Final Exam Review - Managerial Economics II

Suppose that GNV Pool owns the only community pool in Gainesville, FL. The market demand for annual passes to this pool is Q = 600 - 2P where Q is the quantity of annual passes demanded and P is the per-pass price. GNV Pool knows that it has a total cost of providing annual passes equal to TC(q) = 25000 + (1/4)q^2 What is the price per pass at GNV pool's profit-maximizing quantity? a. 300 b. 100 c. 200 d. 150

200

If the price of corn, an input to corn chips, increases, this will cause the short-run average total cost curves to shift ________ and the long-run average cost curve to shift ________. A) upward; upward B) upward; downward C) downward; upward D) downward; downward

A

The law of demand states that: A. all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease B. all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will increase C. all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will not change D. all other factors being equal, as the price of a good or service decreases, consumer demand for the good or service will decrease

A

The prices of related goods matters when determining supply because it affects: A. the opportunity cost of production B. whether or not your good will sell C. the competition in the market D. the availability of substitute goods

A

A decrease in the price of Pepsi is likely to cause: A. a decrease in the demand for Coca-Cola due to a change in the price of a complementary good. B. a decrease in the demand for Coca-Cola due to a change in the price of a substitute good. C. an increase in the demand for Coca-Cola due to a change in the price of a complementary good. D. an increase in the demand for Coca-Cola due to a change in the price of a substitute good.

B

All of the following are true for the minimum wage, except which one? A) It is a type of price floor. B) It creates a shortage of workers. C) It benefits some workers. D) It creates a surplus of workers.

B

A demand curve with shift due to changes in all of the following variables EXCEPT: A. population B. expectations about the future C. price D. the prices of related goods

C

At a particular output level, if a firm's long-run marginal cost is $12 and its long-run average cost is $8, the firm is likely to be experiencing ________. A) economies of scale B) constant returns to scale C) diseconomies of scale D) sunk costs

C

Which of the following might be considered a substitute good for arabica coffee? A. Voss water B. Surge soda C. robusta coffee D. green tea

C

A firm is a natural monopoly if it exhibits the following as its output increases: a. decreasing marginal revenue b. increasing marginal cost c. decreasing average revenue d. decreasing average total cost

D

The vertical distance between the average ________ cost curve and the average total cost curve becomes ________ as the quantity increases. A) marginal; larger B) variable; larger C) marginal; smaller D) variable; smaller

D

​Input 1Input 2Input 3Price$10$15$20Marginal Product4AB Refer to the table above. If A = 6 and B = 8, which of the following is true? A) The firm should buy more of Input 1 and less of Inputs 2 and 3. B) The firm should buy more of Input 2 and less of Inputs 1 and 3. C) The firm should buy more of Input 3 and less of Inputs 1 and 2. D) The firm is minimizing costs.

D

A monopolist can earn negative marginal revenue. True False

a

As the number of firms in a Cournot oligopoly ________, the equilibrium quantity gets closer to the ________ equilibrium quantity. A) increases; perfectly competitive B) decreases; monopolistically competitive C) decreases; perfectly competitive D) increases; monopoly

a

Big Waves is a large water park. Suppose the individual demand for entrance into Big Waves is Qd = 50 - (2 × P) and each consumer has the same demand. Big Waves has a constant marginal cost of $5 per consumer. If Big Waves practices two-part pricing and requires a membership fee and then a separate entrance fee, what is the profit-maximizing membership fee? A) $400 B) $200 C) $50 D) $125

a

Compared to the socially efficient level, a monopoly firm maximizing profits will choose a. a quantity that is too low and a price that is too high b. a quantity that is too high and a price that is too low c. a quantity and a price that are both too high d. a quantity and a price that are both too low

a

Demand tends to be more elastic when: price is high and more inelastic when price is low price is low and more inelastic when price is high demand is perfectly inelastic the quantity demanded is larger

a

In the long-run, all factors of production are variable fixed rented refundable

a

Knowing the price elasticity of demand is important in business because it allows a manager to determine whether: a price increase will cause total revenue to rise or fall an increase in supply will cause total profit to rise or fall a price increase will cause the quantity demanded to rise or fall a price increase will cause the demand to rise or fall

a

Price discrimination occurs when a firm charges different customers different prices that are not based on differences in marginal costs. True False

