2024 – Question 1 To trust a potential cooperator until the first defection and then never cooperate thereafter is
ECO 550 FINAL EXAM PART 2 WITH FOUR OTHER VERSIONS – 2024
Question 1
To trust a potential cooperator until the first defection and then never cooperate thereafter is
Answer
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[removed] |
a dominant strategy |
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[removed] |
an irrational strategy |
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[removed] |
a grim trigger strategy |
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[removed] |
a non-cooperative finite game strategy |
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[removed] |
a subgame imperfect strategy |
Question 2
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)?
Answer
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The problem is their lack of information. |
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The problem is that it is a nonzero sum game. |
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The problem is that both spies have incentives to double cross each other. |
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The problem is that all the outcomes are not particularly good for either player |
Question 3
An illustration of a non-credible commitment is the promise
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to not increase capacity in a declining industry |
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to match a new entrant’s discount price |
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to enter a profitable industry |
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to restrain output to the quota assigned by a cartel |
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to exit in the face of projected losses. |
Question 4
The starting point of many methods for predicting equilibrium strategy in sequential games is
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designing proactive reactions to rival actions |
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information sets |
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uncertain outcomes |
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backwards induction based on an explicit order of play |
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endgame analysis |
Question 5
Non-cooperative sequential games can incorporate all the following features except
Answer
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[removed] |
a single decision-maker in the endgame |
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[removed] |
no communication |
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[removed] |
finite or infinite time periods |
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[removed] |
third-party enforceable agreements |
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[removed] |
an explicit order of play |
Question 6
Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting
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universal access price discrimination |
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declining block price discrimination. |
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mixed bundling price discrimination. |
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two-part price discrimination. |
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uniform pricing |
Question 7
____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm.
Answer
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Incremental price |
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Marginal price |
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Full-cost price |
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Transfer price |
Question 8
Electricity pricing that varies in its billing expense throughout the day is called
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full pricing |
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marginal cost pricing |
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dynamic pricing |
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variable pricing |
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full cost pricing pricing |
Question 9
Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when:
Answer
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the preference rankings of vacationers travelling together are negatively correlated. |
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a preference for cities is always higher than preferences for mountain vistas. |
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preference rankings of vacationers travelling together are positively correlated. |
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preference for the seaside is always higher than preferences for city excursions |
Question 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
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Prestige pricing |
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Price lining |
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Skimming |
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Incremental pricing |
Question 11
Vertical integration may be motivated by all of the following except:
Answer
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[removed] |
Upstream market power |
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Economies of ever wider spans of managerial control |
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[removed] |
Technological interdependencies |
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Reduced search and bargaining cost |
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[removed] |
The hold-up problem. |
Question 12
When manufacturers and distributors establish credible commitments to one another, they often employ
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vertical requirements contracts |
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third-party monitoring |
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credible threat mechanisms |
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non-price tactics |
Question 13
When borrowers who do not intend to repay are able to hide their bad credit histories, a lender’s well-intentioned borrowers should
Answer
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complain to regulatory authorities |
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withdraw their loan applications |
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offer more collateral in exchange for lower interest charges |
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divulge still more information on their loan applications |
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hope for a pooling equilibrium |
Question 14
Which of the following are not approaches to resolving the principal-agent problem?
Answer
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ex ante incentive alignment |
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[removed] |
deferred stock options |
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[removed] |
ex post governance mechanism |
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[removed] |
straight salary contracts |
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[removed] |
monitoring by independent outside directors |
Question 15
Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as
Answer
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[removed] |
an export trading company |
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[removed] |
a spot market contract |
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[removed] |
a vertically integrated firm |
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[removed] |
an on-going relational contract |
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a joint stock company |
Question 16
The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
Answer
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[removed] |
monopolistic competition |
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perfectly contestable |
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oligopoly |
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monopoly |
Question 17
____ 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
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[removed] |
Pecuniary benefits and costs |
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[removed] |
Externalities |
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Intangibles |
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Monopoly costs and benefits |
Question 18
____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
Answer
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[removed] |
Baumol’s sales maximization hypothesis |
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[removed] |
The Pareto optimality condition |
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[removed] |
The Cournot model |
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The theory of contestable markets |
Question 19
The ____ is equal to the some of the squares of the market shares of all the firms in an industry.
