Practice Final 1 (with answers)

Practice Final 1 (with answers) - Name:_ Student ID...

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Name:_____________________________________ Student ID Number:__________________________ Section Number:_____________________________ University of Michigan School of Business Administration Practice Final Exam 2 WITH ANSWERS
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Section 1: Multiple Choice -- Choose the best answer (5 points each). 1. The Mayor of Ann Arbor is considering instituting a system of rent controls that will drastically lower rents in Ann Arbor. The likely effect of the policy will be to a) create a relatively large deadweight loss if the supply of rental housing is elastic. b) transfer wealth from landlords to tenants holding leases at the time the controls are instituted. c) cause the rental housing stock in Ann Arbor to deteriorate rapidly. d) all of the above e) none of the above. 2. A toy manufacturer keeps an inventory of specialized small motors used to build rare toy cars. (Note that as the only producer of the toy cars, the manufacturer has discretion over price.) The sales manager learns that the price of these same small motors has just increased dramatically, and is now far above the price paid for those in inventory. If this firm is a profit maximizer, it should a) necessarily sell toy cars manufactured with less expensive motors first. b) necessarily sell toy cars manufactured with the more expensive motors first. c) sell toy cars manufactured with new and old motors simultaneously, but charge a higher price for those manufactured with the more expensive motors. d) sell toy cars manufactured with new and old motors simultaneously at the same price it used to sell its toy cars. e) sell toy cars manufactured with new and old motors simultaneously at a new price reflecting the new price of motors. 3. The railroads of the 1800s had two customer types: low elasticity customers shipping general merchandise and high elasticity customers shipping bulk freight. Assuming the marginal cost for a ton per mile is the same in both markets. A railroad who was limited to charging a single price in each market would have maximized profits by a) setting prices equal in both markets b) charging general merchandise customers higher prices c) charging bulk freight customers higher prices d) setting quantity equal in both markets e) setting price equal to marginal cost in both markets
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4. Autoworld faces upcoming contract talks with its union and is trying to decide whether to bargain hard or soft. The union must then decide whether to strike or not strike. The payoff matrix is:. Union Don’t strike strike Autoworld Bargain Hard 35, 10 10,20 Bargain Soft 40, 40 -5,25 is there a dominant strategy equilibrium? a) Yes, Bargain Hard, Don’t strike. b) Yes, Bargain Hard, Strike c) Yes, Bargain Soft, Don’t strike d) Yes, Bargain Soft, Strike e) There is no dominant strategy equilibrium. 5.
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This test prep was uploaded on 04/02/2008 for the course BE 300 taught by Professor Masten during the Fall '07 term at University of Michigan.

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Practice Final 1 (with answers) - Name:_ Student ID...

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