MGEC02H3 Study Guide - Form 10-Q, Marginal Revenue, Deadweight Loss

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magentaclam212

3 Jul 2014

School

UTSC

Department

Economics for Management Studies

Course

MGEC02H3

Professor

Ata

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Document Summary

Question-1 [25 points] answer the following short questions: [5 points] bookstores often offer annual memberships that allow customers to purchase books at a 10% discount. Explain why this may increase profits of the bookstore: [5 points] the outcome of bertrand duopoly is efficient. True, false, uncertain, explain: [10 points] the market is characterized as a monopsony. Suppose the demand is p =10 q, and the supply is given by p = q 4. Show on the clear graph the changes in producer and consumer surpluses when moving from competitive price and quantity to monopsony: [5 points] you own a family business. You are asked to determine the optimal monthly advertising expenditures for the business. Your total monthly cost is tc = 4q + 0. 0005q2 + a where a is the advertising expenditure. The firm"s marginal revenue from advertising is constant at mra = , and the advertising elasticity of demand is 0. 4.

Related Questions

(Please show as much work as possible)

1. You are bidding in a second-price auction for a painting that you value at $800. You estimate that other bidders are most likely to value the painting at between $200 and $600. Which of these is likely to be your best bid?

a. $1,000

b. $800

c. $600

d. $400

2. Which of the following is true about different ways of conducting a private-value auction?

a. A first-price auction is strategically equivalent to a second-price auction.

b. A first-price auction is strategically equivalent to an English auction.

c. A second-price auction is strategically equivalent to an English auction.

d. None of the above

3. Suppose that five bidders with values of $500, $400, $300, $200, and $100 attend an oral auction. Which of these is closest to the winning price?

a. $500

b. $400

c. $300

d. $200

4. In the above auction, if the bidders with the first- and third-highest values ($500 and

$300) collude, which of these is closest to the winning price?

a. $500

b. $400

c. $300

d. $200

5. If a seller is concerned about collusion among bidders, which of the following changes to the auction, should the seller make?

a. Hold frequent, small auctions instead of infrequent large auctions.

b. Conceal the amount of winning bids.

c. Publically announce the name of each auction's winner.

d. Hold a second-price instead of a first-price auction.

6. You're holding an auction to license a new technology that your company has developed. One of your assistants raises a concern that bidders' fear of the winner's curse may encourage them to shade their bids. How might you address this concern?

a. Release your analyst's positive scenario for the technology's future profitability.

b. Release your analyst's negative scenario for the technology's future profitability.

c. Use an oral auction.

d. All of the above

7. In a first-price auction, you bid ________ your value, and in a second-price auction you bid _________ your value.

a. at; above

b. below; above

c. below; at

d. below; below

8. You hold an auction among three bidders. You estimate that each bidder has a value of either $16 or $20 for the item, and you attach probabilities to each value of 50%. What is the expected price? If two of the three bidders collude, what is the price?

9. In Sweden, firms that fail to meet their debt obligations are immediately auctioned off to the highest bidder. (There is no reorganization through Chapter 11 bankruptcy.) The current managers are often high bidders for the company. Why?

10. When a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, representatives of other museums that have no chance of winning are actively wooed by the auctioneer to attend anyway. Why?

11. The deities Mars and Venus often do battle to create the weather conditions on Earth. Venus prefers extreme temperatures (especially heat), while Mars prefers temperate conditions. The payoffs (expressed in Points of Wrath) are given below.

		Venus
		Warm	Chill
Mars	Warm	20 , 0	0 , 10
Chill	0 , 90	20 , 0

What is the unique mixed-strategy equilibrium of the above game?

(Let p be the probability of "Warm" for Mars, and q the probability of "Warm" for Venus.)

a) p=9/10, q=1/2

b) p=1/2, q=1/10

c) p=1/2, q=1/2

d) p=1/10, q=1/10

Player 2

		H	D
Player 1	H	0 , 0	4 , 1
D	1 , 4	2 , 2

12. The above game is the title of the hawk-dove game and used by evolutionary biologists to describe evolutionary processes. It is also used to model how a business should grow. In the above game, what is the Nash equilibrium in pure strategies and mixed strategies.?

Assume the cost of producing the goods is zero and that each consumer will purchase each good as long as the price is less than or equal to value. Consumer values are the entries in the table.

