Question

Firms that buy inputs from suppliers have more bargaining power when: A. there are many other buyers in the market B. they purchase a relatively small quantity of product C. the costs of switching suppliers are low D. the suppliers sell highly differentiated products If a firm successfully differentiates its product from other products in the market, then we should expect the elasticity of demand for the differentiated product to become: A. We do not have enough information to answer this question B. more inelastic C. more elastic D. retain the same elasticity of demand Which of the following factor does NOT contribute to higher rivalry in a market? A. Fast growth in the market B. Large number of competitors C. High fixed costs D. Low switching costs for buyers Movie theaters tend to charge higher ticket prices for evening and weekend shows. This implies that the demand for these tickets is relatively: A. inelastic B. elastic C. unresponsive to income changes D. necessary Recently, Quandl announced that they were purchased by NASDAQ. Both firms provide historic market data and other information about exchange transactions in equity and futures markets, so they offer substitute products. After the merger is completed, we should expect that the price of these market data products offered by the combined firm will: A. increase B. We do not have enough information to answer this question C. decline D. remain unchanged Suppose the marginal cost to produce Apple iPhones is $400 per phone. Initially, the elasticity of demand for the iPhone is -2 when the product has no close substitutes. As other smart phones enter the market place, the elasticity of demand for iPhones changes to -3. If Apple is setting prices to maximize profits, how much should the iPhone price decline in response to the entry by competing phones? A. $200 B. $300 C. $400 D. $600 To successfully adopt a price discrimination strategy, the seller must: A. be able to identify the willingness to pay for each individual customer B. be able to prevent resale between buying groups C. be able to know which customers belong to the different pricing groups D. offer distinct products for each separate pricing group Which group is offered the lower price under a price discrimation scheme? A. Elastic demand group B. Inelastic demand group The remaining consumer surplus is zero under a successful first-degree price discrimination scheme. True False In general, women's clothing items (e.g., running shoes) have higher prices than comparable products designed for men due to price discrimination. How do the clothing sellers prevent resale in these markets? A. Price discrimination is not possible in clothing markets B. State consumer protection laws prohibit selling goods intended for one group to members of the other group C. The retailers are prohibited from selling products intended for one group to members of the other group D. The clothing products are differentiated by styling or design features Which of the following claims is NOT true? A. Price discrimination is feasible if the costs of arbitrage exceed the difference in prices charged to the different customers B. Volume discounts are not a form of price discrimination C. If arbitrage between customers is possible, the seller should offer uniform prices D. Bundling is profitable if the willingness to pay for the bundle is more homogeneous than the willingness to pay for the bundle components Metering is a type of direct price discrimination. True False The joint payoffs to both players in a prisoners' dilemma would be higher if the players could collude. True False Which of the following statements is true? A. There may be no unique Nash equilibrium to a two-player simultaneous game. B. One of the players must have a first-mover advantage in a two-player sequential game C. Nash equilibria are only defined for repeated games D. Players take actions that maximize their joint profits under a Nash equilibrium Please refer to the game associated with Multiple Choice question 8 in Chapter 15. If the low price / low price payoffs for both players are 30 (instead of 0), is this game a prisoners' dilemma? A. No B. Yes Please refer to the two-player simultaneous game in Multiple Choice question 3 in Chapter 16. How many pure strategy Nash equilibria does this game have? A. 0 B. 1 C. 2 D. 3 Sonny and Cher were a popular singing duo in the 1970's. After establishing their success in the music business, they met to decide how future earnings should be split among the two partners. Together, they could earn $5 million per year from their music act. Separately, Cher could earn $1 million as an actress, and Sonny did not have any outside options for employment. How much of the $5 million joint earnings should be paid to Cher? A. $1 million B. $2 million C. $2.5 million D. $3 million For threats or commitments in a game to be effective, they must be: A. credible B. irrational C. ethical D. None of the above The prospects for success facing your startup are risky: there is a 0.5 probability that you lose $1 million, 0.2 probability that you break even, and 0.3 probability that you make $5 million. What is the expected return from the startup? A. Lose $1 million B. Break even C. Gain $1 million D. Gain $1.5 million Your ad agency advises you that the new email marketing campaign that they designed is expected to have 0.3% of the messages opened. Then, 10% of the recipients who open the email message with click through to your website. If you send the email marketing message to 500,000 people in the first round, what is the expected number of people who will visit your website? A. 150 B. 1500 C. 15000 D. 100000 Which type of randomness can be fully described by a probability distribution? A. Risk B. Uncertainty C. Both of the above D. None of the above Which of the following statements is NOT true? A. Oral auctions are also second-price auctions B. English auctions are also known as oral auctions C. Common value auctions are subject to the winners curse D. The outcomes from Vickrey auctions are identical to first-price sealed bid auctions The prices achieved by common-value auctions tend to increase as more information is provided to buyers. True False There are five buyers at an online book auction with willingness to pay {$20, $25, $30, $30, $40}. What is the likely value of the winning bid? A. Just over $25 B. Just over $30 C. Just over $35 D. Just under $40 In a situation subject to asymmetric information, which party should use the screening techniques? A. Less informed party B. We do not have enough information to answer this question C. Neither party should use screens D. More informed party Which of the following actions can be an example of a signal designed to reduce the impact of asymmetric information? A. A money-back guarantee B. Students pursue graduate training C. Students take an unpaid internship D. All of the above A business owner attains a bank loan to purchase a new delivery truck for the business, but they use the funds to take a vacation to Australia. Which of the following terms describes the problem with this situation? A. Adverse selection B. Moral hazard C. Both moral hazard and adverse selection D. There is not a problem with this situation Firms that hire outside consultants can reduce the impact of moral hazard by: A. hiring work on a fixed-fee basis B. monitoring the quality of the completed work C. hiring consultants with an established reputation for not shirking D. All of the above Please refer to Individual Problem 20-5 in Chapter 20. If the client pays the cost for Form A for all forms processed, what is the average gain or loss earned across all forms processed? A. Lose $0.10 per form B. Break even C. Gain $0.10 per form D. Gain $0.15 per form Which of the following statements about moral hazard is true? A. Moral hazard arises from actions that cannot be observed B. Shirking is a form of moral hazard C. Moral hazard involves taking excessive risk D. All of the above

Answer 1

1. C. By Porter's Five forces model, The buyer bargaining power is high for: larger volumes, more sellers and few buyers, switching costs are low, substitute available at cheaper value, backward integration is available. Hence, Lost switching cost ie. Option C is correct.

2. B. More Inelastic because Customer will be more tolerant towards higher price changes if the product is successfully differentiated.

3.A. By Porter's Five forces model. Rivalry intensity increase with slow growth, high fixed costs, low switching cost of buyer,more competitors, undifferentiated products. So, Fast growth wont contribute to higher rivalry, it leads to lower rivalry.

4.A. Inelastic. Even with higher changes in prices, there is not a considerable impact on the Movie going audience. Rather people flock to cinemas at evening and weekend shows more than the daytime shows or weekday shows which shows the inelastic nature of movie ticket demand.