Economy Exam Questions Essay

1. The Prisoner’s Dilemma involves two spies who are held in separate soundproof rooms. But even if the two spies could communicate, what makes it difficult for them to achieve the cooperative solution (both not confessing)? 2. A key to analyzing subgame perfect equilibrium strategy in sequential games is 3. In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except 4. The starting point of many methods for predicting equilibrium strategy in sequential games is 5. Credible promises and hostage mechanisms can support a continuous stream of cooperative exchanges except when 6. Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting 7. Third-degree price discrimination exists whenever 8. To maximize profits, a monopolist that engages in price discrimination must allocate output in such a way as to make identical the ____ in all markets. 9. Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when 10. ____ is a new product pricing strategy which results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied 11. Contracts are distinguished from tactical alliances by which of the following characteristics: 12. When someone contracts to do a task but fails to put full effort into the performance of an agreement, yet the lack of effort is not independently verifiable, this lack of effort constitutes a 13. When borrowers who do not intend to repay are able to hide their bad credit histories, a lender’s well-intentioned borrowers should 14. To accomplish its purpose a linear profit-sharing contract must 15. When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____. 16. The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model. 17. ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model 18. ____ occurs whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant. 19. The antitrust laws regulate all of the following business decisions except ____. 20. The sentiment for increased deregulation in the late 1970’s and early  1980’s has been felt most significantly in the price regulation of 21. The ____ depicts the risk-return relationship in the market for all securities: 22. If the acceptance of Project A makes it impossible to accept Project B, these projects are: 23. Capital expenditures: 24. The decision by the Municipal Transit Authority to either refurbish existing buses, buy new large buses, or to supplement the existing fleet with mini-buses is an example of: 25. Which of the following items is (are) not considered as part of the net investment calculation? 1. In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as: 2. Evidence from empirical studies of long-run cost-output relationships lends support to the: 3. Theoretically, in a long-run cost function: 4. In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called: 5. A ____ total cost function implies that marginal costs ____ as output is increased. 6. In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by: 7. Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long distance service is: 8. All of the following are mechanisms which reduce the adverse selection problem except ____. 9. In the long-run, firms in a monopolistically competitive industry will 10. An â€Å"experience good† is one that: 11. The price for used cars is well below the price of new cars of the same general quality. This is an example of: 12. In the short-run for a purely competitive market, a manufacturer will stop production when: 13. Experience goods are products or services 14. Declining cost industries 15. In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then: 16. When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation. 17. Regulatory agencies engage in all of the following activities except _______. 18. ____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility’s plant over a larger number of units of output. 19. The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of: 20. Some industries that have rigid prices. In those industries, we tend to 21. The existence of a kinked demand curve under oligopoly conditions may result in 22. Barometric price leadership exists when 23. A cartel is a situation where firms in the industry 24. Even ideal cartels tend to be unstable because 25. Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?