a

Suppose there are only two companies in the whole world that manufacture and sell hoverboards: ABC Corp and XYZ Inc. Both companies have similar technology that allows them to make hoverboards for $20 each. Neither firm has any fixed costs. The worldwide demand for hoverboards is pretty low now that they are known to catch fire. It can be expressed by the inverse demand function below: P(Q)=200−Q Suppose that ABC Corp. and XYZ Inc. are able to form a cartel. How many hoverboards will each firm produce when they collude to maximize profits? ABC Corp will produce 45 Hoverboards and XYZ Inc. will produce 45 Hoverboards ABC Corp will produce 45 Hoverboards and XYZ Inc. will produce 60 Hoverboards ABC Corp will produce 60 Hoverboards and XYZ Inc. will produce 45 Hoverboards ABC Corp will produce 60 Hoverboards and XYZ Inc. will produce 60 Hoverboards

a

Suppose there are only two companies in the whole world that manufacture and sell hoverboards: ABC Corp and XYZ Inc. Both companies have similar technology that allows them to make hoverboards for $20 each. Neither firm has any fixed costs. The worldwide demand for hoverboards is pretty low now that they are known to catch fire. It can be expressed by the inverse demand function below: P(Q)=200−Q Suppose that ABC Corp. and XYZ Inc. are able to form a cartel. If they split the market evenly and each produce the profit maximizing quantity of hoverboards, how much more profit will each firm make when colluding to sell hoverboards as compared to the Cournot-Nash equilibrium where they compete on quantity? $450 $900 $1,800 $3,600

a

You are invited to play a lottery. Entering the lottery costs $25 and you will receive an amount in return for the number you roll on a six-sided die, with you being entitled to $10 times the number you roll. Rolling a 1 pays $10, rolling a 2 pays $20, rolling a 3 pays $20, and so on. What is the expected value of entering this lottery? $10 -$10 $25 -$25

a

The relationship between number of donuts consumed per day (D) and body fat percentage (F) was studied in 360 college students using ordinary least squares (OLS) regression. The following regression equation was obtained from this study: F= 0.012+.025D The above equation implies that each donut consumed increases body fat percentage by 2.5% on average it takes 2.5 donuts to increase body fat percentage by 1% on average each unit of daily donut consumption is associated with a 2.5% increase in body fat percentage each unit of daily donut consumption decreases body fat percentage by an average amount of 1.2%

a (or c)

A firm in a perfectly competitive market can engage in price discrimination. True False

b

Casino War is a card game played with a single 52 card deck. The cards are ranked in the same way that cards in poker games are ranked, with aces being the highest cards. One card each is dealt to a dealer and to a player. If the player's card is higher, he or she wins the wager they bet. However, if the dealer's card is higher, the player loses their bet. A tie occurs when the dealer and the player each have cards of the same rank. In a tie situation, the player has two options: The player can surrender, in which case the player loses half the bet. The player can go to war, in which case the player must double his stake. If the player continues play in view of a tie, the dealer burns (discards) three cards before dealing each of them an additional card. If the player's card is ranked higher than the dealer's, then the player wins the amount of his original wager only. If the dealer's card is ranked higher than the player's, the player loses his (doubled) wager. If the ranks are equal, then the player wins the amount of his doubled wager. What is the expected value of betting $10 on this game if the player knows they will surrender in the event of a tie? Round all probabilities to the nearest whole number value (i.e. 46% or .46, not 46.2% or .46234) -$10 -$0.30 $0.30 $9.70

b

Happy Campers Offer No offer Offer 3\10 10\12 No offer 4\7 0\0 Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies.Refer to the payoff matrix above. In reference to the Nash equilibrium/equilibria in this game, which of the following is true? A) There are no Nash equilibria in this game. B) Camp with Us Offer Financing and Happy Campers Do Not Offer Financing is a Nash equilibrium. C) Camp with Us Offer Financing and Happy Campers Offer Financing is a Nash equilibrium. D) Camp with Us Do Not Offer Financing and Happy Campers Do Not Offer Financing is a Nash equilibrium.

b

Happy Feet Ad No Ad Ad 4\1 3\2 No Ad 1\5 1\4 Happy Feet wants to prevent Best Nails from entering the nail salon market. The above game tree illustrates the different strategies and corresponding payoffs for the two firms. Both Happy Feet and Best Nails have the same strategies of advertising (Ad) or not advertising (No Ad). The payoffs represent net profit in millions. The Nash equilibrium of this game is for Happy Feet to ________ and Best Nails to ________. A) No Ad; No Ad B) No Ad; Ad C) Ad; Ad D) Ad; No Ad

b

High Low High 9\8 7\11 Low 10\6 8\7 Refer to the payoff matrix above. If Best Lights and Bright Lights both know that the above game will be played exactly four times, which of the following will be the outcome of the game in each of the four periods? A) Set High Price/Set High Price B) Set Low Price/Set Low Price C) Set High Price/Set Low Price D) Set Low Price/Set High Price

b

High Low High 9\8 7\11 Low 10\6 8\7 Refer to the payoff matrix above. Which of the following is the dominant strategy equilibrium? A) Set High Price/Set High Price B) Set Low Price/Set Low Price C) Set High Price/Set Low Price D) Set Low Price/Set High Price

b

If Best Lights and Bright Lights are competing in a duopoly, Best Lights' profit depends solely on the decisions of its managers. True False

b

If a monopolistically competitive firm is producing 9,000 units of output and at this output level, the price is $10 and the average total cost is $10, the firm profit/loss is equal to ________ and it ________ possible for the firm to be in long-run equilibrium. A) $900; is not B) $0; is C) $900; is D) $0; is not

b

If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost, the difference between the wholesale demand curve and the consumer retail demand curve is the ________. A) marginal cost of production B) marginal cost of distribution C) average fixed cost of distribution D) marginal revenue of production

b

In a successive monopoly structure, the profit-maximizing wholesale price is equal to the difference between the ________ and the ________ of distribution. A) wholesale demand; marginal cost B) marginal revenue; marginal cost C) wholesale demand; marginal revenue D) retail demand; marginal revenue

b

Managers of firms in oligopoly markets can employ any of the following business practices to increase the probability of generating tacit collusion, except Price Visibility Price Fixing Precommitments Price Leadership

b

Suppose that Dave gets happiness from money according to the utility function U($) = $. This means that $25 worth of money gives him 25 units of happiness and $50 worth of money gives him 50 units of happiness. Suppose a casino lets him bet on the spin of a roulette wheel. He can bet $10 on black and will win $10 if the ball falls in a black bin, or lose his $10 if the ball falls in either a red or green bin. Suppose further that there are are 24 possible black bins, 24 red bins, and two green bins. How much would we expect playing this game would impact Dave's happiness? It makes him 4.8 units happier if he plays the game vs. not playing the game. It makes him 0.40 units less happy if he plays the game vs. not playing the game. It makes him 2.4 units less happy if he plays the game vs. not playing the game. It makes him 0.20 units happier if he plays the game vs. not playing the game.

b

Suppose that Dave gets happiness from money according to the utility function U($) = $. This means that $25 worth of money gives him 25 units of happiness and $50 worth of money gives him 50 units of happiness. Suppose a casino lets him bet on the spin of a roulette wheel. He can bet $10 on black and will win $X if the ball falls in a black bin, or lose his $10 if the ball falls in either a red or green bin. Suppose further that there are are 24 possible black bins, 24 red bins, and two green bins. What is the minimum amount of money $x that Dave would need to win in order to be willing to play this game? Round your answer up to the nearest penny. $10.01 $10.84 $5.20 $4.80

b

Suppose that GNV Pool owns the only community pool in Gainesville, FL. The market demand for annual passes to this pool is Q = 600 - 2P where Q is the quantity of annual passes demanded and P is the per-pass price. GNV Pool knows that it has a total cost of providing annual passes equal to TC(q) = 25000 + (1/4)q^2 What is GNV pool's profit or loss at the profit-maximizing quantity? $30,000 profit $5,000 profit ($15,000) loss $15,000 profit

b

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, the percentage change in price would be: -0.50 -50% 0.54 54%

b

Your bakery firm sells loaves of bread for $7.50, and the cost of producing each loaf is $1.50. If a loaf of bread is not sold the day it is produced, it is donated to a local food bank. Suppose that as a manager you use past sales data to estimate that the probabilities of selling different quantities of bread are the same probabilities shown in the table below. What is the profit-maximizing quantity of bread loaves to carry in inventory? 51 loaves of bread 56 loaves of bread 54 loaves of bread 58 loaves of bread

b

A regression line only works if a strong linear relationship exists between the dependent and independent variables establishes a cause-effect relationship between variable may be used to predict a value of the dependent variable if the corresponding value of the independent variable is given none of the other options listed are correct

c

High = 3000, crosses MC = 500 Low = 1000, crosses MC = 100 If the probability of demand being high, DH, is 40 percent and the probability of demand being low, DL, is 60 percent, what quantity of grapes maximizes your expected profit? 500 tons of grapes per year 300 tons of grapes per year 260 tons of grapes per year 200 tons of grapes per year

c

Larger values of R-squared imply that the observations are more closely grouped about the average value of the independent variables average value of the dependent variable least squares regression line origin

c

Suppose that GNV Pool owns the only community pool in Gainesville, FL. The market demand for annual passes to this pool is Q = 600 - 2P where Q is the quantity of annual passes demanded and P is the per-pass price. GNV Pool knows that it has a total cost of providing annual passes equal to TC(q) = 25000 + (1/4)q^2 What is the profit-maximizing quantity of passes that GNV pool will sell? a. 300 b. 100 c. 200 d. 150

c

Suppose that you are a manager at the only Ford dealership in Great Falls, Montana. Your service department is closed on Saturday, but you are considering whether to open. If you do, you estimate there are three possibilities: (1) You attract little business, so you have only 20 new Saturday customers each month; (2) you attract some business, so you have 40 new Saturday customers each month; or (3) your initiative is a resounding success, with 100 new Saturday customers each month. If the probability of outcome 1 is 25 percent, the probability of outcome 2 is 50 percent, and the probability of outcome 3 is 25 percent, what is your expected number of customers? 20 40 50 100

c

The demand curve for a monopolist is given by P=50-Q. Their marginal cost is given by MC=10. The firm has no fixed costs. What will the firm's profits equal? $0 $200 $400 $600

c

The figure above shows the wholesale demand and marginal revenue curves for Slick Shades Sunglasses, a sunglasses firm with market power. Slick Shades Sunglasses has a constant marginal cost of production and it sells to perfectly competitive independent retail distributors that have a constant marginal cost of distribution. Slick Shades has a constant marginal cost of production equal to $40 and the distributors have a constant marginal cost of distribution equal to $20. If Slick Shades is producing the profit-maximizing number of sunglasses (in hundreds) and charging the profit-maximizing wholesale price, what is the retail price? A) $120 B) $150 C) $140 D) $160

c

What is the probability of randomly drawing a card from a standard deck of playing cards, finding that it is an ace, then replacing it in the deck, randomly drawing another card, and finding that you have drawn an ace once more? 2/52 1/51 1/169 1/221

c

When a monopolist switches from charging a single price to practicing perfect price discrimination, it reduces a. the quantity produced b. the firm's profit c. consumer surplus d. total surplus

c

When a person purchases an insurance policy they are: probably making premium payments that are larger than the cost of their potential loss. eliminating their risk reducing their risk probably making premium payments that are smaller than the expected value of their potential loss.

c

Which of the following is a common issue that one might run in to when attempting to model the relationship between a dependent variable and several explanatory variables: racial bias radial bias omitted variable bias fixed bias

c

Which of the following is not an example of a commodity bundle? A McDonald's Happy Meal A "Buy One Get Three Free" promotion A 12 pack of buns Adobe's Creative Cloud software suite

c

A hotel that charges Dave and Carol $100 each for a standard queen sized bedroom on Thursday night when he books it on Tuesday, but on Wednesday (the next day) charges Tim and Pam $120 each to book the same room for the same night is most likely engaging in Hint: None of these people are staying in the same room. first degree price discrimination second degree price discrimination perfect price discrimination third degree price discrimination

d

At the profit maximizing level of output, a monopoly firm has a marginal cost of production for the last unit sold of $2 and the elasticity of demand at this quantity is equal to 2. What is the per-unit price at which this firm is selling its output? $2.00 $2.50 $3.00 $4.00

d

If a monopoly firm's fixed costs increase, its price will ________ and its profit will ________ a. increase, decrease b. decrease, increase c. increase, stay the same d. stay the same, decrease

d

Labor(L) Capital(K) Output(Q) 0 10 0 1 10 15 3 10 25 4 10 30 6 10 32 Given the short-run production function described by the table above, what is the marginal product of labor associated with hiring the fifth worker? 5 units of output 10 units of output 2 units of output 1 unit of output

d

Suppose a uni-variate regression is run with N=100 data points, yielding a coefficient estimate for the X variable of 2.5. The standard error associated with this estimate was calculated to be 1.2. Which of the following ranges represents the 95% confidence interval associated with this coefficient estimate? (-1.2, 1.2) (1.3, 3,7) (2.5, 4.85) (0.15, 4.85)

d

Suppose the CEO of HyVee can either pay $400/day or $200/day for a store manager. If the manager behaves well, HyVee will earn $800/day, and if he/she does not behave well, HyVee will only earn $400/day. HyVee must offer a wage to the manager before observing his/her behavior. Behaving well costs the manager $200/day in effort, while exerting the effort to behave badly only costs the manager $100/day. What is the Nash equilibrium outcome of this game? CEO pays $400/day, the store manager behaves well CEO pays $400/day, the store manager behaves badly CEO pays $200/day, the store manager behaves well CEO pays $200/day, the store manager behaves badly

d

Vertical integration can reduce transaction costs through all of the following ways except which one? A) decreasing the incentive for litigation B) increasing information and control C) establishing a partnership between the two firms D) creating managerial diseconomies

d

What is the probability of randomly drawing two cards from a standard deck of playing cards and both of the cards being aces? 2/52 1/51 1/169 1/221

d