| D. | Focus on core competencies and expand production Question 10 Please refer to Table 8.3 on page 132 in the book. Suppose we change the payoffs in the "low price, low price" cell to 0, 25 from 0, 0. Does this change the Nash equilibrium for the game, and is the game still a Prisoner's Dilemma? | A. | Equilibrium changes, still a Prisoner's Dilemma | | B. | Equilibrium changes, no longer a Prisoner's Dilemma | | C. | Same equilibrium, no longer a Prisoner's Dilemma | | D. | Same equilibrium, still a Prisoner's Dilemma | 3 points Question 11 Which of the following statements about restricting entry to markets is NOT true? | A. | Brand identity and logos are expensive to establish, and entrants may find it very expensive to establish comparable position in the market. | | B. | Predatory pricing is illegal but very difficult to prove in court | | C. | Branded products tend to have more elastic demand, which makes it more difficult for entrants to charge high prices and they must stay out of the market. | | D. | A low-quality seller cannot effectively use a warranty program to keep other firms out of its market | 3 points Question 12 Your firm earns $2 million per quarter in total revenue, and your accounting profits are $100,000 per quarter. You do not charge the firm for the use of an old building that you own because it is 50 years old and fully depreciated. However, another firm has offered you $200,000 per quarter to use the facility, and this is the market rental rate for similar facilities. In this case, we know that your: | A. | Opportunity costs are positive and economic profits are negative | | B. | Opportunity costs and economic profits are positive | | C. | Opportunity costs are negative and economic profits are positive | | D. | Opportunity costs and economic profits are negative | 3 points Question 13 Please refer to Question 13 in Chapter 1 (page 17). What is the marginal cost of reducing global warming by 0.017 degrees? | A. | MC = 60 | | B. | MC = 5 | | C. | We do not have enough information to answer this question | | D. | MC = 50 | 3 points Question 14 In Chapter 6, Boyes focuses on negative externalities such as the various types of pollution. However, as we discussed during our online session, we can also observe positive externalities in which external benefits are generated for people. Which of the following is NOT an example of a positive externality? | A. | Workers can help one another to "cover the phones" and make sure that someone is always available to help clients | | B. | Workers can provide ideas to one another about how to solve problems | | C. | All of these cases are examples of positive externalities | | D. | Workers can form carpools and use other means to reduce commuting costs | 3 points Question 15 Common property resources are: | A. | Non-rival and non-excludable | | B. | Non-rival and excludable | | C. | Rival and non-excludable | | D. | Rival and excludable | 3 points Question 16 The free-rider problem arises in markets for common property resources. 3 points Question 17 Firms that set their product price below the actual cost of production may be engaging in: | A. | Predatory pricing | | B. | Monopoly pricing | | C. | Moral hazard | | D. | Dollar-cost averaging | 3 points Question 18 Under a cap-and-trade mechanism to control air pollution, what happens to the price of pollution rights if the supply of righs is reduced (i.e., the supply of rights is reduced)? | A. | Increases | | B. | Decreases | | C. | No change Question 19 The key method for a manufacturing firm to avoid hold-up problems is to have another source of inputs. 3 points Question 20 Your firm sells luxury autos, and you have asked the marketing department to develop and stronger brand identity through a new ad campaign. After the campaign has run for 6 months, you hire an economic consultant to study the impact of the campaign on the demand for your autos. The consultant reports that the demand for your cars is now more elastic than it was 6 months ago. Was the new ad campaign successful? | |