Answer
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[removed] |
market concentration ratio |
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[removed] |
Herfindahl-Hirschman index |
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[removed] |
correlation coefficient |
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standard deviation of concentration |
Question 20
The sentiment for increased deregulation in the late 1970’s and early 1980’s has been felt most significantly in the price regulation of
Answer
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coal |
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grain |
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transportation |
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automobiles |
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electric power generation |
Question 21
Which of the following is (are) a basic principle(s) when estimating a project’s cash flows?
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cash flows should be measured on a pre-tax basis |
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cash flows should ignore depreciation since it is a non-cash charge |
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only direct effects of a project should be included in the cash flow calculations |
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cash flows should be measured on an incremental basis |
Question 22
The ____ depicts the risk-return relationship in the market for all securities:
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characteristic line |
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security market line |
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investment opportunity curve |
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marginal cost of capital schedule |
Question 23
In cost-effectiveness analysis, constant cost studies:
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are rarely used |
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attempt to specify the output which may be achieved from a number of alternative programs, assuming all are funded at the same level |
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are useless because they fail to adequately evaluate program benefits |
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try to find the least expensive way of achieving a certain objective |
Question 24
Any current outlay that is expected to yield a flow of benefits beyond one year in the future is:
Answer
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a capital gain |
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a wealth maximizing factor |
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a capital expenditure |
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a cost of capital |
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a dividend reinvestment |
Question 25
Which of the following should not be counted in a cost-benefit analysis?
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direct benefits and costs |
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real secondary benefits |
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technological secondary costs |
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pecuniary benefits |
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intangibles |
Question 1
In a game, a dominated strategy is one where:
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It is always the best strategy |
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It is always the worst strategy |
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It is the strategy that is the best among the group of worst possible strategies. |
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Is sometimes the best and sometimes the worst strategy |
Question 2
Cooperation in repeated prisoner’s dilemma situations seems to be enhanced by all of the following except
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limited punishment schemes |
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clarity of conditional rewards |
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grim trigger strategy |
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provocability–i.e., credible threats of punishment |
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tit for tat strategy |
Question 3
Consider the game known as the Prisoner’s Dilemma. What’s the dilemma?
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By both not confessing, both get to the cooperative solution and minimize time in prison. |
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By both confessing, both get to the noncooperative solution and both serve significant time in prison. |
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As a group, they are better off cooperating by not confessing, but each player has an incentive to be first to confess in a double cross. |
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The problem is that the spies should never have been caught; they should move to Rio. |
Question 4
To trust a potential cooperator until the first defection and then never cooperate thereafter is
Answer
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[removed] |
a dominant strategy |
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|
[removed] |
an irrational strategy |
|
|
[removed] |
a grim trigger strategy |
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[removed] |
a non-cooperative finite game strategy |
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[removed] |
a subgame imperfect strategy |
Question 5
When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the decision-makers are engaged in
Answer
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[removed] |
a single play game |
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[removed] |
a sequential game |
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an entry decision |
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a simultaneous game |
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an infinite repetition game |
Question 6
The following are possible examples of price discrimination, EXCEPT:
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prices in export markets are lower than for identical products in the domestic market. |
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senior citizens pay lower fares on public transportation than younger people at the same time. |
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a product sells at a higher price at location A than at location B, because transportation costs are higher from the factory to A. |
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subscription prices for a professional journal are higher when bought by a library than when bought by an individual. |
Question 7
____ 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
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[removed] |
Prestige pricing |
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[removed] |
Price lining |
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[removed] |
Skimming |
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[removed] |
Incremental pricing |
Question 8
____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm.
Answer
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[removed] |
Incremental price |
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[removed] |
Marginal price |
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[removed] |
Full-cost price |
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[removed] |
Transfer price |
Question 9
Third-degree price discrimination exists whenever:
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the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. |
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different prices are charged by blocks of services. |
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the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. |
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the seller will bargain with buyers in each of the markets to obtain the best possible price. |
Question 10
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.
