Question 1

A risk loving individual would

Accepted Answer

A) prefer $5 with certainty than a risky prospect with the expected of $5. 
B) prefer a risky prospect with an expected value of $5 to a certain amount of $5. 
C) be indifferent between a risky prospect with an expect value of $5 to a certain amount of $5. 
D) prefer a risky prospect with the expected of $0.50 than $5 with certainty. 
A) prefer $5 with certainty than a risky prospect with the expected of $5. 
B) prefer a risky prospect with an expected value of $5 to a certain amount of $5. 
C) be indifferent between a risky prospect with an expect value of $5 to a certain amount of $5. 
D) prefer a risky prospect with the expected of $0.50 than $5 with certainty.

Question 2

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table.
  
-Which project has the lowest expected value?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 3

Joe's search costs are $7 per search.He wants to buy a VCR for his wife for Christmas, and the lowest price he's found so far is $200.Joe thinks one-third of the stores charge $300 for a VCR, one-third charge $200, and one-third charge $185.Should Joe continue to search or buy a VCR at a price of $200?

Accepted Answer

Joe's expected benefit of searching once

Question 4

An incumbent usually charges a higher price than a new entrant does.Which of the following is a plausible reason for this observation?

Accepted Answer

A) An incumbent usually has a bigger bureaucratic body than a new entrant does and hence has a higher marginal cost. 
B) Consumers are risk averse, hence new firms charge lower prices to attract customers. 
C) The incumbent is ignorant of the new entrant, hence it is still charging the old high price. 
D) All of the statements associated with this question are correct. 
A) An incumbent usually has a bigger bureaucratic body than a new entrant does and hence has a higher marginal cost. 
B) Consumers are risk averse, hence new firms charge lower prices to attract customers. 
C) The incumbent is ignorant of the new entrant, hence it is still charging the old high price. 
D) All of the statements associated with this question are correct.

Question 5

Consider an auction with 1,000 risk-neutral bidders.It is know that these bidders have affiliated values.Based on this information we know the expected revenues for the different auction types will be

Accepted Answer

A) English > Second-price, sealed-bid > First-price, sealed-bid = Dutch. 
B) English = Second-price, sealed-bid = First-price, sealed-bid = Dutch. 
C) First-price, sealed-bid = Dutch > English > Second-price, sealed-bid. 
D) First-price, sealed-bid > Second-price, sealed-bid > English > Dutch. 
A) English > Second-price, sealed-bid > First-price, sealed-bid = Dutch. 
B) English = Second-price, sealed-bid = First-price, sealed-bid = Dutch. 
C) First-price, sealed-bid = Dutch > English > Second-price, sealed-bid. 
D) First-price, sealed-bid > Second-price, sealed-bid > English > Dutch.

Question 6

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table.
  
-The variance in the returns of project D is

Accepted Answer

A) 15. 
B) 225. 
C) 40. 
D) 1600. 
A) 15. 
B) 225. 
C) 40. 
D) 1600.

Question 7

Holding the mean value of a gamble constant, the larger the standard deviation, the

Accepted Answer

A) higher the utility will be from the gamble. 
B) less risky the gamble will be. 
C) more risky the gamble will be. 
D) none of the statements associated with this question are correct. 
A) higher the utility will be from the gamble. 
B) less risky the gamble will be. 
C) more risky the gamble will be. 
D) none of the statements associated with this question are correct.

Question 8

Which of the following is a feature of a Dutch auction?

Accepted Answer

A) The auctioneer begins with a very low asking price. 
B) The winner pays exactly what she bid for the item. 
C) Bidders simultaneously write their valuation on a paper and submit them independently. 
D) Several bidders will announce their valuations. 
A) The auctioneer begins with a very low asking price. 
B) The winner pays exactly what she bid for the item. 
C) Bidders simultaneously write their valuation on a paper and submit them independently. 
D) Several bidders will announce their valuations.

Question 9

Suppose a consumer has determined that her reservation price, R, is $75.The expected benefit of an additional search at this reservation price is $25.Based on this information we can conclude that

Accepted Answer

A) search costs are $25 per search. 
B) this consumer will reject any price above $25. 
C) this consumer will accept any price below $75. 
D) search costs are $25 per search and this consumer will accept any price below $75. 
A) search costs are $25 per search. 
B) this consumer will reject any price above $25. 
C) this consumer will accept any price below $75. 
D) search costs are $25 per search and this consumer will accept any price below $75.

Question 10

_______ occurs when people smoke more after buying life insurance.

Accepted Answer

A) Adverse selection 
B) Moral hazard 
C) Asymmetric information 
D) Cournot and Bertrand competition 
A) Adverse selection 
B) Moral hazard 
C) Asymmetric information 
D) Cournot and Bertrand competition

Question 11

In the presence of ______, the market mechanism can break down.

Accepted Answer

A) extensive form games 
B) normal form games 
C) common knowledge 
D) asymmetric information 
A) extensive form games 
B) normal form games 
C) common knowledge 
D) asymmetric information

Question 12

A manager is attempting to assess the probability of a recession ending in the next six months, and its impact on expected profitability.The manager believes there is 75 percent chance the recession will end in six months and profits will return to $400 million.However, there is a 25 percent chance the recession will not end in six months resulting in a $5 million loss.The expected profits over the next six months are

Accepted Answer

A) $298.75 million. 
B) $301.25 million. 
C) $395 million. 
D) $405 million. 
A) $298.75 million. 
B) $301.25 million. 
C) $395 million. 
D) $405 million.

