1. Credibility in threats and commitments in sequential games is based on
randomizing one's actions so they are unpredictable
explicit communications with competitors
effective scenario planning
analyzing best reply responses
2. In a game, a dominated strategy is one where:
It is always the best strategy
It is always the worst strategy
It is the strategy that is the best among the group of worst possible strategies.
Is sometimes the best and sometimes the worst strategy
3. The starting point of many methods for predicting equilibrium strategy in sequential games is
designing proactive reactions to rival actions
information sets
uncertain outcomes
backwards induction based on an explicit order of play
endgame analysis
4. 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
5. 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
6. 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
7. 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.
8. __ is a new product pricing strategy which results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied.
Prestige pricing
Price lining
Skimming
Incremental pricing
9. 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.
10. Governance mechanisms are designed
to increase contracting costs
to resolve post-contractual opportunism
to enhance the flexibility of restrictive covenants
to replace insurance
11. 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
uncertainty
moral hazard
creative ingenuity
insurance reliance
12. 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.
13. 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
breach of contractual obligations
denial of good guarantee
loss of reputation
moral hazard
14. 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
15. The sentiment for increased deregulation in the late 1970's and early 1980's has been felt most significantly in the price regulation of
coal
grain
transportation
automobiles
electric power generation
16. _ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model.
Baumol's sales maximization hypothesis
The Pareto optimality condition
The Cournot model
The theory of contestable markets
17. The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
market concentration
income distribution
technological progressiveness
price discrimination
18. 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
Externalities
Intangibles
Monopoly costs and benefits
19. 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
20. In determining the optimal capital budget, one should choose those project's whose ____ exceeds the firm's ____ cost of capital.
internal rate of return, average
internal rate of return, marginal
internal rate of return, historic
average rate of return, marginal
21. 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
22. The decision by the Municipal Transit Authority to either refurbish existing buses, buy new large buses, or to supplement the existing fleet with mini-buses is an example of:
independent projects
mutually exclusive projects
contingent projects
separable projects
23. Capital expenditures:
are easily reversible
are forms of operating expenditures
Affect long-run future profitability
Involve only money, not machinery
24. In the constant-growth dividend valuation model, the required rate of return on common stock (i.e., cost of equity capital) can be shown to be equal to the sum of the dividend yield plus the ____.
yield-to-maturity
present value yield
risk-free rate
dividend growth rate