02 Jun Question Question 1 1. A business is more likely to vertically integrate and produce an input internally if
Question
Question 1
1.
A business is more likely to vertically integrate and produce an input internally if
Specialized investments are important and the contracting environment is simple
Specialized investments are important and the contracting environment is complex
Specialized investments are not important and the contracting environment is simple
Specialized investments are not important and the contracting environment is complex
3 points
Question 2
1.
A problem with using a “revenue sharing” plan to compensate employees is that the plan
Does not provide incentives for employees to work hard
Will be costly if revenues are low
Does not provide incentives for workers to minimize costs
Will have high administrative costs
3 points
Question 3
1.
Assume the compensation of a manager is given by the equation W = S + b?, where ? is the profit of the business. Then, an increase in the bonus rate (b) and a decrease in the base salary (S) will create
Stronger incentives and more risk for the manager
Weaker incentives and more risk for the manager
Stronger incentives and less risk for the manager
Weaker incentives and less risk for the manager
3 points
Question 4
1.
The return from an investment is uncertain and there is a 25% chance that it will be 100,000 dollars, a 50% chance that it will be 50,000 dollars, and a 25% chance that it will be 20,000 dollars. The expected return from the investment is
45,000 dollars
50,000 dollars
55,000 dollars
75,000 dollars
3 points
Question 5
1.
In a Second-Price, Sealed-Bid auction with independent private values, the optimal strategy is to
Make a bid above your valuation of the item
Make a bid below your valuation of the item
Make a bid equal to your valuation of the item
Not make a bid
3 points
Question 6
1.
A few years back, Disney switched from a “fee-per-ride” pricing strategy to a “fee-per-day” pricing strategy. The “fee-per-day” pricing strategy is a form of
Two-part pricing
Peak-load pricing
Transfer pricing
Randomized pricing
3 points
Question 7
1.
A movie theater will generally charge a lower price to students because
Students buy less popcorn than the general public
Students buy more popcorn than the general public
Students have a less elastic demand for movies than the general public
Students have a more elastic demand for movies than the general public
3 points
Question 8
1.
There are three businesses in an industry, with sales of 20 million, 10 million, and 10 million, respectively. The HHI index for this industry is
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