fin 321 final
Firm B High
After the first round of elimination, are there any more dominated strategies to eliminate? If so, which one(s)?
table shows probability distribution of payoffs from an activity pt a what is the expected value?
EV=∑(Payoff×Probability) = 46.5
news magazine offers students a discount on the regular subscription rate. The total number of subscriptions is optimal, and, at the current prices, the marginal revenue from the last subscription sold to a student is $6, while the marginal revenue from the last subscription sold to a regular customer is $10. If the magazine sells one more subscription to a regular customer and one less subscription to a student:
The correct answer is: profit will increase $4
Firm A High; Firm B Low
Using the method of successive elimination of dominated strategies, which strategies, if any, are eliminated after the first round?
none
What dominant strategies exist in the original payoff table above?
Cell E (Medium, Medium)
Which cell in the payoff table represents the likely outcome of this advertising game?
In a repeated decision for which the present value of the benefits of cheating are greater than the present value of the costs of cheating, deciding to cooperate is a value-maximizing decision. deciding to cheat is a value-maximizing decision. deciding to cheat is never a value-maximizing decision. None of these options are correct.
deciding to cheat is a value-maximizing decision.
Which of the following conditions make it LESS likely that a cartel will succeed?
differentiated cost structures among cartel members.
dead wait cost
everything above the price and below the cost
A second-mover advantage exists when a firm can earn greater profit by reacting to earlier decisions made by rivals.always arises when there is not a first-mover advantage in a sequential decision.arises because rivals have imperfect information about payoffs.None of the choices are correct.
exists when a firm can earn greater profit by reacting to earlier decisions made by rivals.
vertical integration
government owns everything; prevents people from jumping into the market
Price leadership... is not useful to a dominant firm if it could eliminate all its rivals through a price war. is an arrangement in which one firm in the market sets a price that the other firms match. occurs when a group of firms agree to limit competitive forces in the market. is when a firm makes a noncooperative decision to raise its price.
is an arrangement in which one firm in the market sets a price that the other firms match.
In every prisoners' dilemma situation, cooperation
is possible
In order to maximize profit, a firm producing two goods that are related in consumption should choose the levels of output at which
marginal revenue equals marginal cost for each good simultaneously.
In order to maximize profit, a firm that sells its output in two markets will allocate total output between the two markets so that:
marginal revenue is equal in the two markets.
The WildTimes Bar offers female patrons a lower price for a drink than male patrons. The bar will maximize profit by selling a total of 200 drinks per night. At the current prices, male customers buy 150 drinks, while female customers buy 50 drinks. The marginal revenue from the last drink sold to a male customer is $1.50, while the marginal revenue from the last drink sold to a female customer is $0.50. The bar
should lower the price for male customers and raise the price for female customers.
measure of risk
standard deviation - the highest number on daily demand/daily supply chart
A firm sells two goods (X and Y) that are related in consumption. The estimated demand and cost conditions are: PX = 20 − 0.1QX − 0.05QY PY = 70 − 0.3QY − 0.1QX MCX = 1 + 0.1QX MCY = 2 + 0.25QY Goods X and Y are
substitutes
A form of strategic entry deterrence is
tacit collusion.
The coefficient of variation rule,
takes into account both the expected value and the standard deviation of the distribution.
Marginal utility of profit is,
the amount by which total utility increases with an additional dollar of profit earned by the firm.
An underallocation of resources in an industry means that for the last unit produced,
the cost of producing the last unit exceeds its value to society.
Private provision of public goods fails to occur because
the free rider problem prevents collection of sufficient revenue.
The following payoff matrix shows the various profit outcomes for 3 projects, A, B and C, under 2 possible states of nature: the product price is $15 or the product price is $25. Suppose the decision maker is able to determine that product price is likely to follow the probability distribution below: Which project should be chosen under the expected value rule?
Project A: EVA=(60×0.4)+(80×0.6) EVA=24+48=72 Project B: EVB=(−28×0.4)+(160×0.6) EVB=−11.2+96=84.8 Project C: EVC=(40×0.4)+(100×0.6) EVC=16+60=76
When there is negative externality in production,
Marginal social cost exceeds marginal private cost.
pt b using the maximin rule, the decision maker would choose
Project A
pt a the following payoff matrix shows the various profit outcomes for 3 projects, A, B, and C, under 2 possible states of nature: the product price is $15 or the product price is $25. Using the maximax rule, the decision maker would choose
Project B
To successfully practice price discrimination
both "the firm must possess market power" and "it must be difficult for consumers in one market to sell to consumers in the other market"
A firm is producing two goods (X and Y) that are related in consumption. The demand function for X is: Qd = 120 − 4PX − 10PY Which of the following pairs of goods might the firm be producing?
cars and gasoline
When we say that market prices allocate goods to the highest-valued users, we mean that
only consumers who value the good more than the market price of the good will choose to buy the good.
In long-run perfectly competitive equilibrium, economic efficiency is achieved because
price equals minimum long-run average cost for every firm in the industry.
Market or monopoly power leads to market failure because
price exceeds marginal revenue, which causes the profit-maximizing firm to under-produce the good or service.
using the minimax regret rule the decision maker would choose
project c
expected return
r hat e = p1r1 +p2r2 + p3r3
A decision maker who ignores risk in decision making and considers only expected values of decisions is described as,
risk neutral.