Question 13

Consider an auctioneer who is selling an item through an auction.It is known that the 10 risk-neutral bidders have independent private values that are uniformly distributed between $1,000 and $2,000.Based on this information we can conclude that the expected revenue in this auction will be

Accepted Answer

A) $2,000. 
B) $1,900. 
C) $1,000. 
D) There is insufficient information to determine the expected revenue. 
A) $2,000. 
B) $1,900. 
C) $1,000. 
D) There is insufficient information to determine the expected revenue.

Question 14

Consider a consumer who is searching for the lowest price for good X.The consumer knows that 75 percent of the time she will find a store charging $10 and 25 percent of the times she will find a store charging $7.The expected benefit from an additional search is

Accepted Answer

A) $3. 
B) $0.75. 
C) $2.25. 
D) $0. 
A) $3. 
B) $0.75. 
C) $2.25. 
D) $0.

Question 15

Which of the following phenomena shows that risk aversion is the characteristic of many people?

Accepted Answer

A) Gambling. 
B) Looting. 
C) Investing in one stock rather than a portfolio. 
D) Auto insurance. 
A) Gambling. 
B) Looting. 
C) Investing in one stock rather than a portfolio. 
D) Auto insurance.

Question 16

You are considering opening your own hamburger restaurant.List the information that will influence your decision about whether to start your own restaurant, or go with a franchise.

Accepted Answer

One important piece of information is ho

Question 17

People having a bad driving record find it difficult to buy automobile insurance because insurance companies fear that ___________ may happen if they raise the premiums.

Accepted Answer

A) adverse selection 
B) moral hazard 
C) risk aversion 
D) none of the statements associated with this question are correct 
A) adverse selection 
B) moral hazard 
C) risk aversion 
D) none of the statements associated with this question are correct

A risk loving individual would

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table. -Which project has the lowest expected value?

An incumbent usually charges a higher price than a new entrant does.Which of the following is a plausible reason for this observation?

Consider an auction with 1,000 risk-neutral bidders.It is know that these bidders have affiliated values.Based on this information we know the expected revenues for the different auction types will be

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table. -The variance in the returns of project D is

Holding the mean value of a gamble constant, the larger the standard deviation, the

Which of the following is a feature of a Dutch auction?

Suppose a consumer has determined that her reservation price, R, is $75.The expected benefit of an additional search at this reservation price is $25.Based on this information we can conclude that

_______ occurs when people smoke more after buying life insurance.

In the presence of ______, the market mechanism can break down.

Consider an auctioneer who is selling an item through an auction.It is known that the 10 risk-neutral bidders have independent private values that are uniformly distributed between $1,000 and $2,000.Based on this information we can conclude that the expected revenue in this auction will be

Consider a consumer who is searching for the lowest price for good X.The consumer knows that 75 percent of the time she will find a store charging $10 and 25 percent of the times she will find a store charging $7.The expected benefit from an additional search is

Which of the following phenomena shows that risk aversion is the characteristic of many people?

You are considering opening your own hamburger restaurant.List the information that will influence your decision about whether to start your own restaurant, or go with a franchise.

People having a bad driving record find it difficult to buy automobile insurance because insurance companies fear that ___________ may happen if they raise the premiums.

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 12: The Economics of Information

A risk loving individual would

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table. -Which project has the lowest expected value?

An incumbent usually charges a higher price than a new entrant does.Which of the following is a plausible reason for this observation?

Consider an auction with 1,000 risk-neutral bidders.It is know that these bidders have affiliated values.Based on this information we know the expected revenues for the different auction types will be

You are a hotel manager, and are considering four projects that yield different payoffs, depending upon whether there is an economic boom or recession.The potential payoffs and corresponding payoffs are summarized in the following table. -The variance in the returns of project D is

Holding the mean value of a gamble constant, the larger the standard deviation, the

Which of the following is a feature of a Dutch auction?

Suppose a consumer has determined that her reservation price, R, is $75.The expected benefit of an additional search at this reservation price is $25.Based on this information we can conclude that

_______ occurs when people smoke more after buying life insurance.

In the presence of ______, the market mechanism can break down.

Consider an auctioneer who is selling an item through an auction.It is known that the 10 risk-neutral bidders have independent private values that are uniformly distributed between $1,000 and $2,000.Based on this information we can conclude that the expected revenue in this auction will be

Consider a consumer who is searching for the lowest price for good X.The consumer knows that 75 percent of the time she will find a store charging $10 and 25 percent of the times she will find a store charging $7.The expected benefit from an additional search is

Which of the following phenomena shows that risk aversion is the characteristic of many people?

You are considering opening your own hamburger restaurant.List the information that will influence your decision about whether to start your own restaurant, or go with a franchise.

People having a bad driving record find it difficult to buy automobile insurance because insurance companies fear that ___________ may happen if they raise the premiums.

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters