"econMore Practice - Discrimination Industry Org Etc

"econMore Practice - Discrimination Industry Org Etc -...

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Unformatted text preview: ABC Widget Company is a monopoly, confronting the following demand for its product (“Widgets”). ABC’s marginal costs of production are constant, equal to $8.00/Widget. ABC has no fixed costs. 29. If ABC Widget Company is a non-price discriminating , revenue maximizer, it will produce and sell _____widgets a) 1000 b) 1200 c) 1600 d) 2000 e) 2400 30. If ABC Widget Company is a non-price discriminating, revenue maximizer , it will earn economic profits of _______dollars. a) b) 4,000 c) 6,000 d) 8,000 e) 12,000 31. If ABC Widget Company is a non-price discriminating, profit maximizing , firm it will produce and sell _____widgets. a) 1000 b) 1200 c) 1600 d) 2000 e) 2400 32. If ABC Widget Company is a non-price discriminating, profit maximizing , firm it will earn economic profits equal to: a) b) 4,000 c) 6,000 d) 8,000 e) 12,000 33. If ABC Widget Company practices perfect price discrimination; it will earn economic profits equal to: a) b) 4,000 c) 6,000 d) 8,000 e) 12,000 34. If ABC Widget Company practices perfect price discrimination; it will produce and sell ___ widgets. a) 1000 b) 1200 c) 1600 d) 2000 e) 2400 P Q D 1000 2000 3000 4000 $5.00 $10.00 $15.00 11. The own price elasticity of market demand for apparel in the United States is -1.1. For a representative firm in this industry the own price elasticity of demand is -4.1. The Rothschild Index for this industry equals _______, which suggests that this is a ___________ industry. a) 0.27; competitive b) 3.73; competitive c) 0.27; non-competitive d) 3.73; non-competitive 18. Long-term contracts become longer a) when specialized investment becomes more important. b) when the exchange environment is more complex. c) spot markets work well. d) marginal costs are declining. 19. In negotiating a purchase in spot markets, or the terms of contracts extending into the future, parties incur transactions costs generated by asymmetries of information. This is the problem of: a) adverse selection b) free riders c) moral hazard d) opportunism which leads to hold ups. 20. When relationship-specific exchange occurs in highly complex contractual environments, the best way to purchase inputs is through a) spot markets. b) vertical integration. c) short-term agency agreements. d) long-term contracts. 21. A drawback of separating ownership from control by creating a firm is: a) The losses of specialization. b) Increased transaction costs. c) The principal-agent problem. d) Synergies of team production. 22. Suppose compensation is given by W = 512,000 + 217 π + 10.08S, where W = total compensation of the CEO, π = company profits (in millions) = $200, and S = Sales (in millions) = $400. What percentage of the CEO's total earnings are tied to profits of the firm: a) 8.2%. b) 10.9%. c) 7.8%. d) 5.1%....
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This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue.

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"econMore Practice - Discrimination Industry Org Etc -...

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