Ch.10 Test 2 - Good Score

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 2

1 Marks: 1

Choose one answer.

a. a form of oligopoly in which firms formally agree to establish a common price, in effect acting like a monopoly.

b. a form of oligopoly in which firms agree to sell at different prices like in monopolistic competition.

c. a form of oligopoly in which firms agree to compete with each other on an equal basis.

d. any oligopolistic industry with fewer than 4 firms.

A cartel is defined to be

CorrectMarks for this submission: 1/1.

2 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.


9th Assignment

Review of attempt 2

Finish review

Started on Sunday, June 12, 2011, 10:11 PMCompleted on Sunday, June 12, 2011, 10:57 PM

Time taken 46 mins 14 secsMarks 22/30Grade 3.67 out of a maximum of 5 (73%)

of 9ECON510-1900-SP11: 9th Assignment

6/12/2011http://moodle.unva.edu/moodle/mod/quiz/review.php?attempt=63310&showall=true

3 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


4 Marks: 1

Choose one answer.

a. lower quantity sold.

b. cost minimization.

c. higher profits.

d. lower demand elasticity.

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


5 Marks: 1

Choose one answer.

a. different demand price elasticities must exist in different markets.

b. markets must be interdependent.

c. markets must be capable of being separated.

d. demand price elasticities must be identical in all markets.

e. Both A and C

In order that price discrimination can exist

IncorrectMarks for this submission: 0/1.

6 Marks: 1

Choose one answer.

a. fourth-degree price discrimination.

b. third-degree price discrimination.

By far, the most frequently encountered price discrimination is the



c. second-degree price discrimination.

d. first-degree price discrimination.


7 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


8 Marks: 1

Choose one answer.

a. the dominant firm establishes the price at the quantity where its MR = MC, and permits all other firms to sell all they want to sell at that price.

b. the dominant firm charges the lowest price in the industry.

c. one firm drives the others out of the market.

d. the dominant firm decides how much each of its competitors can sell.

Dominant price leadership exists when


9 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




10 Marks: 1

Choose one answer.

a. decrease margarine sales.

b. increase margarine sales.

c. increase butter sales.

d. None of the above

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


11 Marks: 1

Choose one answer.

a. joint products that are complements.

b. joint products in fixed proportions.

c. unrelated to each other.

d. joint products in variable proportions.

Gasoline and heating oil are examples of products which are


12 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


13 Marks: 1

All of the following are conditions which are favorable to the formation of cartels except



Choose one answer.

a. easy entry into the industry.

b. geographic proximity of firms.

c. the existence of a small number of firms.

d. homogeneity of the product.


14 Marks: 1

Choose one answer.

a. prices in export markets are lower than for identical products in the domestic market.

b. subscription prices for a professional journal are higher when bought by a library than when bought by an individual.

c. a product sells at a higher price at location A than at location B, because transportation costs are higher from the factory to A.

d. senior citizens pay lower fares on public transportation than younger people at the same time.

The following are possible examples of price discrimination except


15 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


16 Marks: 1

Choose one answer.

a. decrease in the quantity demanded of burgers.

b. decrease the demand for mustard.

Assuming mustard and burgers are complements, a decline in the price of burgers will



c. increase the demand for mustard.

d. decrease the demand for burgers.


17 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


18 Marks: 1

Choose one answer.

a. the dominant firm establishes the price at the quantity where its MR = MC, and permits all other firms to sell all they want to sell at that price.

b. the dominant firm charges the lowest price in the industry.

c. one firm drives the others out of the market.

d. the dominant firm decides how much each of its competitors can sell.

Dominant price leadership exists when


19 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




20 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


21 Marks: 1

Choose one answer.

a. have no effect on total quantity sold.

b. have an effect on total quantity sold.

c. decrease total quantity sold.

d. increase total quantity sold.

In the Baumol model, a change in fixed costs will


22 Marks: 1

Choose one answer.

a. 20%.

b. $2.

c. 25%.


If a product which costs $8 is sold at $10, the profit margin is


23 Marks: 1

a. minimize a multinational firm's tax liabilities.

Transfer pricing is a method used to



Choose one answer.

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


24 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


25 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


26 Marks: 5

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



Answer: ANS:- A

If Perfect Competition then NO PROFIT. Profit = 0 Eqlibiriam Price = 50 Q= 1,000 - 50 Q= 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 ------------------------------ 1,000 - 2 Q = 50 2 Q = 950 Q = 950 / 2 Q = 475 ---------------------------------- P = 1,000 - 475 P = 525 --------------------------------------- Q = Q / 5 Q = 475 / 5 Q = 95 -------------------------------------------

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?

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ECON510-1900-SP11



Ch.10 Test 2 - Good Score

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