Consider the game known as the Prisoner’s Dilemma. What’s the dilemma?

Consider the game known as the Prisoner’s Dilemma. What’s the dilemma?

Answer

		By both not confessing, both get to the cooperative solution and minimize time in prison.
		By both confessing, both get to the noncooperative solution and both serve significant time in prison.
		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.
		The problem is that the spies should never have been caught; they should move to Rio.

 

Question 2

 

A key to analyzing subgame perfect equilibrium strategy in sequential games is

Answer

		predictable behavior
		an explicit order of play for at least some participants
		information sets that are known with certainty
		credible threats clearly communicated
		randomness

Question 3

 

When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the decision-makers are engaged in

Answer

		a single play game
		a sequential game
		an entry decision
		a simultaneous game
		an infinite repetition game

Question 4

 

A dominant strategy differs from a Nash equilibrium strategy in that

Answer

		Nash equilibrium strategy does not assume best reply responses
		dominant strategy assumes best reply responses
		only Nash strategy applies to simultaneous games
		one dominant strategy is sufficient to predict behavior in a multi-person game
		Nash strategy is often unique

Question 5

 

When there is an Equilibrium (or a Nash Equilibrium), we expect that:

Answer

		once the firm’s get there, no one will change their strategy.
		firms will tend to select a randomized strategy.
		neither firm will care what it does.
		this is always a dominated strategy.

Question 6

 

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:

Answer

		first-degree price discrimination
		market penetration
		third-degree price discrimination
		second-degree price discrimination

Question 7

 

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

		the preference rankings of vacationers travelling together are negatively correlated.
		a preference for cities is always higher than preferences for mountain vistas.
		preference rankings of vacationers travelling together are positively correlated.
		preference for the seaside is always higher than preferences for city excursions.

Question 8

 

Electricity pricing that varies in its billing expense throughout the day is called

Answer

		full pricing
		marginal cost pricing
		dynamic pricing
		variable pricing
		full cost pricing pricing

Question 9

 

Third-degree price discrimination exists whenever:

Answer

		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.

Question 10

 

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

Answer

		Incremental price
		Marginal price
		Full-cost price
		Transfer price

Question 11

 

Buying electricity off the freewheeling grid at one quarter ’til the hour for delivery on the hour illustrates:

Answer

		relational contracts with distributors
		vertical requirements contracts
		spot market transactions
		variable price agreements

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

		breach of contractual obligations
		denial of good guarantee
		loss of reputation
		moral hazard

Question 13

 

When manufacturers and distributors establish credible commitments to one another, they often employ

Answer

		vertical requirements contracts
		third-party monitoring
		credible threat mechanisms
		non-price tactics

Question 14

 

When borrowers who do not intend to repay are able to hide their bad credit histories, a lender’s well-intentioned borrowers should

Answer

		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

Question 15

 

Which of the following are not approaches to resolving the principal-agent problem?

Answer

		ex ante incentive alignment
		deferred stock options
		ex post governance mechanism
		straight salary contracts
		monitoring by independent outside directors

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

		Pecuniary benefits and costs
		Externalities
		Intangibles
		Monopoly costs and benefits

Question 17

 

The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.

Answer

		market concentration
		income distribution
		technological progressiveness
		price discrimination

Question 18

 

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

Answer

		market concentration ratio
		Herfindahl-Hirschman index
		correlation coefficient
		standard deviation of concentration

Question 19

 

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

Answer

		monopolistic competition
		perfectly contestable
		oligopoly
		monopoly

Question 20

 

____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.

Answer

		Baumol’s sales maximization hypothesis
		The Pareto optimality condition
		The Cournot model
		The theory of contestable markets

Question 21

 

Which of the following items is (are) not considered as part of the net investment calculation?

Answer

		installation and shipping charges
		acquisition cost of new asset
		salvage value of old equipment that is being replaced
		first year’s net cash flow

Question 22

 

Which of the following should not be counted in a cost-benefit analysis?

Answer

		direct benefits and costs
		real secondary benefits
		technological secondary costs
		pecuniary benefits
		intangibles

Question 23

 

The ____ depicts the risk-return relationship in the market for all securities:

Answer

		characteristic line
		security market line
		investment opportunity curve
		marginal cost of capital schedule

Question 24

 

Which of the following would not be classified as a capital expenditure for decision-making purposes?

Answer

		purchase of a building
		investment in a new milling machine
		purchase of 90-day Treasury Bills
		investment in a management training program

Question 25

 

Which of the following is (are) a basic principle(s) when estimating a project’s cash flows?

Answer

		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

 

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