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Spring 2009 - Final - Blue

# Spring 2009 - Final - Blue - Consider a firm which faces...

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Consider a firm which faces demand for its product Q A = 400 – P A in Market A and demand for its product Q B = 1200 – 2P B in Market B. Costs for the firm are C(Q) = 60,000 + 100Q + (1/2)Q 2 , where total output Q = Q A + Q B . The firm is able to prevent arbitrage between these two markets, and practices 3 rd degree price discrimination. 1. This firm maximizes profits selling ______ units of output in Market A. a) 20 b) 80 c) 120 d) 240 e) None of the above are correct. 2. This firm will set its price equal to ______ in Market B. a) 240 b) 380 c) 440 d) 480 e) None of the above are correct. 3. The firm’s revenues in Market B equal: a) 7,600 b) 42,800 c) 68,000 d) 115,200 e) None of the above are correct. 4. This firm earns an economic profit equal to: a) -14,000 b) 3,000 c) 8,000 d) 12,000 e) None of the above are correct. 5. Billy Bob operates a carwash in Tulsa, Oklahoma. He knows the price elasticities of demand for a carwash are -1.5 for Okies and -2.0 for Texans. If he charges drivers of cars with Oklahoma plates \$15 for a car wash, how much will he charge drivers of cars with Texas plates? a) \$5 b) \$10 c) \$15 d) \$20 e) None of the above are correct. 6. Two firms with shares of total industry sales of 15 percent and 5 percent plan to merge. This merger will increase the HHI by: a) 75 b) 100 c) 125 d) 150 e) None of the above are correct. Consider the following simultaneous move game: Player 2 Strategy Up Down Player 1 Up (100, 150) (200, 300) Down (150, 200) (300, 100) 7. Which of the joint strategies [(Player 1’s move; Player 2’s move)] below is a Nash equilibrium? a) (Up; Up) b) (Up; Down) c) (Down; Up) d) (Down; Down) e) None of the above. 8. We would expect Player 1 to be willing to pay up to ______ dollars for the right to make the first move, assuming Player 2 would observe this move before she makes her move. a) 0 b) 50 c) 100 d) 150 e) 200 9. Player 2 would be willing to pay up to _______ dollars to prevent Player 1 from making the first move. a) 0 b) 50 c) 100 d) 150 e) 200 10. An increase in price will increase total revenue in the region of the demand curve for which: a) |E Q,P | = 0 b) 0 < |E Q,P | < 1 c) |E Q,P | = 1 d) |E Q,P | > 1

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11. Consider the extended form of a sequential game shown below. Here the payoffs shown are (Player 1’s payoff, Player 2’s payoff). For this game we have a subgame perfect equilibrium for a sequence of play: a) Player 1 plays C; Player 2 plays X; Player 1 plays E b) Player 1 plays A; Player 2 plays Y; Player 1 plays D c) Player 1 plays C; Player 2 plays Y; Player 1 plays F d) Player 1 plays B; Player 2 plays Y; Player 1 plays D e) None of the above are correct. 12. The presence of Credit Default Swaps reduced the __________ problem confronting prospective buyers of Mortgage Backed Securities, and increased the systemic __________ problem that worsened our current financial crisis.
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Spring 2009 - Final - Blue - Consider a firm which faces...

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