1. The fully allocated cost of a product is $45. If the firm wants to use a markup of 30%, then it should change a unit price of
2. 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?
3. A firm that is considering one independent project should accept it if
4. 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 firms composite cost of capital?
5. A market is comprised of five firms and their market shares are 30%, 25%, 20%, and 10%. What is the Herfindahl index for the industry?
6. In game theory, a dominant strategy refers to a choice
7. What of the following is a condition required for the practice of price discrimination?
8. Investment A has and 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,
9. A firm can borrow at an interest rate of 5%. Its marginal tax rate is 40%. What is its cost of debt?
10. Which of these deals with asymmetry of information?
11. The break-up of AT&T in 1984 separated the production of long distance and local telephone service and sacrificed benefits from.
12. Which of the following defines a zero-sum game?
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. Which of the following is a device that controls imports and generates government revenue
15. One difference between the public interest theory and the economic theory of regulation is that the former:
16. A strategy that is best regardless of what rival players do is called
17. Antilock brakes, airbags and seatbelts increased the number of accidents while simultaneously decreasing the number of fatal accidents. Why does this happen?
18. A movie theater that charges a lower price for matinees than for evening showings is engaging in
19. The threat of new entrants would be higher under which of the following conditions?
20. 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
21. 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
22. In repeated games a strategy that involves attacking players that attack you and cooperating with players that cooperate with you is a
23. 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
24. 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
25. If an increase in output by a firm imposes uncompensated cost on other firms, these costs are referred to as
26. Which of the following is always illegal in the U.S.?
27. Which of the following is a characteristic of both monopolistic competition and perfect competition?
28. The restaurant industry has a market structure that comes closest to
29. 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 maximum and minimax regret criteria to this decision.
30. Identify the Nash equilibrium in the following game