	Good 1	Good 2
Consumer A	$2,300	$1,700
Consumer B	$2,800	$1,200

13. Suppose the monopolist only sold the goods separately. What price will the monopolist charge for good 1 to maximize revenues for good 1?

a. $2,300

b. $2,800

c. $1,200

d. $1,700

14. What is the total profit to the monopolist from selling the goods separately?

a. $4,500

b. $6,300

c. $7,000

d. $6,000

15. What is a better pricing strategy for the monopolist? At this price, what are the total profits to the monopolist?

a. Bundle the goods at $2,800; Profits = $5,600

b. Bundle the goods at $4,000; Profits = $8,000

c. Charge $2,800 for good 1 and charge $1,700 for good 2; Profits = $4,500

d. Charging the lowest price for each good individually is the best pricing strategy; Profits = $7,000

16. The prisoners' dilemma is an example of

a. a sequential game.

b. a simultaneous game.

c.a shirking game.

d. a dating game

17. Nash equilibrium

a. is where one player maximizes his payoff, and the other doesn't.

b. is where each player maximizes his own payoff given the action of the other player.

c.is where both players are maximizing their total payoff.

d. is a unique prediction of the likely outcome of a game.

viridianlocust640

_____ 1. Suppose you make silver jewelry. If the price of silver falls, we would expect you to:

a. be willing and able to produce less jewelry than before at each possible price.

b. be willing and able to produce more jewelry than before at each possible price.

c. face greater demand for your jewelry.

d. face a weaker demand for your jewelry.

_____ 2. If suppliers expect the price of their product to fall in the future, then they will:

a. increase supply (supply curve shifts out) now.

b. decrease supply (supply curve shifts in) now.

c. increase supply in the future, but not now.

d. decrease supply in the future, but not now.

_____ 3. Consider the market for portable air conditioners, initially in equilibrium. When a heatwave strikes, the equilibrium price:

a. increases and equilibrium quantity decreases.

b. decreases, and the equilibrium quantity increases.

c. and quantity both increase.

d. and quantity both decrease.

_____ 4. Buyers can buy all they want to buy and sellers can sell all they want to sell at:

a. prices at and above the equilibrium price.

b. prices at and below the equilibrium price.

c. prices above and below the equilibrium price, but not at the equilibrium price.

d. the equilibrium price, but not at prices above or below the equilibrium price.

_____ 5. The law of supply and demand states that:

a. demand and supply curves shift out as time goes by.

b. the price of a goodwill rise in response to excess demand for that good.

c. when the supply curve for good shifts, the demand curve for that good shifts in response.

d. the equilibrium price of goodwill be rising more often than it will be falling.

_____ 6. If Doritos and Cheetos are substitutes, a rise in the price of Cheetos will cause:

a. the equilibrium quantity of Doritos to fall and the price of Doritos to rise.

b. the equilibrium quantity and price of Doritos to rise.

c. the equilibrium quantity and price of Doritos to fall.

d. the equilibrium quantity of Doritos to rise and the price of Doritos to fall.

_____ 7. New production technology is perfected that allows auto manufacturers to build an automobile using half the labor hours formerly needed. As a result:

a. the equilibrium quantity of automobiles increases and the price decreases.

b. the equilibrium quantity and price of automobiles increase.

c. the equilibrium quantity and price of automobiles decreases.

d. there is likely no change in the number of automobiles produced.

_____ 8. The U.S. government announces that it will raise the interest rate on college student loans beginning in January of next year. The immediate market impact is:

a. the demand curve for student loans shifts out.

b. the supply curve for student loans shifts out.

c. we anticipate that more student loans will be completed next year than this year.

d. all of the above are correct.

_____ 9. What curve shift produces a fall in price and increase in quantity exchanged?

a. An inward shift in the demand curve.

b. An inward shift in the supply curve.

c. An outward shift in the supply curve.

d. An outward shift in the demand curve.

_____ 10. We note that fewer motorcycles were sold this year than last and that the price is also lower. What event could have caused this outcome?

a. A technological change that improved the fuel efficiency of motorcycles.

b. A rise in the wages paid to motorcycle manufacturing workers.

c. A motorcycle craze due to the popularity of Sons of Anarchy.

d. Increasing concerns about health impacts from breathing motorcycle exhaust.

_____ 11. The price that results in quantity supplied equaling quantity demanded is the optimal (best) price because it:

a. maximizes the combined welfare of buyers and sellers.

b. maximizes the cost of the seller.

c. minimizes the expenditure of buyers.

d. all of the above are correct.

