MBA 651 - QUIZ #10 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. The variance in the returns of project B is - Answers 225
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. Which project has the greatest expected value? - Answers D
People having a bad driving record find it difficult to buy automobile insurance because insurance
companies fear that ___________ may happen if they raise the premiums. - Answers adverse
selection.
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. A risk-averse manager will prefer project - Answers D
Which of the following pricing strategies does not usually enhance the profits of firms with market
power? - Answers marginal cost pricing
Which group of policies aims at discouraging rivals to enter a price war? - Answers price matching,
beat-or-pay, and randomized pricing
If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you
advertise, you will each earn $10 million in profits. However, if one of you advertises and the other
does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1
million. Suppose this game is repeated for a finite number of times, but the players do not know the
exact date at which the game will end. The players can earn collusive profits as a Nash equilibrium to
the repeated play of the game if the probability the game terminates in any period is - Answers close
to zero
A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $30.
Assuming that the new firm is equally as efficient as the incumbent firms, what will the new price be
should the three firms co-exist after the entry? - Answers Equal to $30
A monopoly has produced a product with a patent for the last few years. The patent is going to
expire. What will likely happen to the demand for the patent-holder's product when the patent runs
out? - Answers Demand will decline.
You are the manager of a firm that sells its product in a competitive market at a price of $48. Your
firm's cost function is C = 60 + 2Q2. Your firm's maximum profits are - Answers $228
Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when
5 units of capital and 10 units of labor are employed? - Answers 3
If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the price of sugar
will lead to - Answers an increase in the consumption of sugar.
If quantity demanded for sneakers falls by 6% when price increases 20% we know that the absolute
value of the own-price elasticity of sneakers is - Answers 0.3
People having a bad driving record find it difficult to buy automobile insurance because insurance
companies fear that ___________ may happen if they raise the premiums. - Answers adverse
selection
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. Which project has the lowest variance? - Answers D
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. The variance in the returns of project B is - Answers 225
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. Which project has the greatest expected value? - Answers D
People having a bad driving record find it difficult to buy automobile insurance because insurance
companies fear that ___________ may happen if they raise the premiums. - Answers adverse
selection.
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. A risk-averse manager will prefer project - Answers D
Which of the following pricing strategies does not usually enhance the profits of firms with market
power? - Answers marginal cost pricing
Which group of policies aims at discouraging rivals to enter a price war? - Answers price matching,
beat-or-pay, and randomized pricing
If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you
advertise, you will each earn $10 million in profits. However, if one of you advertises and the other
does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1
million. Suppose this game is repeated for a finite number of times, but the players do not know the
exact date at which the game will end. The players can earn collusive profits as a Nash equilibrium to
the repeated play of the game if the probability the game terminates in any period is - Answers close
to zero
A new firm enters a market which is initially serviced by a Bertrand duopoly charging a price of $30.
Assuming that the new firm is equally as efficient as the incumbent firms, what will the new price be
should the three firms co-exist after the entry? - Answers Equal to $30
A monopoly has produced a product with a patent for the last few years. The patent is going to
expire. What will likely happen to the demand for the patent-holder's product when the patent runs
out? - Answers Demand will decline.
You are the manager of a firm that sells its product in a competitive market at a price of $48. Your
firm's cost function is C = 60 + 2Q2. Your firm's maximum profits are - Answers $228
Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when
5 units of capital and 10 units of labor are employed? - Answers 3
If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the price of sugar
will lead to - Answers an increase in the consumption of sugar.
If quantity demanded for sneakers falls by 6% when price increases 20% we know that the absolute
value of the own-price elasticity of sneakers is - Answers 0.3
People having a bad driving record find it difficult to buy automobile insurance because insurance
companies fear that ___________ may happen if they raise the premiums. - Answers adverse
selection
You are a hotel manager, and are considering four projects that yield different payoffs, depending
upon whether there is an economic boom or recession. There is a $50% probability of a boom and a
50% probability of a recession. The potential payoffs and corresponding payoffs are Project A makes
$20 in a boom and -$10 in a recession, Project B makes -$10 in a boom and $20 in a recession, Project
C make $30 in a boom and -$30 in a recession, and Project D makes $50 in both a boom and a
recession. Which project has the lowest variance? - Answers D
