Ch.10 Test 1

ECON510-1900-Managerial Economics-SP11-KIM You are logged in as Dhruv Dholakiya (Logout)

UNVA-Online► ECON510-1900-SP11► Quizzes► 9th Assignment► Review of attempt 1

1 Marks: 1

Choose one answer.

a. because of price "chiseling" by one or more members.

b. during economic downturns.

c. when there is overcapacity in the industry.

d. All of the above

Cartel agreements tend to break down

CorrectMarks for this submission: 1/1.

2 Marks: 1

Choose one answer.

a. production may exceed that which would prevail under perfect competition.

b. prices will be lower than under perfect competition.

c. production may equal that which would exist under perfect competition.

d. production will always be lower than under perfect competition.

Under conditions of first-degree price discrimination


9th Assignment

Review of attempt 1

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Started on Sunday, June 12, 2011, 07:16 PMCompleted on Sunday, June 12, 2011, 08:36 PM

Time taken 1 hour 19 minsMarks 18/30Grade 3 out of a maximum of 5 (60%)

of 10ECON510-1900-SP11: 9th Assignment

6/12/2011http://moodle.unva.edu/moodle/mod/quiz/review.php?attempt=63257&showall=true

3 Marks: 1

Choose one answer.

a. some information possessed by the parties in a transaction may be false.

b. a zero-sum game exists.

c. one party in a transaction has more information than the other party.

d. all parties to a transaction possess less than full information.

Asymmetric information represents a market situation in which


4 Marks: 1

Choose one answer.

a. fraud.

b. moral hazard.

c. adverse selection.

d. moral suasion.

If banks face a problem in loan markets when bad credit risks are the ones most likely to seek bank loans, it is described as


5 Marks: 1

Choose one answer.

a. outcome of a Prisoner's Dilemma.

b. risk associated with a Dutch auction.

c. result of market signaling.

d. risk that one party to a contract may alter its post-contract behavior to the detriment of another party.

Moral hazard is the


6 Marks: 1

a. price skimming.

If a monopolist sets a low price to discourage potential competitors from entering the market, it is referred as



Choose one answer.

b. limit pricing.

c. predatory pricing.

d. penetration pricing.

IncorrectMarks for this submission: 0/1.

7 Marks: 1

Choose one answer.

a. marginal cost equals industry price.

b. total cost equals the industry total revenue.

c. average cost equals the industry revenue.

d. the sum of the members' marginal costs equals industry marginal revenue.

A cartel price will be established at the quantity where


8 Marks: 1

Choose one answer.

a. where its marginal revenue is equal to its marginal cost.

b. where its marginal revenue is zero.

c. that is equal to its minimum average variable cost.

d. None of the above

Revenue maximization occurs when a firm sells at a price


9 Marks: 1

Choose one answer.

a. the company should charge a high transfer price for the components if income taxes in country A are higher than in country B.

b. the company should charge a high transfer price for the components if income taxes in country B are higher than in country A.

Assume that a multinational company produces components in country A and ships them to a subsidiary in country B. In order to increase its profits



c. the company should charge a low transfer price for the components if income taxes in country B are higher than in country A.



10 Marks: 5

Answer: ANS:- A

If Perfect Competition then NO PROFIT.

Profit = 0

Eqlibiriam Price =50

Q=1'000-50=950

Ans:- B

Q = 1,000 - P P = 1,000 - Q

---------------------- TR = (1,000 - Q ) Q = 1,000 Q - (Q)²

MR = 1,000 - 2 Q

MR = 50 ------------------------------

Industry demand is given by:

Qd = 1000 - P

All firms in the industry have identical and constant marginal and average costs of $50/unit.

a. If the industry is perfectly competitive, what will industry output be? What will be the

equilibrium price? What profit will each firm earn?

b. Now suppose that there are five firms in the industry, and that they collude to set price. What price will they set? What will be the output of each firm? What will be the profit of each firm?



1,000 - 2 Q = 50 2 Q = 950 Q= 950 / 2 = 475

----------------------------------

P = 1,000 - 475 = 525

---------------------------------------

q = Q / 5 = 475 / 5 = 95

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11 Marks: 1

Choose one answer.

a. decrease margarine sales.

b. increase margarine sales.

c. increase butter sales.


Other things remaining the same, an increase in the price of butter can be expected to


12 Marks: 1

Choose one answer.

a. different groups of buyers are charged different prices based on their price elasticities of demand.

b. different prices are charged for different blocks of services.

c. a different price is charged for each amount of a product purchased.


Second-degree price discrimination occurs when


13 Marks: 1

A company which charges a lower price than may be indicated by economic analysis to gain a foothold in the market is practicing



Choose one answer.

a. penetration pricing.

b. price skimming.

c. psychological pricing.

d. prestige pricing.


14 Marks: 1

Choose one answer.

a. the Marshall model.

b. the aggressive model.

c. the aggregate model.

d. the Baumol model.

The oligopolistic situation in which a company's objective is to maximize revenue subject to a minimum profit requirement is usually referred to as


15 Marks: 1

Choose one answer.

a. a few firms producing a storable product.

b. many firms producing a perishable product.

c. many firms producing a storable product.

d. a few firms producing a perishable product.

A successful and stable cartel can be established if there are


16 Marks: 1

Choose one answer.

a. adverse selection.

b. a non-zero sum, non-cooperative game with a dominant strategy.

c. market signaling.

d. a zero-sum game.

The Prisoner's Dilemma is an example of




17 Marks: 1

Choose one answer.

a. $8.

b. $5.

c. $10.

d. $15.

If the demand elasticity for a product is -2, and a profit-maximizing firm sells the product for $10, its marginal cost must be


18 Marks: 1

Choose one answer.

a. third-degree discrimination.

b. fourth-degree discrimination.

c. first-degree discrimination.

d. second-degree discrimination.

When state universities charge higher tuition fees to out-of-state students than to local students, the universities are practicing


19 Marks: 1

Choose one answer.

a. penetration pricing.

b. predatory pricing.

c. price skimming.

d. limit pricing.

When a firm sets a price relatively low in order to increase the market share, it is referred as


20 The result for the seller of being able to practice price discrimination will be



Marks: 1 Choose one answer.

a. lower quantity sold.

b. cost minimization.

c. higher profits.

d. lower demand elasticity.


21 Marks: 1

Choose one answer.

a. monopoly prices.

b. marginal cost.

c. prices under monopolistic competition.

d. competitive prices.

Prices under an ideal cartel situation will be equal to


22 Marks: 1

Choose one answer.

a. -1.5.

b. -3.

c. -2.

d. -1.

When mark-up equals 50%, then demand elasticity will be


23 Marks: 1

Choose one answer.

a. try to enforce cartel agreements.

b. want to avoid price competition and violating antitrust laws.

c. compete on the basis of differentiated products.

d. All of the above

Barometric price leadership can occur when oligopolistic firms

Incorrect



Marks for this submission: 0/1.

24 Marks: 1

Choose one answer.

a. high

b. no

c. zero

d. minimum

The position of a cartel will become weaker if there is ________ excess-capacity among the firms belonging to the cartel.


25 Marks: 1

Choose one answer.

a. minimize a multinational firm's tax liabilities.

b. determine whether a firm should make or buy a component product.

c. determine the correct value of a product as it moves from one stage of production to another.

d. All of the above

Transfer pricing is a method used to


26 Marks: 1

Choose one answer.

a. prestige pricing

b. penetration pricing

c. predatory pricing

d. price skimming

A firm uses ________ for goods which the consumer takes pride in owning.


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ECON510-1900-SP11



Ch.10 Test 1

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