ECN 601 Exam 2 Questions with Verified
Correct Answers
In a principal-agent relationship
The principal wants the agent to act on her own behalf.
Viceroy Vacations is deciding on how to price its vacation packages. Which of the
following strategies would you suggest?
Advertise them as an all-inclusive vacations.
In a two-person repeated game, a tit-for-tat strategy is:
When players start by cooperating and then mimic the other player's last move.
Compared to simple pricing, price discrimination leads to:
Both B and C
The optimal strategy in a Vickery auction is to:
Bid exactly your value.
Use the table provided to answer the following question. If the groups are of equal size
and the firm can only set one price, how should the firm price the high-end wok?
Price low and sell to both groups.
The general rule to increase profits when two close complementary brands are jointly
owned is:
Increase prices for both brands.
The tradeoff between ____ and _____ is represented as the labor supply curve.
Work and leisure
, If the VP of a product launch thinks that a particular product would be profitable, but
ended up launching an unprofitable product, this will be a:
Type II error
Which of the following is true?
Incentive compensation imposes risk on the agent for which the agent should be compensated
Which of the following would not be illegal according to the Robinson-Patman Act?
"Fred's Farms" offering 50 cents off a crate of strawberries to retailers to match other
suppliers with similar rates.
Which of the following is a screen against adverse selection?
Prospective secretaries must take a typing test before being hired.
Tom wants to avoid any accidents on the work floor of his factory. If an accident does
occur, it would cost him $500,000 in damages. Installing safety equipment would
decrease the probability of an accident occurring from 20% to 10%. However, the
equipment costs $20,000 to install. Would Tom install the safety equipment?
Yes, because it costs him less than its worth.
Tom wants to avoid any accidents on the work floor of his factory. If an accident does
occur, it would cost him $500,000 in damages. Installing safety equipment would
decrease the probability of an accident occurring from 20% to 10%. However, the
equipment costs $20,000 to install. What is his expected loss after installing the safety
equipment?
$50,000
For a production function with a diminishing, but positive, marginal product of labor:
Correct Answers
In a principal-agent relationship
The principal wants the agent to act on her own behalf.
Viceroy Vacations is deciding on how to price its vacation packages. Which of the
following strategies would you suggest?
Advertise them as an all-inclusive vacations.
In a two-person repeated game, a tit-for-tat strategy is:
When players start by cooperating and then mimic the other player's last move.
Compared to simple pricing, price discrimination leads to:
Both B and C
The optimal strategy in a Vickery auction is to:
Bid exactly your value.
Use the table provided to answer the following question. If the groups are of equal size
and the firm can only set one price, how should the firm price the high-end wok?
Price low and sell to both groups.
The general rule to increase profits when two close complementary brands are jointly
owned is:
Increase prices for both brands.
The tradeoff between ____ and _____ is represented as the labor supply curve.
Work and leisure
, If the VP of a product launch thinks that a particular product would be profitable, but
ended up launching an unprofitable product, this will be a:
Type II error
Which of the following is true?
Incentive compensation imposes risk on the agent for which the agent should be compensated
Which of the following would not be illegal according to the Robinson-Patman Act?
"Fred's Farms" offering 50 cents off a crate of strawberries to retailers to match other
suppliers with similar rates.
Which of the following is a screen against adverse selection?
Prospective secretaries must take a typing test before being hired.
Tom wants to avoid any accidents on the work floor of his factory. If an accident does
occur, it would cost him $500,000 in damages. Installing safety equipment would
decrease the probability of an accident occurring from 20% to 10%. However, the
equipment costs $20,000 to install. Would Tom install the safety equipment?
Yes, because it costs him less than its worth.
Tom wants to avoid any accidents on the work floor of his factory. If an accident does
occur, it would cost him $500,000 in damages. Installing safety equipment would
decrease the probability of an accident occurring from 20% to 10%. However, the
equipment costs $20,000 to install. What is his expected loss after installing the safety
equipment?
$50,000
For a production function with a diminishing, but positive, marginal product of labor:
