quantity of output.
Question 4
The curve labeled V represents the firm's _______ curve.
total cost
average total cost
marginal cost
average variable cost
Question 5
When an increase in the firm's output reduces its long-run average cost, it experiences:
economies of scale.
diseconomies of scale.
constant returns to scale.
variable returns to scale.
Question 6
A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:
economies of scale.
diseconomies of scale.
labor-intensive production.
capital-intensive production.
Question 7
If your plant is operating in the positively-sloped portion of a long-run average cost curve, this could be the result of:
decreased input prices.
improved utilization of by-products.
specialization of resources.
limited decision-making capacity.
Question 8
Perfect competition is a model of the market that assumes all of the following EXCEPT:
a large number of firms.
firms face downward-sloping demand curves.
firms produce identical goods.
many buyers.
Question 9
The Case in Point on the Burkha Industry suggested that this industry:
might be an example of perfect competition although it did not feature easy entry and exit.
might be an example of perfect competition because it did feature easy entry and exit.
might not be an example of perfect competition although it did feature easy entry and exit.
might not be an example of perfect competition because it did not feature easy entry and exit.
Question 10
If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:
$10.
more than $10.
less than $10.
$300.
Question 11
The difference between total revenue and total cost is:
economic profit.
nominal revenue.
average revenue.
marginal revenue.
Question 12
If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:
is maximized.
can be increased by increasing production.
can be increased by decreasing production.
can be increased by increasing the price.
Question 13
In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:
P = ATC.
P < AVC.
AVC > P > ATC.
AVC < P < ATC.
Question 14
If all fir ...
Week 3 Activity 1 Midterm ExamTop of FormQuestion 1 In gene.docxmelbruce90096
Week 3 Activity 1: Midterm Exam
Top of Form
Question 1
In general, what is a price index? What questions does it help answer?
Answer:
Question 2
For the perfectly competitive firm, price equals marginal revenue because _________.
Choose one answer.
a. when another unit of the good is sold, total revenue increases by the price of the good
b. when another unit of the good is sold, total revenue decreases by the price of the good
c. when another unit of the good is sold, total revenue increases by less than the price of the good
d. when another unit of the good is sold, total revenue increases by more than the price
Question 3
The law of supply states that _________.
Choose one answer.
a. firms supply more of a product as consumer income rises
b. firms supply more of a product as consumer income falls
c. firms supply more of a product as the price of the product rises
d. firms supply more of a product as the price of the product falls
Question 4
The price elasticity of demand is calculated by _________.
Choose one answer.
a. the change in price divided by the change in quantity demanded
b. the change in quantity demanded divided by the change in price
c. the percentage change in price divided by the percentage change in quantity demanded
d. the percentage change in quantity demanded divided by the percentage change in price
Question 5
Scarcity can best be defined as a situation in which _________.
Choose one answer.
a. there are no buyers willing to purchase what sellers have produced
b. there are not enough goods to satisfy all of the buyers’ demand
c. resources are limited in quantity and can be used in different ways
d. there is not enough money to satisfy consumers’ wants
Question 6
Match the description to the right curve.
is cost that varies with the level of output
is cost that does not vary with output
is the sum of total variable cost and total fixed cost
shows the additional cost of each additional unit of output a firm produces
is total cost divided by quantity.
is the firm’s variable cost per unit of output; it is total variable cost divided by quantity
which is total fixed cost divided by quantity
Question 7
State the essential difference between the classical and Keynesian schools of thought. If you were a public policymaker and received conflicting advice from a classical and a Keynesian economist, how would you choose? Explain.
Answer:
Question 8
In the short-run, ______ factors of production are fixed, while in the long-run, _____ of them are.
Choose one answer.
a. some, none
b. all, none
c. no, at least some
d. all, at least some
Question 9
When economists say a market has "barriers to entry" they refer to _________.
Choose one answer.
a. monopolists being prohibited from selling their products to certain customers
b. a policy that some countries establish to reduc.
Role of Technology in Long-Term CareUsing Scholarly Library and .docxjoellemurphey
Role of Technology in Long-Term Care
Using Scholarly Library and the Internet, find three articles describing the role technology will play in addressing the challenges ahead in long-term care. Summarize your findings and based on your learning, respond to the following questions:
· Which challenges in long-term care system remain unmet? Why?
· What changes can we expect to occur with the influx of baby boomers entering into the long-term care system?
· Why do you think technology is important to long-term care? Support your answer with relevant examples.
· What are the pros and cons of the implementation of technology in long-term care? Consider both providers and consumers while describing.
· How does technology improve the type and quality of care received by long-term care consumers?
· How important is the commitment by top management for the use of information technology in long-term care to be successful? Why?
· How can the challenges be proactively addressed as opposed to being reactive?
Legal and Ethical Issues: Case Study
Cathy Smith, an eighty-eight-year-old woman, was admitted to the emergency room from the nursing facility with acute respiratory distress. Although Smith does not have a living will, her daughter Rose, a health care professional, has the power of attorney (POA) to make her mother's health decisions.
Smith suffers from end-stage Alzheimer's disease and recently experienced congestive heart failure. Her condition is alarming. The doctors want to place her on life-support equipment, including a ventilator. Smith's son, Andrew, agrees with the doctor's decision. However, Rose states her mother would never want to be placed on life-support machines to prolong her life.
Analyze the scenario and answer the following questions:
· What are the autonomy-beneficial conflicts between Rose and Andrew related to placing their mother on life support in this case? Who has the right to make the decision on behalf of the client? Why?
· What are the ethical issues related to the competency and decision-making capacity of the client while making the health care decisions? Do these issues impact the services offered in long-term care? How?
· What are some of the critical issues related to informed consent? Who has the right to assume this responsibility? Why?
ECO 500 FINAL EXAMS
The main role of economic profits is to:
signal where resources are most highly valued by society
allow firms to cover their production costs
allow consumers to cover their opportunity cost
None of the statements associated with this question are correct
If the interest rate is 3 percent, the present value of $900 received at the end of three years is:
$891.
$823.63.
$799.64
$983.45
The optimal amount of exercise is determined by comparing:
marginal benefit and the total cost of exercise.
total benefit and the marginal cost of exercise.
marginal benefit and the marginal cost of exercise.
total benefit and the total cost of exercise.
Suppose the ma ...
1. A highly capable brick and mortar electronics retailer with a l.docxaulasnilda
1. A highly capable brick and mortar electronics retailer with a loyal regional customer base (such as Fry's) should adopt which of the following medium term strategies?
"50% off" sale every month
Divest
Niche or harvest
Invest in R&D
2. Amazon's strategy involves offering expanded variety but at very competitive prices. This is primarily achieved through
