Sie sind auf Seite 1von 8

Jack and Jill are playing a simultaneous game shown in normal form below.

Jill must choose move A, B, or C as Jack chooses move X, Y, or Z. Payoffs for each of the possible nine joint strategies are shown as (Jills payoff, Jacks payoff). JACK Y (75,80) (65,100) (60,90)

JILL

Moves A B C

X (100,75) (95,85) (75,90)

Z (85,85) (80,70) (65,110)

1.

If both players play a secure strategy, Jacks payoff will be: a) 75 b)80 c) 85 d)90

e) None of the above are correct.

2.

We would expect the outcome of this game to be Jill plays move _____ and Jack plays move _____ a) B; Z b) A; Y c) C; Z d) B; X e) None of the above are correct.

3.

_____________ has a potential first mover advantage in this game, and would be willing to pay up to _______ for the right to make the first move. a) Jack; 5 b) Jill; 5 c) Jack; 10 d) Jill; 10 e) None of the above are correct.

4.

In a competitive market for good X, . If the price of good Y rises, and firms producing good X face an increase in the price of intermediate goods used in production, we can predict, ceteris paribus, a) the price of good X will rise, but the change in quantity sold is indeterminate. b) the price of good X will fall, but the change in quantity sold is indeterminate. c) the quantity sold of good X will rise, but the change in the price of good X is indeterminate. d) the quantity sold of good X will fall, but the change in the price of good X is indeterminate. e) None of the above are correct. In a competitive market for good X, , where I is average consumer income. If average income rises, and labor costs for producers of good X fall, we can predict, ceteris paribus, a) the price of good X will rise, but the change in quantity sold is indeterminate. b) the price of good X will fall, but the change in quantity sold is indeterminate. c) the quantity sold of good X will rise, but the change in the price of good X is indeterminate. d) the quantity sold of good X will fall, but the change in the price of good X is indeterminate. e) None of the above are correct. In a competitive market quantity demanded Qd = 2,000 5P and quantity supplied Qs = 5P 1,000. If a strictly enforced price ceiling PC = 250 is imposed on this market we will see a deadweight loss in efficiency equal to a) 0 b) 2,500 c) 7,500 d) 12,500 e) None of the above are correct.

5.

6.

Blue Final Exam

Page 1 of 8

Econ 419 Spring 2013

7.

In a market characterized by monopolistic competition we would expect find that firms in the long run a) will produce at minimum efficient scale to minimize costs. b) will set their price above marginal cost of production. c) will earn accounting profits equal to zero. d) All of the above are correct. e) None of the above are correct. You are participating in an auction with 6 risk neutral bidders, including yourself. Potential bids on the item being sold range from a low of $1,000 to a high of $5,000. You value the object at $4,000. If this is a first price sealed bid auction, the probability that your optimal bid is higher than one of the other bidders equals a) 3/5 b) 5/8 c) 2/3 d) 3/4 e) None of the above. You are participating in an auction with 6 risk neutral bidders, including yourself. Potential bids on the item being sold range from a low of $1,000 to a high of $5,000. You value the object at $4,000. If this is a first price sealed bid auction, your maximum expected gain from participating in the auction equals a) $47.68 b) $68.69 c) $112.26 d) $ 134.89 e) None of the above.

8.

9.

10.

Gabbys Grinders sells its product with a markup of 50 percent above marginal cost. The Lerner Index for this firm equals: a) 1/4 b) 1/3 c) 1/2 d) 3/4 e) None of the above are correct.

11.

Two firms with market shares of 15 and 20 percent merge. This action will increase the HHI by: a) 300 b) 350 c) 600 d) 700 e) None of the above are correct.

12.

Chimeric Images, a profit maximizing firm, faces demand for its product Q = 600 P, and constant marginal cost of production MC = 200. For the entire industry, price elasticity of total market demand, ET = - 1.2. The Rothschild Index for Chimeric Images equals: a) 0.6 b) 0.75 c) 0.90 d) 1.00 e) None of the above are correct.

13.

Compensation for most CEOs of publicly traded companies includes bonus based upon current profits and stock options that will be worthless unless the companies stock rises in price. These packages are designed to address the __________ problem confronting shareholders. a) Principle-Agent b) Lemons c) Adverse Selection d) Dividend Risk Page 2 of 8 Econ 419 Spring 2013

Blue Final Exam

14.

Joe College is currently spending all of his income on two goods, glasses of beer (B) and slices of pizza (P). The price of pizza is $4.00/slice and the price of beer is $3.00/glass. He is currently consuming 60 slices of pizza and 40 glasses of beer each month. The utility Joe receives from consumption of beer and pizza U(B,P) = 100B1/2P1/2, with U(B,P)/B = 50B-1/2P1/2 and U(B,P)/P = 50B1/2P-1/2. From this information, we can determine that Joe should be consuming _______ glasses of beer each month to maximize his utility. a) 20 b) 40 c) 60 d) 80 e) None of the above are correct.

Heidi faces an uncertain future. If she has no accident, her wealth will be $1,000,000. However, she faces a probability of 1 percent that she will have an accident which will wipe her out, reduce her wealth to zero. Her utility of wealth U(W) = 300W1/3, with marginal utility U(W)/W = 100W-2/3. 15. The maximum insurance premium Heidi would be willing to pay for insurance against loss due this accident equals _______dollars. a) 26,885 b) 39,701 c) 46,405 d) 62,875 e) None of the above are correct. The minimum insurance premium a company would charge Heidi to insure against her loss assuming zero transactions costs equals _______ dollars. a) 1,000 b) 5,000 c) 10,000 d) 20,000 e) None of the above are correct.

16.

17.

Consumers consider bagels and cream cheese to be complements. Which of the events below would cause a fall in both the price of cream cheese and the quantity of bagels sold? a) a rise in the price of flour c) a fall in the price of flour b) a fall in the price of milk d) a rise in the price of milk Buy two, get one free is an example of ______ degree price discrimination. a) 1st b) 2nd c) 3rd d) 4th e) None of the above are correct.

18.

Blue Final Exam

Page 3 of 8

Econ 419 Spring 2013

A partial representation of Ellens tastes and preferences over baskets of two goods, Good X and Good Y, is shown in the graph below: Units of Y 15

10

5 10 15 Units of X Current market prices for Good X and Good Y are PX = 45 and PY = 15. Ellens income that she has available to purchase X and Y is M = 225. She is a utility maximizer, and consumes integral quantities of X and Y. 19. Ellens marginal rate of substitution at her utility maximizing basket of X and Y equals ______ units of Y per unit of X. a) -1/3 b) -2/3 c) -3/2 d) -2 e) -3 The price of good X falls to PX = 15. The price of good Y and Ellens income remain unchanged. The change in Ellens quantity demanded of good X following this fall in the price of X due to the substitution effect equals _____ units of X. a) -2 b) -1 c) 0 d) +1 e) +2 The price of good X falls to PX = 15. The price of good Y and Ellens income remain unchanged. The change in Ellens quantity demanded of good X following this fall in the price of X due to the income effect equals _____ units of X. a) -2 b) -1 c) 0 d) +1 e) +2

20.

21.

Blue Final Exam

Page 4 of 8

Econ 419 Spring 2013

You must make a production decision, Q, before you know what demand will be for your product. Demand will be high, Q = 360 2P, with probability 2/3, and low, Q = 240 2P, with probability 1/3. Your cost of production is given as C(Q) = 7,200 + 40Q. 22. At your expected profit maximizing quantity, your cost of production will equal a) 9,600 b) 12,000 c) 16,000 d) 18,800 e) None of the above If demand turns out to be low, the maximum price you will be able to charge and sell all of your output equals: a) 40 b) 60 c) 80 d) 100 e) None of the above You must make a production decision, Q, before you know what demand will be for your product will be. Demand will be high, Q = 360 2P, with probability 2/3 and low, Q = 240 2P, with probability 1/3. Your cost of production is given as C(Q) = 7,200 + 40Q. If demand turns out to be high, your profit will equal a) 0 b) 1,200 c) 2,400 d) 4,800 e) None of the above Rounded to the nearest dollar, the standard deviation of your profit, a measure of risk for shareholders in your firm, equals a) 1,276 b) 2,012 c) 2,844 d) 3,394 e) None of the above

23.

24.

25.

26.

Two problems emerge in markets when there are asymmetries of information available to negotiating parties. _____ is a problem before the contract is signed. After the contract is signed the problem is _______. a) moral hazard; adverse selection c) hold up; principle-agent b) principle-agent; hold up d) adverse selection; moral hazard

Blue Final Exam

Page 5 of 8

Econ 419 Spring 2013

Two firms, Firm A and Firm B, must simultaneously decide whether to charge a High (retail) price versus a Low (sale) price for their products. The firms profits, given their joint decisions, are shown in the normal form below: Firm B Low Price Firm A Low Price High Price (10, 10) (-10, 120) High Price (120, -10) (20, 20)

27.

