ECO 550 Week 11 Final Exam 3

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1). Evidence from empirical studies of short-run cost-output relationships lends support to the:

2). Break-even analysis usually assumes all of the following except:

3). In determining the shape of the cost-output relationship only ____ depreciation is relevant. Answer

4). In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by: Answer

5). A firm in pure competition would shut down when: Answer

Selected Answer: price is less than average variable cost Correct Answer: price is less than average variable cost

6). Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will Answer

7). An "experience good" is one that: Answer

8). Experience goods are products or services Answer

9). The demand curve facing the firm in ____ is the same as the industry demand curve. Answer

10). In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates. Answer

11). The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of: Answer

12). Of the following, which is not an economic rationale for public utility regulation? Answer

13). If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical. Answer

14). Which of the following is an example of an oligopolistic market structure? Answer

15). Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful? Answer

16). Even ideal cartels tend to be unstable because Answer

17). In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except Answer

18). 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)? Answer

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

20). To trust a potential cooperator until the first defection and then never cooperate thereafter is Answer

21). 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

22). Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting Answer

23). The optimal mark-up is: m = -1/ (E+1). When the mark-up on cookware equals 50%, then demand elasticity (E) for cookware is: Answer

24). Third-degree price discrimination exists whenever: Answer

25). Governance mechanisms are designed Answer

26). Vertical integration may be motivated by all of the following except: Answer

Economies of ever wider spans of managerial control

27). Agency problems appear in many settings within a firm. All of the following are examples, except which is NOT a good example of this problem? Answer

28). Reliant assets are always all of the following except: Answer

29). ____ 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

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

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

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

33).In determining the optimal capital budget, one should choose those project's whose ____ exceeds the firm's ____ cost of capital. Answer

34). The ____ method assumes that the cash flows over the life of the project are reinvested at the ____. Answer

35). Any current outlay that is expected to yield a flow of benefits beyond one year in the future is

36). Capital expenditures

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