Economies of scope
Focus on international markets
Economies of scale
Innovative products
3. Uber is an example of industry chaining in which of the following ways?
Economies of scale for service providers
Economies of scope for customers
Improving access and reduced search costs for customers and service providers
Lower wages for service providers and lower prices for customers
4. Shareholder returns are primarily derived from
Growth in share value and dividend payments
dividend payments only
Growth in company profits
Growth in the share value only
5. Strategy is defined best as:
A unique value proposition supported by sound financial decisions
A unique value proposition supported by synergies in operations
A unique value proposition supported by aggressive marketing
A unique value proposition supported by a complex supply chain
6. The cost of attracting new customers is the highest with which of the following groups?
Early adopters
Late majority
Laggards
Innovators
7. In the context of the Differentiation (Quality) vs Efficiency trade-off curve, the efficient frontier refers to:
The company that provides maximum quality for a given cost
The company that provides minimum cost
The company that provides maximum quality
The company that maximizes efficiency
8. Nike hiring sports stars to be brand ambassadors is an example of which of the following mechanisms?
Market development
Customer segmentation
Product development
Market penetration
9. Which of the following is an indication of strategic committment of a company in an industry
Lowering wages of the workforce
Increased technology investment
Acquiring real-estate in an urban location of demand
Increased divident payments for two years in a row
10. A pharma company with a deep roster of capable engineers and scientists and that is the market leader is best advised to begin development of a new drug as:
A partnership with smaller competitors
License its innovation from other laboratories
An independent venture
Smaller scale effort
11. The most valuable competency in the declining phase of an industry is:
Resposiveness
Innovation
Efficiency
Quality
12. There is often limited capacity relative to demand in the early growth period of an industry because:
Capacity is very expensive in the later stages of an industry
Only few companies have products or technologies in a budding industry
Prices tend to be low in the embryonic stage
Many companies compete for early advantage in an emerging industry
13. If the willingness to pay of .
1. A highly capable brick and mortar electronics retailer with a l.docxjeremylockett77
1. A highly capable brick and mortar electronics retailer with a loyal regional customer base (such as Fry's) should adopt which of the following medium term strategies?
"50% off" sale every month
Divest
Niche or harvest
Invest in R&D
2. Amazon's strategy involves offering expanded variety but at very competitive prices. This is primarily achieved through
Economies of scope
Focus on international markets
Economies of scale
Innovative products
3. Uber is an example of industry chaining in which of the following ways?
Economies of scale for service providers
Economies of scope for customers
Improving access and reduced search costs for customers and service providers
Lower wages for service providers and lower prices for customers
4. Shareholder returns are primarily derived from
Growth in share value and dividend payments
dividend payments only
Growth in company profits
Growth in the share value only
5. Strategy is defined best as:
A unique value proposition supported by sound financial decisions
A unique value proposition supported by synergies in operations
A unique value proposition supported by aggressive marketing
A unique value proposition supported by a complex supply chain
6. The cost of attracting new customers is the highest with which of the following groups?
Early adopters
Late majority
Laggards
Innovators
7. In the context of the Differentiation (Quality) vs Efficiency trade-off curve, the efficient frontier refers to:
The company that provides maximum quality for a given cost
The company that provides minimum cost
The company that provides maximum quality
The company that maximizes efficiency
8. Nike hiring sports stars to be brand ambassadors is an example of which of the following mechanisms?
Market development
Customer segmentation
Product development
Market penetration
9. Which of the following is an indication of strategic committment of a company in an industry
Lowering wages of the workforce
Increased technology investment
Acquiring real-estate in an urban location of demand
Increased divident payments for two years in a row
10. A pharma company with a deep roster of capable engineers and scientists and that is the market leader is best advised to begin development of a new drug as:
A partnership with smaller competitors
License its innovation from other laboratories
An independent venture
Smaller scale effort
11. The most valuable competency in the declining phase of an industry is:
Resposiveness
Innovation
Efficiency
Quality
12. There is often limited capacity relative to demand in the early growth period of an industry because:
Capacity is very expensive in the later stages of an industry
Only few companies have products or technologies in a budding industry
Prices tend to be low in the embryonic stage
Many companies compete for early advantage in an emerging industry
13. If the willingness to pay of ...
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Ind...FaHaD .H. NooR
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Industry Types | What Is Industry | Competitor Analysis | Studying Industry Trends |
Eco 550 final exam 36 questions with correct answers
1. ECO 550 Final Exam 36 Questions with Correct Answers
HomeworkLance Dot Com
Description:
Question 1
The short-run cost function is:
Answer
where all inputs to the production process are variable
relevant to decisions in which one or more inputs to the production process are fixed
not relevant to optimal pricing and production output decisions
crucial in making optimal investment decisions in new production facilities
In a study of banking by asset size over time, we can find which asset sizes are tending to
become more prominent. The size that is becoming more predominant is presumed to be least
cost. This is called:
Answer
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
2. Which of the following is not
an assumption of the linear breakeven model:
Answer
constant selling price per unit
decreasing variable cost per unit
fixed costs are independent of the output level
a single product (or a constant mix of products) is being produced and sold
all costs can be classified as fixed or variable
Question 4
A ____ total cost function implies that marginal costs ____ as output is increased.
