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LU BUSI 620 WK8 HW
Terms in this set (42)
Suppose that a fair coin is tossed and if a head appears you receive $10 and if a tail appears you receive $20. The expected value of this game is:
Indicate how a manager can induce a risk averse individual to consume new products.
Offer free samples
The optimal search strategy is to search for a better price when the price charged by a firm is
greater than the reservation price.
A manager's attitude toward risk _______ affect the likelihood that they will pursue a risky project
Suppose that a fair die is rolled and, based on the result, you receive the following payout:Rolling a six pays $12, a five pays $10, a four pays $8, a three pays $6, a two pays $4, and a one pays $2.The expected value of the game equals
Suppose an individual prefers a risky prospect with the possibility to win $18, but an expected value of $12, over $12 with certainty. What type of individual is this
Compare the search strategy of a risk-neutral producer to a risk-neutral consume
If expected marginal revenue exceeds marginal cost, a manager should
increase output to increase profits.
How might asymmetric information lead some consumers to leave a market completely?
The belief that a seller will only sell a good for a price that exceeds its value.
Due to the hidden characteristics of consumers, insurance companies often face a problem of:
Which of the following are reasons that markets fail
When a firm is able to set its price above marginal cost and produce less than the socially efficient output, the firm has
Markets with a post-merger Herfindahl-Hirschman Index (HHI) greater than __________ are considered highly concentrated
Selfishly motivated efforts to influence another party's decisions is
Costs borne by people not directly involved in the production or consumption of a good, are called
All of the following are sources of market failure EXCEPT which one?
firms acting as price takers
When a firm with market power produces less than the socially efficient level of output, there would be ____________ to society of producing one more unit
a net gain
Which of the following goods is generally considered to be nonexclusionary?
Antitrust policies are government policies designed to prevent firm managers from:
A typical problem associated with college group projects (where each member receives the same grade) is that some students tend to do most (if not all) of the work required to earn a desirable grade while others do nothing. This is often called the ________ _________ problem
Rent seeking is is selfishly motivated efforts to influence another party's:
Certification is common in which of the following areas?
Pollution is a common example of a(n)
The Truth in Lending Simplification Act (TLSA) ensures that all debtors are given the opportunity to do what?
Understand all aspects of borrowing.
Which of the following are reasons that markets fail?
Advertising regulation encourages:
truth in advertising
Suppose an economy produces a good that it cannot prevent people from consuming (even if they did not pay for it). Furthermore, consumption of the good by one person does not preclude others from also consuming it. This is an example of a _________________good. (Enter one word in the blank)
One solution to the "end-of-period" problem is the government's enforcement of:
Suppose that a good is both nonrival and nonexclusionary in consumption. In this case, consumers
have little incentive to purchase the good.
The government uses certification programs in order to eliminate
individuals' cost of gathering information.
What is the effect of the Truth in Lending Act?
Interest rates increase.
How does the government guard against asymmetric information in advertising?
The Lanham Act
In the presence of a quota, domestic producers benefit at the expense of whom?
Domestic consumers and foreign producers
True or false: Government enforcement of contracts can solve market failure caused by the end-of-period problem.
If demand is _____________ a lump-sum tariff will not change the profits of domestic producers.
Public goods can lead to market failure due to which of the following economic issues?
When a central authority assumes an information-gathering role and sets minimum standards in industries such as education and medicine, it is employing a _______________ program.
In an attempt to reduce competition in the U.S. cotton ball market, the U.S. could impose a ___________ a limit on the amount of cotton balls other countries are allowed to sell in the U.S.
Suppose that Spain must pay the United States a fixed fee in order to sell its prized saffron to U.S. consumers. What type of government policy does Spain face?
You are the manager of a firm that sells a "commodity" in a market that resembles perfect competition, and your analytics team estimates that your cost function is C(Q) = 2Q + 3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600.
a. Calculate the expected market price.
b. What ouptut should you produce in order to maximize expected profits?
c. What are your expected profits?
The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all participants in the auction are risk neutral.
Which auction type—first-price, second-price, English, or Dutch—would you recommend if all bidders value spectrum rights identically but have different estimates of the true underlying value of spectrum rights?
After seven years of negotiations, 12 countries—including the United States, Japan, Vietnam, and nine other Pacific Rim countries—crafted the Trans-Pacific Partnership (TPP). A key feature of the TPP was the lifting of tariffs on many products traded between the member countries, ranging from agriculture to footwear. Before the U.S. ultimately pulled out of the deal, each member country went through the process of ratifying the agreement, with numerous domestic firms and collective interests voicing opposition. In the United States, New Balance was one of these opposing firms, specifically stating its disapproval of phasing out U.S. tariffs on shoes made in Vietnam.
What would a reduction of U.S. tariffs on Vietnamese shoes do to the supply of Vietnamese shoes in the U.S.?
-it will increase
What impact would this have on the equilibrium quantity of shoes sold in the United States?
-it will increase
Would the tariff reduction cause the equilibrium price for shoes in the United States to increase or decrease?
-it will decrease
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