Adopting trigger strategies will work to insure cooperation between these firms in pricing their products if this game is to be played into an indefinite future and the rates of time discount for each firm are less than _____ percent. For any rate above this rate, the firms will charge low prices. a) 5 b) 10 c) 15 d) 20 e) None of the above are correct.

28.

The internet has _______ the marginal ______ of searching for lower prices, and has as a result, ______ the reservation prices of would be buyers of goods. a) increased; benefit; increased d) decreased; cost; decreased b) decreased; cost; increased e) None of the above are correct. c) decreased; benefit; decreased The winners curse drives bidders in ________ auctions to revise downward their estimated value of the item being sold. a) 1st Price Sealed Bid b) Independent Values c) Correlated Values d) Dutch e) All of the above are correct. You are hired as a consultant for Acme, Incorporated. You determine that at the firms current level of production the marginal product of labor equals 25 and the marginal product of capital equals 40. The wage Acme is paying equals 45, and the rental rate of capital equals 60. Based upon this information, you would advise the firm that in the long run it a) can reduce costs by replacing some workers with additional capital. b) should continue to employ the same mix of capital and labor to minimize costs. c) can reduce costs by hiring more workers and using less capital. d) should consider exiting the industry, since it is currently earning negative economic profits.

29.

30.

Blue Final Exam

Page 6 of 8

Econ 419 Spring 2013

Two companies, Pennys and Macys, must decide each period whether to charge retail prices (RP) or sale prices (SP). Managers of the companies are not able to observe their competitors strategy before they make their decision. If both companies charge retail prices, Pennys profit equals $190 million and Macys profit equals $170 million. If both companies charge sale prices, Pennys profit equals $80 million and Macys profit equals $80 million. If Pennys charges retail prices and Macys charges sale prices, Pennys profit equals $150 million and Macys profit equals $180 million. Finally, if Pennys charges sale prices and Macys charges retail prices Pennys profit will equal $200 million and Macys profit will equal $120 million. 31. Which of the following joint pure strategies, (Pennys Strategy, Macys Strategy, qualify as a Nash Equilibrium? a) (RP,RP) b) (RP, SP) c) (SP, RP) d) (SP,SP) e) both (RP, SP) and (SP, RP) Pennys commits to a Same Low Price Every Day marketing strategy. Macys responds by randomizing its prices in such a way that Pennys expected profit will be the same regardless of whether it charges retail or sale prices. Such randomized prices will make Pennys expected profit equal to _______ million dollars. a) 180 b) 185 c) 190 d) 195 e) None of the above are correct. In a defensive move, Pennys abandons its Same Low Price Every Day strategy, and randomizes its prices to make Macys expected profits the same whether or not it charges retail prices or sale prices. Given the joint mixed strategies adopted by these two firms, the probability that both Pennys and Macys will be charging sale prices in the same period equals ______percent. a) 2.5 b) 5.0 c) 7.5 d) 10.0 e) None of the above are correct.

32.

33.

Blue Final Exam

Page 7 of 8

Econ 419 Spring 2013

34.

Consider the extended form of a sequential game shown below. Here the payoffs shown are (Player 1s payoff, Player 2s payoff). For this game we would expect the sequences of choices: a) Player 1 plays B; Player 2 plays X; Player 1 plays E b) Player 1 plays A; Player 2 plays X; Player 1 plays F c) Player 1 plays C; Player 2 plays Y; Player 1 plays F d) Player 1 plays B; Player 2 plays Y; Player 1 plays D e) None of the above are correct.

D X
2 1

(80, 250)

E F D

(60, 210) (160, 200)

Y
1

(140, 220)

(110, 180) (150, 140)

A D X
1 1

(120, 300)

(130, 250) (100, 280)

Y
1

D
E F

(80, 200) (70, 230) (50, 250) (200, 200)

C D X
2 1

E F D

(210, 180) (190, 190)

Y
1

(130, 300)

E F

(140, 250) (150, 200)

35.

A profit maximizing firm will shut down in the short run if a) economic profits are negative. b) average revenue is less than average variable cost. c) marginal revenue is less than marginal cost. d) All of the above are correct. e) None of the above are correct.

Blue Final Exam

Page 8 of 8

Econ 419 Spring 2013