FINAL2011EEP142 - EEP 142 Industrial Organization with...

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EEP 142 Industrial Organization with Applications to Agriculture and Natural Resources Spring - Villas-Boas, Final 2011 due May 11 by 4pm by turning in to me, in person or sliding under my door and emailing me that you have turned it in waiting for my email reply confirmation. Please write your answers ONLY in the answer sheet in the last THREE pages. 1 Exam has SIX pages, BUT THE LAST THREE ARE THE ANSWER SHEET PAGES TO BE TURNED IN Was fun to have you in class, best wishes and have a great Summer! (Please choose one of the explanations in multiple choice questions below) A1. After some months of successful predation (i.e., finally eliminating its rival), Miss Young’s husband can charge henceforth the monopoly prices. Choose one of the answers below and enter into the answer sheet in back. Same applies to all remaining questions. True. After the predation eliminates rival, the husband is alone in the market therefore can charge monopoly prices. Depends. After predation eliminates the rival, the husband cannot charge monopoly prices because even though he is alone, if other firms can enter easily, they will do so if the husband raises the prices to monopoly prices. False. After predation eliminates the rival, the husband cannot charge monopoly prices henceforth because the consumer stops buying the product. A2. The lemons problem does not occur in the real lemons market if neither consumers nor the producers know the quality of each lemon for sale until they both consume it. Statement is True or Statement is False Part B: B1. Alpha Airlines, the only carrier currently offering flights to and from town A heard that Beta Airlines was thinking of entering the market. In an effort to deter Beta, Alpha threatens that it will respond to Betas entry with a price war. Suppose Beta believes the threat. In what way can Beta minimize the losses of such a price war other than by choosing not to enter the route to and from town A? (give me two ways she can do this) B2. Why does an antique store offer the following add at the store front “Like my grandfather used to do to his customers I too follow this policy. Buy an item from us and we will buy it back after a year plus 10 percent more of the price you paid if you are not happy.” Please provide a two line answer. B3. Theory of the firm questions: A contract between a franchiser and a new franchisee specifies that the latter has to buy a huge neon sign with the logo of the franchise. The neon sign is very expensive. Explain (giving two reasons) why such a requirement (neon sign as a clause in contract) may be optimal for the franchiser? Give me a two line sentence maximum reply.
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This note was uploaded on 06/06/2011 for the course EEP 142 taught by Professor Villas-boas during the Spring '11 term at University of California, Berkeley.

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FINAL2011EEP142 - EEP 142 Industrial Organization with...

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