Question 1.1. Demand for a company product is,

Q=400-0.5P and, TC=20000+50Q+3Qsquare

Total profit is maximized at output of; 
a) 750
b) 625
c) 850
d) 75
E) none of the above


Question 2.2. What is the profit maximizing price? .
a) 810
b) 750
c) 650
d) 600
e) none of the above


Question 3.3. What will profits be at the profit max output and price; .
a) 8000
b) 8100
c) 9050
d) 8125
e) none of the above


Question 4.4. A company sells a product to retail and commercial customers. The inverse demand functions for these markets are;

Ratail P1=180-8Q1, p2=100-4Q2
Total cost for the company is: TC=50+20(Q1+Q2)



Assuming the company can charge different prices in each market, the company's total profit will be; .
a) 11,500
b) 5,600
c) 1,225
d) 1,150
e) none of the above


Question 5.5. A company is considering the purchase of a new machine which will cost $100,000. Net cash flow before depreciation and taxes are $25,000 per year for five years. The machine would be depreciated (straight-line method) over five years with no salvage value.


What is the annual net cash flow after depreciation and taxes? .
a) 25,000
b) 21,000
c) 28,000
d) 23,000
e) none of the above


Question 6.6. What is the internal rate of return .
a) 8. 25%
b) 4. 85%
c) 3. 80%
d) 6. 20%
e) none of the above


Question 7.7. In the short-run for a purely competitive market, a manufacturer will stop producing when: .
a) the total revenue is less than total cost
b) the contribution to fixed cost is zero or less
c) the price is greater than AVC
d) operating at a loss
e) a and b


Question 8.8. If a price ceiling is set below the market clearing price, .
a) supply will exceed demand
b) rationing is likely
c) consumers will face a situation of surpluses
d) supply will exactly equal demand at that price


Question 9.9. Under asymmetric information, .
a) you never get what you paid for
b) you sometimes get cheated
c) you never get cheated
d) at best you get what you pay for
e) sellers make profits in excess of competitive returns


Question 10.10. All of the following are mechanisms which reduce the adverse selection problem except_________________ .
a) warranties from established enterprises with non-redeploy able assets
b) high interest rate
c) large collateral requirements
d) brand names and products-specific promotions and retail displays
e) higher prices in repeat customers transactions


Question 11.11. In the case of pure monopoly: .
a) one firm is the sole producer of a good or service which has no close substitutes
b) the firm 's profit is maximized at the price and output combination where marginal cost equals marginal revenue
c) the demand curve is always elastic
d) a and b only
e) a, b, and c


Question 12.12. A monopoly will always produce less than a purely competitive industry, ceteris paribus. .
True
False


Question 13.13. The practice by telephone companies of charging lower long -distance rates at night than during the day is an example of: .
a) inverted block pricing
b) second-degree pricing discrimination
c) peak-load pricing
d) first-degree price discrimination
e) none of the above


Question 14.14. An oligopoly is characterized by: .
a) a relative small number of firms
b) either differentiated or undifferentiated products
c) actions of any individual firm will affect sales of other firms in the industry
d) a and b
e) a, b, and c


Question 15.15. Advertising intensity will be larger for_______________. .
a) Perfectly Competative COS.
b) COS. with large gross margins
c) Advertising elasticity is large
d) Oligopolies
e) b and c


Question 16.16. Transfer pricing: .
a) is typical of a centralized firm
b) assumes no external sources available
c) should maximize a division's profits, rather than the firm's
d) can exist with or without an external competitive market
e) none of the above


Question 17.17. Which of the statements about price discrimination is (are) false? .
a) It must be possible to segment the market
b) It must be difficult to transfer the seller's product from one market segment to another
c) public utilities practice first-degree price discrimination
d) there must be differences in the elasticity of demand from one segment to another
e) c and d


Question 18.18. Joint product are: .
a) products which are technically independent in the production process
b) exemplified by beef and hide from cattle
c) products whose production process are interdependent
d) a and b
e) b and c


Question 19.19. _________________ is a new product pricing strategy which results in a high initial product price. This is reduced over time as demand at the higher price is satisfied. .
a) Prestige pricing
b) Price lining
c) Skimming
d) Incremental pricing
e) none of the above


Question 20.20. For a monopolist that engages in price discrimination, when the price elasticity in market 1 is less (in absolute value) than in market 2, the optimal price in market 1 will exceed the optimal price in market 2. .
True
False


Question 21.21. In pure competition: .
a) The optimal price-output solution occurs at the point where marginal revenue is equal to price
b) a firm's demand curve is represented by a horizontal line
c) a firm is a price-taker since the products of every producer are perfect substitutes for the products of every other producer
d) a and b only
e) a, b, and c


Question 22.22. Experience goods are products or services .
a) that the customer already knows
b) whose performance is highly unusual
c) whose quality is undetectable when purchased
d) not likely to cause repeat purchases
e) all of the above


Question 23.23. The market for "lemons" is one in which .
a) the rational buyer discounts
b) the seller's products claim are unverifiable at the point of purchase
c) "the bad apples drive out the good"
d) the problem of adverse selection is rampant
e) all of the above


Question 24.24. One justification for allowing regulated firms to engage in price discrimination is that costs for most users are lower than they would be in the absence of price discrimination. .
True
False


Question 25.25. The kinked demand curve was developed to explain: .
a) fluctuations of prices in pure competition
b) rigidities observed in prices in oligopolistic industries
c) fluctuations observed in prices in oligopolistic industries
d) all of the above
e) none of the above


Question 26.26. If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the _______________________of all firms is identical. .
a) average total cost
b) average profit
c) marginal profit
d) marginal cost
e) marginal revenue


Question 27.27. Effective collusion generally is more difficult as the number of oligopolistic firms involved increases .
True
False


Question 28.28. Given TC = 10 + 5Q
ED = -3 the optimal price is :




.
a) 2 MC
b) $ 10
c) 50 cents
d) a and b
e) none of the above


Question 29.29. The Domino principle .
a) is a smoothing technique
b) is an econometric technique
c) refers to cross-sectional data
d) is a barometric technique (lagging indicator)
e) none of the above


Question 30.30. Retailers .
a) do not need forecasts
b) could get their forecast from industrial forecasts
c) any forecasting technique would apply
d) none of the above


Question 31.31. A forecast can be reliable but not valid .
True
False


Question 32.32. Accuracy of forecasts .
a) cannot be determined
b) is inversely related to average error or root mean square error
c) depends on seasonality
d) none of the above


Question 33.33. Econometric techniques of forecasting .
a) use time as the predictor variable
b) are inferior to time series techniques
c) do not allow you to add predictor variable once you create the model
d) are limited to using a system of equations
e) none of the above


Question 34.34. In time series models .
a) you must be careful in choosing predictor variables
b) data must be random
c) in a good model autocorrelations will be large and positive
d) there is no way to determine if the data is random
e) none of the above


Question 35.35. If variability of data in a time series increases overtime .
a) you should use an additive model
b) you should use a multiplicative model
c) you cannot use the data
d) none of the above


Question 36.36. The CAPM is used to: .
a) Determine the Cost of bonds
b) Determine the IRR
c) Price of Common Stock
d) Compare risk and return
e) c and d