Assignment

Question 1
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

Question 2
To trust a potential cooperator until the first defection and then never cooperate thereafter is
a dominant strategy
an irrational strategy
a grim trigger strategy
a non-cooperative finite game strategy
a subgame imperfect strategy

Question 3
A key to analyzing subgame perfect equilibrium strategy in sequential games is
predictable behavior
an explicit order of play for at least some participants
information sets that are known with certainty
credible threats clearly communicated
randomness

Question 4
When there is no Equilibrium (or no Nash Equilibrium), we expect that:
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 5
The Prisoner's Dilemma involves two spies who are held in separate soundproof rooms. But even if the two spies could communicate, what makes it difficult for them to achieve the cooperative solution (both not confessing)?
The problem is their lack of information.
The problem is that it is a nonzero sum game.
The problem is that both spies have incentives to double cross each other.
The problem is that all the outcomes are not particularly good for either player.

Question 6
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.

Question 7
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.

Question 8
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

Question 9
____ 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

Question 10
Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting
universal access price discrimination
declining block price discrimination.
mixed bundling price discrimination.
two-part price discrimination.
uniform pricing

Question 11
Which of the following is not among the functions of contract?
to provide incentives for efficient reliance
to reduce transaction costs
to discourage the development of asymmetric information
to provide risk allocation mechanisms

Question 12
When borrowers who do not intend to repay are able to hide their bad credit histories, a lender's well-intentioned borrowers should
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 13
When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____.
reliance relationships
uncertainty
moral hazard
creative ingenuity
insurance reliance

Question. 14
Governance mechanisms are designed
to increase contracting costs
to resolve post-contractual opportunism
to enhance the flexibility of restrictive covenants
to replace insurance

Question 15
When manufacturers and distributors establish credible commitments to one another, they often employ
vertical requirements contracts
third-party monitoring
credible threat mechanisms
non-price tactics

Question 16
The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
monopolistic competition
perfectly contestable
oligopoly
monopoly

Question 17
____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
Baumol's sales maximization hypothesis
The Pareto optimality condition
The Cournot model
The theory of contestable markets

Question 18
The antitrust laws regulate all of the following business decisions except ____.
collusion
mergers
monopolistic practices
price discrimination
wage levels

Question 19
The sentiment for increased deregulation in the late 1970's and early 1980's has been felt most significantly in the price regulation of
coal
grain
transportation
automobiles
electric power generation

Question 20
The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
market concentration
income distribution
technological progressiveness
price discrimination

Question 21
Capital expenditures:
are easily reversible
are forms of operating expenditures
Affect long-run future profitability
Involve only money, not machinery

Question 22
Cost-benefit analysis is the public sector counterpart to ____ used in private, profit-oriented firms.
ratio analysis
break-even analysis
capital budgeting techniques
economic forecasting

Question 23
Which of the following would not be classified as a capital expenditure for decision-making purposes?
purchase of a building
investment in a new milling machine
purchase of 90-day Treasury Bills
investment in a management training program

Question 24
Any current outlay that is expected to yield a flow of benefits beyond one year in the future is:
a capital gain
a wealth maximizing factor
a capital expenditure
a cost of capital
a dividend reinvestment

Question 25
The social rate of discount is best approximated by:
the cost of government borrowing
the opportunity cost of resources taken from the private sector
3 percent
30 percent.