Answer
linear; increase linearly
quadratic; are constant
cubic; increase linearly
linear; are constant
Long distance telephone service has become a competitive market. The average cost per
call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long
distance service is:
Answer
Governmental pressure to lower the price
3. Reduced demand for long distance service
Entry into this industry pushes prices down
Lower price for a barrel of crude oil
Increased cost of providing long distance service
What is the profit maximization point for a firm in a purely competitive environment?
Answer
The output where
The output where P < MC
The output where P > MC
The output where
The output where AVC < P
Question 7
The problems of asymmetric information exchange arise ultimately because
Answer
one party to the exchange possesses different information than another
one party has more information than another
4. one party knows nothing
one party cannot independently verify the information of another
information is scarce
Question 8
An “experience good” is one that:
Answer
Only an expert can use
Has undetectable quality when purchased
Can be readily experienced simply by touching or tasting
Improves with age, like a fine wine
Question 9
Of the following, which is not
an economic rationale for public utility regulation?
Answer
production process exhibiting increasing returns to scale
constant cost industry
5. avoidance of duplication of facilities
protection of consumers from price discrimination
Question 10
____ as practiced by public utilities is designed to encourage greater usage and therefore spread
the fixed costs of the utility’s plant over a larger number of units of output.
Answer
Peak load pricing
Inverted block pricing
Block pricing
First degree price discrimination
Question 11
In natural monopoly, AC continuously declines due to economies in distribution or in
production, which tends to found in industries which face increasing returns to scale. If price
were set equal to marginal cost, then:
Answer
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
6. Question 12
Regulatory agencies engage in all of the following activities except _______.
Answer
controlling entry into the regulated industries
overseeing the quality of service provided by the firms
setting federal and state income tax rates on regulated firms
setting prices that consumers will pay
Question 13
5 points
In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-
output level, assumes that the other firm’s ____ will not change.
Answer
price
output
marketing strategy
inventory
Question 14
Barometric price leadership exists when
Answer
7. one firm in the industry initiates a price change and the others follow it as a signal of changes in
cost or demand in the industry.
one firm imposes its best price on the rest of the industry.
all firms agree to change prices simultaneously.
one company forms a price umbrella for all others.
the firms are all colluding.
Question 15
A(n) ____ is characterized by a relatively small number of firms producing a product.
Answer
monopoly
syndicate
cooperative
oligopoly
Question 16
Even ideal cartels tend to be unstable because
Answer
firms typically prefer competition to collusion as competition, because it leads to more profits.
collusion leads to lowest possible overall profits in the industry.
oligopolistic managers are extremely risk loving.
8. firms can benefit by secretly selling more than they promised the other firms
Question 17
The starting point of many methods for predicting equilibrium strategy in sequential games is
Answer
designing proactive reactions to rival actions
information sets
uncertain outcomes
backwards induction based on an explicit order of play
endgame analysis
Question 18
Cooperation in repeated prisoner’s dilemma situations seems to be enhanced by all of the
following except
Answer
limited punishment schemes
clarity of conditional rewards
grim trigger strategy
provocability–i.e., credible threats of punishment
tit for tat strategy
9. Question 19
When there is no Equilibrium (or no Nash Equilibrium), we expect that:
Answer
the firms end up in the cooperative strategy.
a firm will follow a randomized strategy.
a firm will not care what it does.
a firm will very likely have a dominant strategy.
Question 20
In making promises that are not guaranteed by third parties and in imposing penalties that are not
enforced by third parties, all of the following are credibility-enhancing mechanisms except
Answer
establishing a bond forfeited by violating the commitment
investing in a non-redeployable reputational asset tied to the promise or threat
interrupting the communication of negotiated compromises
offering a warranty
delivering a hostage (e.g., a patent license triggered by violating the promise)
Question 21
10. ____ is a new product pricing strategy which results in a high initial product price. This price is
reduced over time as demand at the higher price is satisfied.
