Question QUESTION 1 In the following game with simultaneous moves, Firm 1 and Firm 2 must decide whether to advertise (Y) or not advertise (N):

05 Jun Question QUESTION 1 In the following game with simultaneous moves, Firm 1 and Firm 2 must decide whether to advertise (Y) or not advertise (N):

Question
QUESTION 1

In the following game with simultaneous moves, Firm 1 and Firm 2 must decide whether to advertise (Y) or not advertise (N):

Game Box

The NASH equilibrium of this game is

(Y, Y)

(Y, N)

(N, Y)

(N, N)

QUESTION 2

A strategy in which a player randomizes over several available actions is called

A dominant strategy

A secure strategy

A mixed strategy

A trigger strategy

QUESTION 3

Consider the following game with sequential moves:

Gane Tree

In the subgame perfect NASH equilibrium of this game,

Firm 1 chooses A and Firm 2 chooses X

Firm 1 chooses A and Firm 2 chooses Y

Firm 1 chooses B and Firm 2 chooses X

Firm 1 chooses B and Firm 2 chooses Y

QUESTION 4

There are N = 3 businesses in an oligopoly industry. The businesses produce identical products and have the same marginal cost of MC = 100 dollars. If the market elasticity of demand is EM = ?2, the equilibrium price in the industry is

100 dollars

120 dollars

130 dollars

150 dollars

QUESTION 5

A monopoly has the total cost function C(q) = 150 + 10q and serves two types of customers, Type A and Type B. If the price elasticity of demand for Type A customers is EA = ?3 and the price elasticity of demand for Type B customers is EB = ?2, the prices which maximize the profit of the monopoly are

PA = 15 and PB = 20

PA = 20 and PB = 15

PA = 20 and PB = 30

PA = 30 and PB = 20

QUESTION 6

Assume your typical customer has the demand function q = 20 ? p and your marginal cost is MC = 10 dollars, as illustrated in the graph.

Demand Function

Then, the optimal two-part pricing strategy is

Fixed fee = 25 dollars and Per-unit price = 15 dollars

Fixed fee = 25 dollars and Per-unit price = 10 dollars

Fixed fee = 50 dollars and Per-unit price = 15 dollars

Fixed fee = 50 dollars and Per-unit price = 10 dollars

QUESTION 7

The pricing strategy in which multiple units of a product are sold as a package is called

Two-part pricing

Peak-load pricing

Transfer pricing

Block pricing

QUESTION 8

An assembly-line worker is more likely to exert less effort and produce fewer units when he is paid by the hour than when he is paid based on the number of units produced. This is an illustration of

Adverse selection

Moral hazard

Signaling

Screening

QUESTION 9

A business is considering an investment with uncertain outcomes. In particular, the return from the investment will be 100,000 dollars with 20% probability, 50,000 dollars with 30% probability, and 20,000 dollars with 50% probability. The expected return from the investment is

20,000 dollars

35,000 dollars

45,000 dollars

50,000 dollars

QUESTION 10

A business in a perfectly competitive market must decide how much to produce before it knows what the market price will be. The business estimates the price will be p = 25 dollars with 25% probability, p = 20 dollars with 50% probability, and p = 15 dollars with 25% probability. If the total cost function of the business is C(q) = 500 + (1/10)q2, what quantity should be produced to maximize the expected profit of the business?

50 units

75 units

100 units

125 units