Exam 2 Practice Problems

Exam 2 Practice Problems - G202 Practice Problems for Exam...

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G202 Practice Problems for Exam 2 I will update these practice problems after any extra credit quizzes (that occur before exam 2) and I will also post some additional questions in here before the exam 2 date to make sure that you have 25 questions to practice for the exam with…so please check this file often. 1) Which of the following statements is true ? A) A firm with market power will have a higher markup of price over cost when its demand is inelastic. B) A firm with market power will have a higher markup of price over cost when its demand is elastic. C) A firm with market power’s markup does not depend on demand elasticity. D) A firm with market power is not able to price above its marginal costs. 2) When compared to the efficient industry, a firm with significant market power will A) produce more output and charge a lower price. B) produce more output and charge a higher price. C) produce less output and charge a lower price. D) produce less output and charge a higher price. 3) According to the DeBeers case, which of the following is a correct statement? A) DeBeers was unsuccessful at capturing a significant share of the U.S. diamond market because of strict ant-trust policies. B) DeBeers uses stockpiling to balance the number of diamonds released to the market in an effort to stabilize diamond valuations at a high level. C) DeBeers does not actually control any of the raw diamond mines located throughout the world. D) DeBeers and its subsidiary have little influence over world diamond prices, but they are able to effectively influence the world output of diamonds. 4) In regards to the Chiquita International case, which of the following is an incorrect statement about the common EU policy on banana imports? A) The common policy established preferential banana trading rules for former colonies of the EU countries. B) The common policy created a surplus of bananas and decreased banana prices in the European market. C) Germany, one of the EU members, was against the formation of the EU’s common policy. D) The common policy weakened the position of the Chiquita company in the European market.
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Consider the following payoff matrix and answer questions (5) and (6): Firm A Firm B Low Price High Price Low Price (4,3) (6,4) High Price (5,7) (8,5) 5) Which of the following statements is true regarding the secure strategies of the two firms? A) Only Firm A has a secure strategy to play high price. B) Only Firm B has a secure strategy to play high price. C) Both firms have a secure strategy to play high price. D) Neither firm has a secure strategy to play high price.
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This note was uploaded on 04/24/2011 for the course ECON 101 taught by Professor Brentkreider during the Spring '07 term at Iowa State.

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Exam 2 Practice Problems - G202 Practice Problems for Exam...

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