Answer
Prestige pricing
Price lining
Skimming
Incremental pricing
Third-degree price discrimination exists whenever:
Answer
the seller knows exactly how much each potential customer is willing to pay and will charge
accordingly.
different prices are charged by blocks of services.
the seller can separate markets by geography, income, age, etc., and charge different prices to
these different groups.
the seller will bargain with buyers in each of the markets to obtain the best possible price.
Which of the statements about price discrimination is (are) false?
Answer
It must be possible to segment the market.
It must be difficult to transfer the seller’s product from one market segment to another.
Public utilities practice first-degree price discrimination.
There must be differences in the elasticity of demand from one segment to another.
The following are possible examples of price discrimination, EXCEPT:
Answer
prices in export markets are lower than for identical products in the domestic market.
11. senior citizens pay lower fares on public transportation than younger people at the same time.
a product sells at a higher price at location A than at location B, because transportation costs are
higher from the factory to A.
subscription prices for a professional journal are higher when bought by a library than when
bought by an individual
Which of the following is not among the functions of contract?
Answer
to provide incentives for efficient reliance
to reduce transaction costs
to discourage the development of asymmetric information
to provide risk allocation mechanisms
Question 26
When borrowers who do not intend to repay are able to hide their bad credit histories, a lender’s
well-intentioned borrowers should
Answer
complain to regulatory authorities
withdraw their loan applications
offer more collateral in exchange for lower interest charges
divulge still more information on their loan applications
hope for a pooling equilibrium
Question 27
12. When someone contracts to do a task but fails to put full effort into the performance of an
agreement, yet the lack of effort is not independently verifiable, this lack of effort constitutes a
Answer
breach of contractual obligations
denial of good guarantee
loss of reputation
moral hazard
Question 28
Which of the following are not approaches to resolving the principal-agent problem?
Answer
ex ante incentive alignment
deferred stock options
ex post governance mechanism
straight salary contracts
monitoring by independent outside directors
Question 29
The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market
model.
13. Answer
monopolistic competition
perfectly contestable
oligopoly
monopoly
Question 30
Industry A has market shares of 50, 30, and 20. Industry B has market shares of 45, 40, and 15.
Hint: HHI = Σ (si2), where si is the market shares of the i-th firm in the industry.
Answer
The Herfindahl index for A is 100.
The Herfindahl index for A is 3,800.
The Herfindahl index for B is 3,600
The Herfindahl index for A is greater than for B.
The Herfindahl index is for B is 4,000.
Question 31
____ occurs whenever a third party receives or bears costs arising from an economic transaction
in which the individual (or group) is not a direct participant.
Answer
Pecuniary benefits and costs
14. Externalities
Intangibles
Monopoly costs and benefits
Question 32
____ yields the same results as the theory of perfect competition, but requires substantially fewer
assumptions than the perfectly competitive model.
Answer
Baumol’s sales maximization hypothesis
The Pareto optimality condition
The Cournot model
The theory of contestable markets
Question 33
Which of the following would not be classified as a capital expenditure for decision-making
purposes?
Answer
purchase of a building
investment in a new milling machine
purchase of 90-day Treasury Bills
15. investment in a management training program
Question 34
Capital expenditures:
Answer
are easily reversible
are forms of operating expenditures
Affect long-run future profitability
Involve only money, not machinery
Question 35
The ____ method assumes that the cash flows over the life of the project are reinvested at the
____.
Answer
net present value; computed internal rate of return
internal rate of return; firm’s cost of capital
net present value; firm’s cost of capital
net present value; risk-free rate of return
Question 36
16. The weights used in calculating the firm’s weighted-average cost of capital are equal to the
proportion of debt and equity ____.
Answer
used to finance the project
used to finance the projects undertaken last year
in the industry average capital structure
in the firm’s target capital structure