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ECON510-1900-SP11: 9th Assignment

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ECON510-1900-Managerial Economics-SP11-KIM You are logged in as Dhruv Dholakiya (Logout)

UNVA-Online► ECON510-1900-SP11► Quizzes► 9th Assignment► Review of attempt 1

 

9th Assignment Review of attempt 1 Finish review

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Sunday, June 12, 2011, 07:16 PM Sunday, June 12, 2011, 08:36 PM 1 hour 19 mins 18/30 3 out of a maximum of 5 (60%)

Cartel agreements tend to break down

Marks: 1

Choose one answer.

a. because of price "chiseling" by one or more members. b. during economic downturns. c. when there is overcapacity in the industry. d. All of the above

Correct Marks for this submission: 1/1.

2

Under conditions of first-degree price discrimination

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a. production may exceed that which would prevail under perfect competition. b. prices will be lower than under perfect competition. c. production may equal that which would exist under perfect competition. d. production will always be lower than under perfect competition.

Correct Marks for this submission: 1/1.

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ECON510-1900-SP11: 9th Assignment

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Asymmetric information represents a market situation in which

Marks: 1

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a. some information possessed by the parties in a transaction may be false. b. a zero-sum game exists. c. one party in a transaction has more information than the other party. d. all parties to a transaction possess less than full information.

Correct Marks for this submission: 1/1.

If banks face a problem in loan markets when bad credit risks are the ones most likely to seek bank loans, it is described as Marks: 1

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Choose one answer.

a. fraud. b. moral hazard. c. adverse selection. d. moral suasion.

Correct Marks for this submission: 1/1.

5

Moral hazard is the

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a. outcome of a Prisoner's Dilemma. b. risk associated with a Dutch auction. c. result of market signaling. d. risk that one party to a contract may alter its post-contract behavior to the detriment of another party.

Correct Marks for this submission: 1/1.

If a monopolist sets a low price to discourage potential competitors from entering the market, it is referred as Marks: 1

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a. price skimming.

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ECON510-1900-SP11: 9th Assignment

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b. limit pricing. c. predatory pricing. d. penetration pricing.

Incorrect Marks for this submission: 0/1.

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A cartel price will be established at the quantity where

Marks: 1

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a. marginal cost equals industry price. b. total cost equals the industry total revenue. c. average cost equals the industry revenue. d. the sum of the members' marginal costs equals industry marginal revenue.

Correct Marks for this submission: 1/1.

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Revenue maximization occurs when a firm sells at a price

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a. where its marginal revenue is equal to its marginal cost. b. where its marginal revenue is zero. c. that is equal to its minimum average variable cost. d. None of the above

Incorrect Marks for this submission: 0/1.

Assume that a multinational company produces components in country A and ships them to a subsidiary in country B. In order to increase its profits Marks: 1

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Choose one answer.

a. the company should charge a high transfer price for the components if income taxes in country A are higher than in country B. b. the company should charge a high transfer price for the components if income taxes in country B are higher than in country A.

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ECON510-1900-SP11: 9th Assignment

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c. the company should charge a low transfer price for the components if income taxes in country B are higher than in country A. d. None of the above Correct Marks for this submission: 1/1.

10 Marks: 5

Industry demand is given by:                                     Qd = 1000 - P All firms in the industry have identical and constant marginal and average costs of $50/unit. a. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn? b. Now suppose that there are five firms in the industry, and that they collude to set price.  What price will they set? What will be the output of each firm? What will be the profit of each firm? Answer:

ANS:- A If Perfect Competition then NO PROFIT. Profit = 0 Eqlibiriam Price =50 Q=1'000-50=950 Ans:- B Q = 1,000 - P P = 1,000 - Q ---------------------TR = (1,000 - Q ) Q = 1,000 Q - (Q)² MR = 1,000 - 2 Q MR = 50 ------------------------------

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ECON510-1900-SP11: 9th Assignment

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1,000 - 2 Q = 50 2 Q = 950 Q= 950 / 2 = 475 ---------------------------------P = 1,000 - 475 = 525 --------------------------------------q = Q / 5 = 475 / 5 = 95 -------------------------------------------

Other things remaining the same, an increase in the price of butter can be expected to Marks: 1

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Choose one answer.

a. decrease margarine sales. b. increase margarine sales. c. increase butter sales. d. None of the above

Correct Marks for this submission: 1/1.