_____ 12. Consumer surplus is the:

a. quantity of good consumers get without paying anything.

b. amount a consumer pays minus the amount the consumer is willing to pay.

c. amount a consumer is willing to pay minus the amount the consumer pays.

d. value of a good to a consumer.

_____ 13. In a market, the marginal buyer is the one:

a. whose willingness to pay is higher than all other buyers and potential buyers.

b. whose willingness to pay is lower than all other buyers and potential buyers.

c. who is willing to buy exactly one unit of the good.

d. who would be the first to leave the market if the price were any higher.

_____ 14. If a consumer is willing and able to pay $20 for a particular good and if she actually pays $16 for the good, then her consumer surplus is:

a. $4.

b. $16.

c. $20.

d. $36.

_____ 15. Suppose there is an early freeze in California that reduces the size of the orange crop. What happens to consumer surplus in the market for oranges?

a. Consumer surplus increases.

b. Consumer surplus decreases.

c. Consumer surplus is not affected by this change.

d. We would have to know whether the demand for oranges is elastic or inelastic.

_____ 16. Producer surplus is the area on a supply/demand graph:

a. under the supply curve.

b. between the supply and demand curves.

c. below the price line and above the supply curve.

d. under the demand curve and above the price line.

_____ 17. Economists typically measure economic efficiency using:

a. total producer and consumer surplus.

b. profits to firms.

c. the quantity supplied by sellers.

d. the price paid by buyers.

_____ 18. Which of the following statements is correct?

a. Efficiency and equality are both maximized when total surplus is maximized.

b. Efficiency deals with the size of the economic pie; equality with how fairly the pie is sliced.

c. Efficiency is more difficult to evaluate than equality.

d. Equality is judged on positive grounds; efficiency requires normative judgments.

_____ 19. The price elasticity of demand measures how much:

a. quantity demanded a response to changes in price.

b. quantity demanded a response to changes in income.

c. price responds to a change in demand.

d. Both a and c are correct

_____ 20. Goods with many close substitutes tend to have:

a. less elastic demands.

b. more elastic demands.

c. price elasticities of demand that are unit elastic.

d. income elasticities that are negative.

Short Answer Questions:

All of the following questions are based on the data shown here for coffee demand and supply at a fictional Columbus coffee shop called Go-bucks.

Price Quantity Quantity

per Cup Demanded Supplied

$1.60 1,700 1,220

$1.80 1,555 1,300

$2.00 1,400 1,400

$2.20 1,235 1,520

$2.40 1,060 1,660

$2.60 875 1,820

_____ 21. (6 points) Using the mid-point formula, calculate the price elasticity of demand as the price increases from $1.60 to $1.80.

_____ 22. (6 points) Repeat the calculation of the price elasticity of demand, this time for a price increase from $1.80 to $2.00.

_____ 23. (6 points) Repeat the calculation of the price elasticity of demand, this time for a price increase from $2.40 to $2.60.

24. (4 points) Over which price range is demand inelastic? Over which price range is demand elastic? Does this follow the trend noted in class?

_____________________________________________________________________________

_____ 25. (6 points) Turning to the supply side, calculate the price elasticity of supply as the price increases from $2.20 to $2.40.

26. (2 points) How would you describe the price elasticity of supply over this range?

_____________________________________________________________________________

graychimpanzee865

1. In closing a request for a recommendation, you should include

a. an expression of appreciation.

b. an indication that youï¿½ve enclosed a stamped, preaddressed envelope.

c. the full name and address of the person to whom the letter should be

sent.

d. all of the above.

2. When writing a claim letter, the best way to begin is by

a. complimenting the company for past service.

b. providing a detailed description of the faulty merchandise.

c. providing a straightforward statement of the problem.

d. threatening legal action if you do not receive a favorable

adjustment.

3. When making a claim or requesting an adjustment, your closing should usually

a. clearly state how angry and disappointed you are.

b. explain the specific details of the problem.

c. request a specific action or express your desire to find a solution.

d. do all of the above.

4. Routine, positive messages should do all of the following except

a. leave your reader with a good impression.

b. use an indirect approach.

c. provide all required details.

d. communicate the information or good news.

5. In a positive message, the main idea is presented

a. in the first sentence of the middle paragraph.

b. at the end of the middle paragraph.

c. right at the beginning of the letter.

d. in the last sentence of the letter.

6. The longest part of a positive message is typically the

a. introduction.

b. body.

c. close.

d. Noneï¿½all parts are usually the same length.

