BUSI 620 Test 2

BUSI 620 Test 2 Liberty University

  1. In game theory, a dominant strategy refers to a choice
  2. The break­up of AT&T in 1984 separated the poduction of long distance and local telephone service and sacrificed beneftis from
  3. Which of the following is a device that controls imports and generates government revenue?
  4. Which of the following is a condition required for the practice of price discrimination?
  5. The threat of new entrants would be higher under which of the following conditions?
  6. The fully allocated cost of a product is $10. If the price elasticity of demand for the product is ­2, then the firm’s optimal markup is
  7. Investment A has an expected value of 5 and a standard deviation of 2. Investment B has an expected value of 10 and a standard deviation of 5. Using the coefficient of variation approach to comparing these two investments,
  8. A firm plans to raise $4 million by borrowing at an interest rate of 16% and to raise $1 million by issuing common stock. The firm’s stock has a beta coefficient of 2, the risk free interest rate is 6%, the average rate of return on stocks is 9%, and the marginal tax rate is 25%. What is the firm’s composite cost of capital?
  9. An individual must decide whether or not to pursue a business opportunity. If he does pursue the opportunity, then he will get a $20 profit if the business is successful and a $10 loss if the business fails. Apply the maximin and minimax regret criteria to this decision.
  10. Which of these deals with asymmetry of information?
  11. Antilock brakes, airbags, and seatbelts increased the number of accidents while simultaneously decreasing the number of fatal accidents. Why does this happen?
  12. The restaurant industry has a market structure that comes closest to
  13. A monopolist faces a marginal revenue function of MR = 20 ­ Q. The monopolist’s marginal cost is $15 at all levels of output. How many units of output should the firm produce in order to maximize profits?
  14. An investment opportunity will pay $10 with a 20% probability, $20 with a 40% probability, $30 with a 30% probability, and $40 with a 10% probability. What is the standard deviation of the investment?
  15. Which of the following is a characteristic of both monopolistic competition and perfect competition?
  16. When several independent firms form a temporary network to take advantage of a short­ term business opportunity, the result is called a
  17. There are two U.S. locations where your company is currently the only producer of soda. You currently make 40 in each location, but Pepsi is entering the markets. What decision should you make? (the chart applies to each location)
  18. In a two­player game, which of the following is a Nash equilibrium?
  19. Which of the following made monopolization and restraint of trade illegal?
  20. In the short run, a monoplist will shut down if it is producing a level of output where marginal revenue is equal to short­run marginal cost, but price is
  21. Identify the Nash equilibrium in the following game.
  22. A firm that is considering one independent project should accept it if
  23. A movie theater that charges a lower price for matinees than for evening showings is engaging in
  24. A firm can borrow at an interest rate of 5%. Its marginal tax rate is 40%. What is its cost of debt?
  25. Suppose that the firms in an oligopolistic market engage in a price war and, as a result, all firms earn lower profits. Game theory would describe this as
  26. A firm that uses profits earned in one market to sell a product or service below its average variable cost in another market is engaged in
  27. An investment opportunity will pay $50 with a 10% probability, $20 with a 40% probability, and will result in a loss of $20 with a 50% probability. What is the expected value of the investment?
  28. An individual has a certainty equivalent coefficient equal to 0.4. What is the most this individual would pay to play a game that pays $50 or $30 with equal probability?
  29. Which of the following is an example of the prisoners’ dilemma?
  30. A strategy that is best regardless of what rival players do is called
  31. Which of the following defines a zero­sum game?
  32. The market demand curve for a perfectly competitive industry is QD=12­2P. The market supply curve is QS=3+P. The market will be in equilibrium if
  33. One difference between the public interest theory and the economic theory of regulation is that the former
  34. An individual is indifferent between a certain payment of $20 and a game that will pay $50 or nothing with equal probabilities. The individual has a certainty equivalent coefficient of
  35. The fully allocated cost of a product is $45. If the firm wants to use a markup of 30%, then it should charge a unit price of
  36. If an increase in output by a firm imposes uncompensated costs on other firms, these costs are referred to as
  37. Which of the following is always illegal in the U.S.?
  38. In repeated games, a strategy that involves attacking players that attack you and cooperating with players that cooperate with you is a
  39. The prisoners’ dilemma explains why
  40. A market is comprised of five firms and their market shares are 30%, 25%, 20%, 15%,
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