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Second-degree price discrimination occurs when

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a. different groups of buyers are charged different prices based on their price elasticities of demand. b. different prices are charged for different blocks of services. c. a different price is charged for each amount of a product purchased. d. None of the above

Incorrect Marks for this submission: 0/1.

A company which charges a lower price than may be indicated by economic analysis to gain a foothold in the market is practicing Marks: 1

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ECON510-1900-SP11: 9th Assignment

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a. penetration pricing. b. price skimming. c. psychological pricing. d. prestige pricing.

Correct Marks for this submission: 1/1.

The oligopolistic situation in which a company's objective is to maximize revenue subject to a minimum profit requirement is usually referred to as Marks: 1

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a. the Marshall model. b. the aggressive model. c. the aggregate model. d. the Baumol model.

Correct Marks for this submission: 1/1.

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A successful and stable cartel can be established if there are

Marks: 1

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a. a few firms producing a storable product. b. many firms producing a perishable product. c. many firms producing a storable product. d. a few firms producing a perishable product.

Correct Marks for this submission: 1/1.

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The Prisoner's Dilemma is an example of

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a. adverse selection. b. a non-zero sum, non-cooperative game with a dominant strategy. c. market signaling. d. a zero-sum game.

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ECON510-1900-SP11: 9th Assignment

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Incorrect Marks for this submission: 0/1.

If the demand elasticity for a product is -2, and a profit-maximizing firm sells the product for $10, its marginal cost must be Marks: 1

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Choose one answer.

a. $8. b. $5. c. $10. d. $15.

Correct Marks for this submission: 1/1.

When state universities charge higher tuition fees to out-of-state students than to local students, the universities are practicing Marks: 1

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Choose one answer.

a. third-degree discrimination. b. fourth-degree discrimination. c. first-degree discrimination. d. second-degree discrimination.

Correct Marks for this submission: 1/1.

When a firm sets a price relatively low in order to increase the market share, it is referred as Marks: 1

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Choose one answer.

a. penetration pricing. b. predatory pricing. c. price skimming. d. limit pricing.

Correct Marks for this submission: 1/1.

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The result for the seller of being able to practice price discrimination will be

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ECON510-1900-SP11: 9th Assignment

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a. lower quantity sold. b. cost minimization. c. higher profits. d. lower demand elasticity.

Correct Marks for this submission: 1/1.

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Prices under an ideal cartel situation will be equal to

Marks: 1

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a. monopoly prices. b. marginal cost. c. prices under monopolistic competition. d. competitive prices.

Incorrect Marks for this submission: 0/1.

22

When mark-up equals 50%, then demand elasticity will be

Marks: 1

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a. -1.5. b. -3. c. -2. d. -1.

Correct Marks for this submission: 1/1.

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Barometric price leadership can occur when oligopolistic firms

Marks: 1

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a. try to enforce cartel agreements. b. want to avoid price competition and violating antitrust laws. c. compete on the basis of differentiated products. d. All of the above

Incorrect

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ECON510-1900-SP11: 9th Assignment

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Marks for this submission: 0/1.

The position of a cartel will become weaker if there is ________ excesscapacity among the firms belonging to the cartel. Marks: 1

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Choose one answer.

a. high b. no c. zero d. minimum

Correct Marks for this submission: 1/1.

25

Transfer pricing is a method used to

Marks: 1

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a. minimize a multinational firm's tax liabilities. b. determine whether a firm should make or buy a component product. c. determine the correct value of a product as it moves from one stage of production to another. d. All of the above

Incorrect Marks for this submission: 0/1.

26

A firm uses ________ for goods which the consumer takes pride in owning.

Marks: 1

Choose one answer.

a. prestige pricing b. penetration pricing c. predatory pricing d. price skimming

Correct Marks for this submission: 1/1.

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ECON510-1900-SP11: 9th Assignment

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ECON510-1900-SP11

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Ch.10 Test 1