The winners curse occurs:
A. only in English auctions.
B. only in second-price, sealed-bid auctions.
C. in a common-values auction.
D. in a private-values auction.
Negotiations between the buyer and seller of a new house are an example of:
A. consumer-consumer rivalry.
B. consumer-producer rivalry.
C. producer-producer rivalry.
D. monopoly.
An incumbent usually charges a higher price than a new entrant does. Which of the
following is a plausible reason for this observation?
A. An incumbent usually has a bigger bureaucratic body than a new entrant does and
hence has a higher marginal cost.
B. Consumers are risk averse, hence new firms charge lower prices to attract customers.
C. The incumbent is ignorant of the new entrant, hence it is still charging the old high
price.
D. All of the statements associated with this question are correct.
Which of the following is NOT one class of a market structure?
A. Perfect competition
B. Dictatorship
C. Monopoly
D. Monopolistic competition
Consider an auctioneer who is selling an item through an auction. It is known that the
10 risk-neutral bidders have independent private values that are uniformly distributed
between $1,000 and $2,000. Based on this information, we can conclude that the
expected revenue in this auction will be:
A. $2,000.
B. $1,900.
C. $1,000.
D. There is insufficient information to determine the expected revenue.
A manager is attempting to assess the probability of a recession ending in the next six
months, and its impact on expected profitability. The manager believes there is a 75
percent chance the recession will end in six months and profits will return to $400
million. However, there is a 25 percent chance the recession will not end in six months,
resulting in a $5 million loss. The standard deviation of profits over the next six months
is:
A. $175.37million.
B. $320.18 million.
C. $286.39 million.
D. $0 million.
An example of vertical foreclosure is when a firm:
A. temporarily prices below its marginal cost to close competitors out of the market.
B. merges with a rival firm with the intention of eliminating the rival firms product
from the market.
C. that controls an essential upstream input refuses to sell to other downstream firms
that need the input.
D. merges with a rival firm with the intention of eliminating the rival firms product
from the market and that controls an essential upstream input refuses to sell to other
downstream firms that need the input.
During spring break, students have an elasticity of demand for a trip to Florida of -3.
How much should an airline charge students for a ticket if the price it charges the
general public is $360? Assume the general public has an elasticity of -2.
A. $240
B. $250
C. $260
D. $270
The production function for a competitive firm is Q = K.5L.5. The firm sells its output at
a price of $10, and can hire labor at a wage of $5. Capital is fixed at 25 units. The
profit-maximizing quantity of labor is:
A. 1
B. 2
C. 10
D. None of the answers are correct.
Which of the following is antitrust legislation?
A. Sherman Act
B. Securities and Exchange Act
C. Lanham Act
D. Sherman Act and Lanham Act