Answer
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ratio of price to marginal cost |
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ratio of marginal cost to marginal utility |
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ratio of price to elasticity |
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marginal revenue |
Question 11
Which of the following is not among the functions of contract?
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to provide incentives for efficient reliance |
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to reduce transaction costs |
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to discourage the development of asymmetric information |
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to provide risk allocation mechanisms |
Question 12
Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as
Answer
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[removed] |
an export trading company |
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[removed] |
a spot market contract |
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[removed] |
a vertically integrated firm |
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[removed] |
an on-going relational contract |
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[removed] |
a joint stock company. |
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 ____.
Answer
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reliance relationships |
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uncertainty |
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moral hazard |
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creative ingenuity |
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insurance reliance |
Question 14
Which of the following are not approaches to resolving the principal-agent problem?
Answer
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[removed] |
ex ante incentive alignment |
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[removed] |
deferred stock options |
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[removed] |
ex post governance mechanism |
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[removed] |
straight salary contracts |
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[removed] |
monitoring by independent outside directors |
Question 15
Buying electricity off the freewheeling grid at one quarter ’til the hour for delivery on the hour illustrates:
Answer
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[removed] |
relational contracts with distributors |
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[removed] |
vertical requirements contracts |
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[removed] |
spot market transactions |
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[removed] |
variable price agreements |
Question 16
The antitrust laws regulate all of the following business decisions except ____.
Answer
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[removed] |
collusion |
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[removed] |
mergers |
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monopolistic practices |
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price discrimination |
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wage levels |
Question 17
The ____ is equal to the some of the squares of the market shares of all the firms in an industry.
Answer
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[removed] |
market concentration ratio |
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[removed] |
Herfindahl-Hirschman index |
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[removed] |
correlation coefficient |
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[removed] |
standard deviation of concentration |
Question 18
____ 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
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[removed] |
Pecuniary benefits and costs |
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[removed] |
Externalities |
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[removed] |
Intangibles |
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[removed] |
Monopoly costs and benefits |
Question 19
The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.
Answer
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[removed] |
monopolistic competition |
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[removed] |
perfectly contestable |
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[removed] |
oligopoly |
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[removed] |
monopoly |
Question 20
The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
Answer
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[removed] |
market concentration |
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[removed] |
income distribution |
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technological progressiveness |
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[removed] |
price discrimination |
Question 21
Any current outlay that is expected to yield a flow of benefits beyond one year in the future is:
Answer
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[removed] |
a capital gain |
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[removed] |
a wealth maximizing factor |
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[removed] |
a capital expenditure |
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[removed] |
a cost of capital |
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[removed] |
a dividend reinvestment |
Question 22
In order to help assure that all relevant factors will be considered, the capital-expenditure selection process should include the following steps except:
Answer
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[removed] |
generating alternative capital-investment project proposals |
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[removed] |
estimating cash flows for the project proposals |
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reviewing the investment projects after they have been implemented |
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allocate manpower to the various divisions within the firm |
Question 23
Cost-benefit analysis is the public sector counterpart to ____ used in private, profit-oriented firms.
