managerial econ final micro
one of the conditions in which price discrimination is profitable is
- ability to identify consumer groups - inability to resell the good - differences in demand elasticity
examples of english auctions
- cattle - real estate - art - autos - charity / silent auctions - online
a country with a fixed exchange rate may choose to devalue that exchange rate in order to
- increase exports - decrease imports - improve its trade balance (by increasing NX)
for a risk averse agent, the difference between the expected consumption following a risky project and the level of consumption that offers the same level of utility as the risky project, but with certainty is
- the amount an agent would have to pay to avoid the risky project in favor of the safe outcome - the amount the agent would have to be compensated to accept risky prospect instead of the safe outcome - the Certainty Equivalent to the risky outcome
if the real exchange rate for coal is 1.5, the price of coal in the US is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?
1.5 = (50e/20) solve for e 3/5
Suppose each of the 50 states had only one gasoline station, and all stations were the same size with identical sales. The HHI would be
10000 * (1/50) = 200
over the past several decades, federal government spending ("oultlays") has been approx what percentage of GDP?
20%
Suppose each of the 50 states had only one gasoline station, and all stations were the same size with identical sales. The four-firm concentration ratio a consumer would experience is:
4/50 = .08
Normally, in industries with just two firms and substantial barriers to entry, equilibrium involves the firms earning substantial economic profits. However, if the two firms are __________ competitors, then the only equilibrium will be for both to price at marginal cost.
Bertrand
which of the following would not shift the demand for good A
Drop in the price of good A
the winners curse occurs
In a common-values auction
you are the manager of monopoly that faces a demand curve described by P = 85 - 5Q and costs as C = 20 + 5Q. What is the profit maximizing level of output?
MR=MC 8
in the long run, perfectly competitive, identical firms produce a level of output such that
P=MC and P=minimum ATC
a perfectly competitive firm faces a
Perfectly elastic demand function
Assume that an oil and gas service firm buys a fleet of trucks that are somewhat specialized to the company's operations. The firm paid $1 million for the fleet, but if it finds that it is unable to use it, they would only be able to resell it for $750000
The opportunity cost of the fleet is $750000 and the sunk cost is $250000
the difference between Uncovered Interest Parity and Covered Interest Parity is?
Uncovered relies on expectated spot exchange rates covered relies on forward exchange rates
which of the following should cause the mexican peso to depreciate against the dollar?
a MX inflation rate greater than the US inflation rate
If a good is inferior, then an increase in income will result in
a decrease in the demand for good A
the reason that the TED spread and other, similar measures of interest rate spreads increased dramatically during the financial crisis was
a flight to safety
According to the interest parity condition, if domestic and foreign yields are unchanged, then which of the following will cause the spot exchange rate to depreciate?
an expected future depreciation
the difference between average total costs and average variable costs is
average fixed cost
which of the following is not a determinant of supply?
average income level
over the next decade, the CBO projects that as a fraction of GDP, the US federal government deficit will
be above its 50 year average
If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?
both equilibrium price and quantity would increase
The primary reason that crude oil prices are so volatile is
both supply and demand are highly inelastic
the primary reason that crude oil prices are so volatile is
both supply and demand are highly inelastic
which of the following industries is best characterized as monopolistically competitive?
breakfast cereal
what is an example of a perfectly competitive market?
coal
Jane pays the market price of $69 for new running shoes, but she would have paid up to $100. This is an example of
consumer surplus
if a monopolist is charging near competitive prices, then it is likely that the market served by the monopolist is
contestable
in english auctions bidders
continually obtain info about buyer values from others bids
which of the following is best characterized as monopolistically competitive?
convenience stores
what property is evident when producing more of Q1 implies that the marginal cost of Q2 declines?
cost complementarity
economies of scale exist whenever long run average costs
decrease as output is increased
when expected inflation falls, the demand for loanable funds _______________, the supply of loanable funds _____________, and nominal interest rates ________________.
decreases, increases, decrease
When the price elasticity of a good is -3.5 then total revenue can be increased by
decreasing the price
If an entrant was forced to pay substantial sunk costs in order to enter an industry, costs that were increased due to the aggressive campaign to keep the potential entrant from doing so, yet entry was ultimately successful, then what entry conduction prevailed?
deterred entry
monopolistic competition is characterized by
differentiated products
what property is evident when the total cost of producing Q1 and Q2 together is less than the total cost of producing Q1 and Q2 separately, where Q1 and Q2 are quantities of two separate goods or services produced by the same company
economies of scope
a binding price floor results in
excess supply
which of the following is not a major factor determining real interest rates?
expected inflation
which of the following is an example of foreign direct investment?
