Final Exams

  ECO 550

 Question 1

4 out of 4 points

  
 In a game, a dominated strategy is one where:   
 Selected Answer: It is always the best strategyCorrect Answer: It is always the best strategy   

 Question 2

4 out of 4 points

  
 The starting point of many methods for predicting equilibrium strategy in sequential games is   
 Selected Answer: endgame analysisCorrect Answer: endgame analysis   

 Question 3

4 out of 4 points

  
 Credible promises and hostage mechanisms can support a continuous stream of cooperative exchanges except when   
 Selected Answer: the hostage can be revoked for just causesCorrect Answer: the hostage can be revoked for just causes   

 Question 4

4 out of 4 points

  
 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)?   
 Selected Answer: The problem is that both spies have incentives to double cross each other.Correct Answer: The problem is that both spies have incentives to double cross each other.   

 Question 5

4 out of 4 points

  
 Non-cooperative sequential games can incorporate all the following features except   
 Selected Answer: third-party enforceable agreementsCorrect Answer: third-party enforceable agreements   

 Question 6

4 out of 4 points

  
 The segmenting of customers into several small groups such as household, institutional, commercial, and industrial users, and establishing a different rate schedule for each group is known as:   
 Selected Answer: third-degree price discriminationCorrect Answer: third-degree price discrimination   

 Question 7

4 out of 4 points

  
 ____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm.   
 Selected Answer: Transfer priceCorrect Answer: Transfer price   

 Question 8

4 out of 4 points

  
 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.   
 Selected Answer: marginal revenueCorrect Answer: marginal revenue   

 Question 9

4 out of 4 points

  
 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:   
 Selected Answer: the preference rankings of vacationers travelling together are negatively correlated.Correct Answer: the preference rankings of vacationers travelling together are negatively correlated.   

 Question 10

4 out of 4 points

  
 Third-degree price discrimination exists whenever:   
 Selected Answer: the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups.Correct Answer: the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups.   

 Question 11

4 out of 4 points

  
 To accomplish its purpose a linear profit-sharing contract must   
 Selected Answer: establish a separating equilibriumCorrect Answer: establish a separating equilibrium   

 Question 12

0 out of 4 points

  
 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 ____.   
 Selected Answer: creative ingenuityCorrect Answer: moral hazard   

 Question 13

4 out of 4 points

  
 Buying electricity off the freewheeling grid at one quarter ’til the hour for delivery on the hour illustrates:   
 Selected Answer: spot market transactionsCorrect Answer: spot market transactions   

 Question 14

4 out of 4 points

  
 Vertical integration may be motivated by all of the following except:   
 Selected Answer: Economies of ever wider spans of managerial controlCorrect Answer: Economies of ever wider spans of managerial control   

 Question 15

4 out of 4 points

  
 When manufacturers and distributors establish credible commitments to one another, they often employ   
 Selected Answer: vertical requirements contractsCorrect Answer: vertical requirements contracts   

 Question 16

4 out of 4 points

  
 The ____ is equal to the some of the squares of the market shares of all the firms in an industry.   
 Selected Answer: Herfindahl-Hirschman indexCorrect Answer: Herfindahl-Hirschman index   

 Question 17

4 out of 4 points

  
 ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.   
 Selected Answer: The theory of contestable marketsCorrect Answer: The theory of contestable markets   

 Question 18

4 out of 4 points

  
 The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.   
 Selected Answer: perfectly contestableCorrect Answer: perfectly contestable   

 Question 19

4 out of 4 points

  
 ____ 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.   
 Selected Answer: ExternalitiesCorrect Answer: Externalities   

 Question 20

4 out of 4 points

  
 The sentiment for increased deregulation in the late 1970’s and early 1980’s has been felt most significantly in the price regulation of   
 Selected Answer: transportationCorrect Answer: transportation   

 Question 21

4 out of 4 points

  
 In determining the optimal capital budget, one should choose those project’s whose ____ exceeds the firm’s ____ cost of capital.   
 Selected Answer: internal rate of return, marginalCorrect Answer: internal rate of return, marginal   

 Question 22

4 out of 4 points

  
 Which of the following would not be classified as a capital expenditure for decision-making purposes?   
 Selected Answer: purchase of 90-day Treasury BillsCorrect Answer: purchase of 90-day Treasury Bills   

 Question 23

4 out of 4 points

  
 In cost-effectiveness analysis, constant cost studies:   
 Selected Answer: attempt to specify the output which may be achieved from a number of alternative programs, assuming all are funded at the same levelCorrect Answer: attempt to specify the output which may be achieved from a number of alternative programs, assuming all are funded at the same level   

 Question 24

4 out of 4 points

  
 Any current outlay that is expected to yield a flow of benefits beyond one year in the future is:   
 Selected Answer: a capital expenditureCorrect Answer: a capital expenditure   

 Question 25

4 out of 4 points

  
 Cost-benefit analysis is the public sector counterpart to ____ used in private, profit-oriented firms.   
 Selected Answer: capital budgeting techniquesCorrect Answer: capital budgeting techniques   



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