Answer
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[removed] |
ratio analysis |
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[removed] |
break-even analysis |
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[removed] |
capital budgeting techniques |
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[removed] |
economic forecasting |
Question 24
The decision by the Municipal Transit Authority to either refurbish existing buses, buy new large buses, or to supplement the existing fleet with mini-buses is an example of:
Answer
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[removed] |
independent projects |
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[removed] |
mutually exclusive projects |
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contingent projects |
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separable projects |
Question 25
If the acceptance of Project A makes it impossible to accept Project B, these projects are:
Answer
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[removed] |
contingent projects |
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complementary projects |
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mutually inclusive projects |
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[removed] |
mutually exclusive projects |
ADDED QUESTIONS BASED ON POPULAR DEMAND
Question 1
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
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a. |
the Folk Theorem |
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b. |
the law of large numbers |
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c. |
the Prisoner’s dilemma |
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d. |
the paradox of large numbers |
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e. |
the strategy of recusal |
Question 2
Credibility in threats and commitments in sequential games is based on
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a. |
randomizing one’s actions so they are unpredictable |
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b. |
explicit communications with competitors |
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c. |
effective scenario planning |
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d. |
analyzing best reply responses |
Question 3
A dominant strategy differs from a Nash equilibrium strategy in that
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a. |
Nash equilibrium strategy does not assume best reply responses |
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b. |
dominant strategy assumes best reply responses |
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c. |
only Nash strategy applies to simultaneous games |
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d. |
one dominant strategy is sufficient to predict behavior in a multi-person game |
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e. |
Nash strategy is often unique |
Question 4
Non-cooperative sequential games can incorporate all the following features except
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a. |
a single decision-maker in the endgame |
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b. |
no communication |
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c. |
finite or infinite time periods |
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d. |
third-party enforceable agreements |
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e. |
an explicit order of play |
Question 5
Vertical integration may be motivated by all of the following except:
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a. |
Upstream market power |
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b. |
Economies of ever wider spans of managerial control |
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c. |
Technological interdependencies |
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d. |
Reduced search and bargaining cost |
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e. |
The hold-up problem. |
Question 6
____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
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a. |
Baumol’s sales maximization hypothesis |
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b. |
The Pareto optimality condition |
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c. |
The Cournot model |
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d. |
The theory of contestable markets
Question 7 Which of the following items is (are) not considered as part of the net investment calculation?
Question 8 Which of the following items is (are) not considered as part of the net investment calculation?
Question 9 The ____ method assumes that the cash flows over the life of the project are reinvested at the ____.
Question 10 Which of the following is (are) a basic principle(s) when estimating a project’s cash flows?
Question 11 The weights used in calculating the firm’s weighted-average cost of capital are equal to the proportion of debt and equity ____.
THIRD VERSION Question 1 Consider the game known as the Prisoner’s Dilemma. What’s the dilemma? Answer
4 points Question 2 Essential components of a game include all of the following except: Answer
4 points Question 3 In a game, a dominated strategy is one where: Answer
4 points Question 4 When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the decision-makers are engaged in Answer
4 points Question 5 Cooperation in repeated prisoner’s dilemma situations seems to be enhanced by all of the following except Answer
4 points Question 6 ____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm. Answer
4 points Question 7 The following are possible examples of price discrimination, EXCEPT: Answer
4 points Question 8 Third-degree price discrimination exists whenever: Answer
4 points Question 9 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. Answer
4 points Question 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
4 points Question 11 Buying electricity off the freewheeling grid at one quarter ’til the hour for delivery on the hour illustrates: Answer
4 points Question 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
4 points Question 13 Non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as Answer
4 points Question 14 Governance mechanisms are designed Answer
4 points Question 15 Which of the following are not approaches to resolving the principal-agent problem? Answer
4 points Question 16 ____ 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
4 points Question 17 The antitrust laws regulate all of the following business decisions except ____. Answer
4 points Question 18 The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____. Answer
4 points Question 19 The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model. Answer
points Question 20
The ____ is equal to the some of the squares of the market shares of all the firms in an industry. Answer
4 points Question 21 In the constant-growth dividend valuation model, the required rate of return on common stock (i.e., cost of equity capital) can be shown to be equal to the sum of the dividend yield plus the ____. Answer
4 points Question 22 In cost-effectiveness analysis, constant cost studies: Answer
4 points Question 23 The social rate of discount is best approximated by: Answer
4 points Question 24 Any current outlay that is expected to yield a flow of benefits beyond one year in the future is: Answer
4 points Question 25 Which of the following would not be classified as a capital expenditure for decision-making purposes? Answer
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