questions/multiple choice answers

Project Description:

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

the folk theorem

the law of large numbers

the prisoner's dilemma

the paradox of large numbers

the strategy of recusal
non-cooperative sequential games can incorporate all the following features except

a single decision-maker in the endgame

no communication

finite or infinite time periods

third-party enforceable agreements

an explicit order of play
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.
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
electricity pricing that varies in its billing expense throughout the day is called

full pricing

marginal cost pricing

dynamic pricing

variable pricing

full cost pricing pricing
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.

ratio of price to marginal cost

ratio of marginal cost to marginal utility

ratio of price to elasticity

marginal revenue
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.
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


moral hazard

creative ingenuity

insurance reliance
to accomplish its purpose a linear profit-sharing contract must

induce the employee to moonlight

communicate a code of conduct that will be monitored and enforced

meet either the participation or the incentive compatibility constraint

establish a separating equilibrium

not realign incentives
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
buying electricity off the freewheeling grid at one quarter 'til the hour for delivery on the hour illustrates:

relational contracts with distributors

vertical requirements contracts

spot market transactions

variable price agreements
non-redeployable durable assets that are dependent upon unique complementary and perfectly redeployable assets to achieve substantial value-added will typically be organized as

an export trading company

a spot market contract

a vertically integrated firm

an on-going relational contract

a joint stock company.
the antitrust laws regulate all of the following business decisions except ____.



monopolistic practices

price discrimination

wage levels
____ 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.

pecuniary benefits and costs



monopoly costs and benefits
the lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model.

monopolistic competition

perfectly contestable


the ____ is equal to the some of the squares of the market shares of all the firms in an industry.

market concentration ratio

herfindahl-hirschman index

correlation coefficient

standard deviation of concentration
the sentiment for increased deregulation in the late 1970's and early 1980's has been felt most significantly in the price regulation of





electric power generation
which of the following is (are) a basic principle(s) when estimating a project's cash flows?

cash flows should be measured on a pre-tax basis

cash flows should ignore depreciation since it is a non-cash charge

only direct effects of a project should be included in the cash flow calculations

cash flows should be measured on an incremental basis
capital expenditures:

are easily reversible

are forms of operating expenditures

affect long-run future profitability

involve only money, not machinery
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
if the acceptance of project a makes it impossible to accept project b, these projects are:

contingent projects

complementary projects

mutually inclusive projects

mutually exclusive projects
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