7. ï¿½If the figures are in by the end of the month we will hopefully be able to begin

planning for the upcoming yearï¿½s budget, but if they are not then the plan

ning process will most definitely have to wait until laterï¿½ is an example of

a. a comma splice.

b. an overly long sentence.

c. an indefinite pronoun starter.

d. an awkward pointer.

8. Which of the following is an example of a hedging sentence?

a. The report seems to be incomplete.

b. The deadline is next Tuesday.

c. The financial statement needs to have two sections.

d. None of the above is hedging.

9. What is wrong with the following sentence? ï¿½To waste time and missing dead

lines are bad habits.ï¿½

a. Similar ideas are not parallel.

b. It contains a dangling modifier.

c. It contains a split infinitive.

d. Nothingï¿½it is grammatically correct as written.

10. What is wrong with the following sentence? ï¿½Driving to the office, a police

officer stopped me for speeding.ï¿½

a. It lacks parallelism.

b. It contains a dangling modifier.

c. It contains an awkward pointer.

d. Nothingï¿½it is grammatically correct as written.

11. ï¿½Government task force report recommendationsï¿½ is an example of

a. redundancy.

b. a dangling modifier.

c. a dependent clause.

d. a long noun sequence.

12. Which of the following sentences contains a camouflaged verb?

a. Some do; others donï¿½t.

b. She is a marketing manager but also serves as ad manager.

c. It is Johnï¿½s recommendation that she be hired.

d. He slowly, deliberately added the numbers.

13. Roughly ___ percent of U.S. employers have terminated employees for

misuse of company e-mail systems.

a. 1

b. 10

c. 25

d. 80

14. E-mail hygiene refers to

a. the absence of slang and informal language in e-mail messages.

b. a nationwide movement to do away with information overload.

c. all the efforts companies make to keep e-mail clean and safe.

d. none of the above

15. E-mails should include all of the following except:

a. information about attachments

b. inside address

c. e-mail addresses of sender and receiver

d. contact information

16. When it comes to monitoring incoming and outgoing e-mail,

a. most companies do not make the effort.

b. only about 10 percent of U.S. employers do it.

c. most employers view it as an invasion of employee privacy.

d. about 50 percent of U.S. employers regularly do so.

17. When it comes to legal issues,

a. e-mails mean nothingï¿½only printed documents can be used in court.

b. e-mail and other electronic documents have the same weight as printed

ones.

c. your e-mail messages are off limitsï¿½using them in court would violate

your privacy.

d. none of the above are correct.

18. According to a recent study, workers exposed to a constant barrage of

e-mail, IM, and phone calls

a. increased their productivity by 20 percent.

b. were 50 percent more likely than their peers to be promoted.

c. experienced an average 10-point drop in their functioning IQ.

d. experienced none of the above

19. One important element of basic e-mail etiquette is to

a. be careful about using the ï¿½ccï¿½ function.

b. use bullets and lists.

c. include headings on all e-mails.

d. capture your readersï¿½ attention.

20. A good opening for a negative message would be

a. Iï¿½m sorry to say I have some bad news.

b. This letter is in reply to your application.

c. Your rï¿½sumï¿½ clearly shows why you are interested in becoming a

management trainee with our company.

d. We have no openings at this time.

21. In a negative message, the reasons for the decision

a. are so obvious that you donï¿½t need to mention them.

b. come directly after the buffer and follow naturally from it.

c. should be glossed over quickly.

d. should be long and roundabout to cushion the negative aspects.

22. In the reasons section of a negative message, you should

a. present enough detail for the audience to understand your reasons.

b. explain what your decision is before you explain why you have reached it.

c. apologize for the negative decision.

d. do all of the above.

23. A way to be tactful when giving your reasons for bad news is to

a. explain why the decision is good for you and your company.

b. highlight, if possible, how your negative decision benefits your readers.

c. explain that the decision is based on company policy.

d. apologize for having to be the bearer of bad news.

24. Using the indirect approach, the bad news comes

a. immediately after the buffer.

b. immediately before the reasons.

c. immediately after the reasons.

d. at the very end.

25. A good way to make bad news less painful is to

a. maximize the space devoted to it.

b. say, ï¿½I trust our decision is satisfactory.ï¿½

c. avoid stating it and hope that the reader understands what you mean.

d. de-emphasize it by embedding it in the middle of a sentence or paragraph

MGEC02H3 Study Guide - Form 10-Q, Marginal Revenue, Deadweight Loss

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