general motors builds a new plant in MX *domestic company makes investment internationally
when a firm increased its output by one unit, its AC rose from $45 to $50. This implies that MC is
greater than $50
The HHI of a local market is usually _________ that of national markets
higher than
the optimal strategy for a risk neutral bidder in a second price auction with independent private values is to bid
his or her true valuation
a price elasticity of one corresponds to a demand curve that is
horizontal
which of the following is true
in the short run, a monopoly will shut down if P<AVC
which of the following are elements of an "austerity plan" as typically imposed by a country borrowing from the IMF as a result of a sovereign debt crisis?
increase taxes
If X and Y are substitutes and the price of good Y increases (decreases) then the demand of good X
increases (decreases)
Which of the following is true about where a profit maximizing monopoly will produce on a linear demand curve when it has positive marginal costs?
it will produce on the elastic portion of the demand curve
the country with the highest debt to GDP ratio in the world is
japan
In second-price(sealed bid) auctions, the optimal bidding strategy for risk neutral bidders is
just bid ones true valuation
The Lerner index in the paper industry is .58. Based on this, a firm charging $3.25 per ream of paper should have a marginal cost of
l = (p-mc)/p solve for mc 1.365
short term price elasticity for inelastic goods becomes _____________ elastic in the long term
less
we would expect the own price elasticity of demand for food to be
less elastic than the demand for cereal
If the short-term own price elasticity for transportation is estimated to be -0.6, then long-term own price elasticity is expected to be
less than -0.6
which of the following are determinants of supply?
level of technology, weather, and prices of inputs
The special cost structure that is necessary for a firm to adopt a peak-load pricing policy is:
limited capacity
Compared with the average market economy in the world, defined by membership in the oecd, the US has __________ lower tax revenue as a fraction of GDP
lower
which of the following constitutes the largest fraction of federal government spending?
mandatory spending
along a linear demand curve, when the price elasticity is -1
marginal revenue is 0
an HHI index of 10,000 suggest
monopoly
When managers of firms are given fixed salaries, which are not tied to the firm's profits, they generally put forth less effort than they otherwise would. This is an example of
moral hazard
which of the following pricing policies does not extract the entire consumer surplus from the market?
peak load pricing
A lerner index of 0 suggests
perfect competition
which of the following industry structures would you expect to have the lowest Lerner index score?
perfect competition
Bertrand Model of Oligopoly reveals that
perfectly competitive prices can arise in markets with only a few firms.
firms that are price takers face a demand function that exhibits
perfectly elastic demand
which of the following factors would not affect the own price elasticity of demand?
price of an input
both nominal and real interest rates are
procyclical
advertising is likely to be important to increase sales in industries where which of the following is true?
products are differentiated
which of the following is the most common way that countries fix their exchange rate?
promising convertibility at a guaranteed rate, and backing the commitment with a large quantity of foreign reserves
which of the following are major factors determinig real interest rates?
risk, maturity, taxes
For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to:
shift to the right
In the crude oil market
supply and demand are both getting more elastic over time
in dutch auctions
the auctioneer starts high and goes lower until one bidder is willing to pay - bidders obtain no info about other bidders
Which of the following illustrates the "Fama puzzle" / "forward premium puzzle": When interest rates are higher in the US vs the UK, we expect
the dollar should depreciate relative to the pound
when markets perceive an increase in investment risks globally, what is the effect on the value of the dollar relative to other currencies?
the dollar will "strengthen" or appreciate relative to other currencies
According to the interest parity condition, if foreign yields exceed domestic yields, then
the domestic currency is expected to appreciate
a euro was worth $1.45 each and now they are worth $1.20 each - what happened to the euros value?
the euro has depreciated against the dollar
In the 1960s, each firm in the computer industry was able to make extremely large profit margins. Over two decades the profit margins decreased from 50-60% to 10-20%. We can conclude that:
the industry evolved from oligopolistic to a more competitive industry
in the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50 to 60 percent. The margin decreased to 20 to 40 percent in the 1970s and to 10 to 20 percent in the 1980s. We conclude that:
the industry evolved from oligopolistic to a more competitive industry in the two decades
When adverse selection results in only low quality products or services being offered for sale, it is an example of
the lemons problem
the lower the lerner index is for a good or service sold by a firm
the lower the markup the firm enjoys
according to the interest parity condition, given the future nominal exchange rate (euros/dollar), the greater the difference between european and domestic yields
the lower the value of the dollar
in first price (sealed bid) auctions, winning bids will be higher
the more risk averse the participants in the auction
when quantity demanded exceeds quantity supplied
the price is below the equilibrium price
According to the PPP theory of exchange rates, in the long run, the nominal exchange rate should equal
the ratio of foreign to domestic prices
in the Us, a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .5 pounds for dollar, which of the following would be correct?
the real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there.
which of the following is a feature of a dutch auction?
the winner pays exactly what she bid for the item
the fact that short term yields are more variable than longterm yields means that
the yield curve can invert
A price elasticity of zero corresponds to a demand curve that is
vertical