UNC MBA 650 Final Exam Questions and
Correct Answers 100% Updated
Question 1
If an insurance company cannot distinguish between the riskiness of potential
customers, then:
a. Their risk pool will have relatively more high risk customers than the population at
large.
b. They primarily sell to low risk customers.
c. They earn more because they can overcharge the low risk customers.
d. They can break at least even if they charge a rate based on the average risk in the
population at large.
Correct Answer
a. their risk pool will have relatively more high risk customers than the population at
large
Question 2
When devising a strategy with considerable uncertainty:
a. develop a plan that is complex enough to handle every conceivable contingency.
b. develop a plan that leaves room for improvising when you experience an
eventuality you did not anticipate.
c. develop a plan that, when you experience an eventuality you did not anticipate, you
ignore it.
d. develop a plan that, when you experience an eventuality you did not anticipate, you
scrap the whole strategy.
Correct Answer
b. develop a plan that leaves room for improvising when you experience an
eventuality you did not anticipate
Page 1 of 102
,Question 3
For direct price discrimination to work effectively
a. the low valued customers should not be able to engage in arbitrage
b. you need to charge the same price to the different groups
c. both groups should have the same elasticity of demand
d. none of the above
Correct Answer
a. the low valued customers should not be able to engage in arbitrage
Question 4
Which one of the following is a way to get out of a repeated Prisoner's Dilemma Nash
Equilibrium?
a. Do not be forgiving
b. Be forgiving
c. Punish the competitors severely forever
d. All of the above
Correct Answer
b. be forgiving
Question 5
Consider a simultaneous move game between a union and a company. If both the
parties bargain hard, each would gain nothing. If only one party bargains hard the
accommodating party gets a profit of $1 million while the bargaining party gets a $5
million, while if they both accommodate, they each get $3 million.
Could either party do better?
a. Yes, both parties can do better without hurting each other if they cooperated
b. Yes, one party can do better, but only at the expense of the other
c. No, neither party can do better
d. No, each party has its best possible outcome
Correct Answer
b. Yes, one part can do better, but only at the expense of the other
Page 2 of 102
,Question 6
Three bidders with values of $5, $100, and $20,000 are participating in an oral English
auction. What is the likely resulting price?
a. $5
b. $100
c. $10,000
d. $20,000
Correct Answer
b. $100
Question 7
which of the following is FASE?
a. to reduce cannibalization among products, make the products more homogenous
b. after acquiring a substitute product, raise prices on both the products
c. after acquiring a complementary product, lower prices on both the products
d. all of the above
Correct Answer
a. to reduce cannibalization among products, make the products more
homogenous
Question 8
Transcendent Technologies is deciding between developing a complicated thought-
activated software, or a simple voice-activated software. Since the thought-activated
software is complicated, it only has a 30% chance of actually going through to a
successful launch, but would generate revenues of $50million if launched. The voice-
activated software is simple and hence has a 80% chance of being launched but only
generates a revenue of $10million. The complicated technology costs 10million,
whereas the simple technology costs 2million.
If the complicated technology costs $10million to develop, what is the expected gain
from developing the thought activated software
a. $5 million
b. $10 million
c. $25 million
d. $50 million
Correct Answer
a. $5 million
Page 3 of 102
, Question 9
If an insurance customer is risk averse, that the amount she would pay to avoid a 50%
probability of a loss of $100 at:
a. Less than $50.
b. Exactly $50.
c. More than $50.
d. None of the above.
Correct Answer
c. more than $50
Question 10
Purchasing a profitable supplier or customer may not make you more profitable
because:
a. The sellers have an incentive to unload their most profitable assets.
b. The sellers do not have as much information about his business as you do to set an
efficient price.
c. The buyer may become victim of adverse selection.
d. The buyer cannot convince the seller that his assessment of the value is more
accurate.
Correct Answer
c. the buyer may become victim of adverse selection
Question 11
anagers of profit centers are usually given a lot of discretion because
M
a. They always do an excellent job
b. The company can never judge their performance
c. The company has a clear performance evaluation metric
d. They rarely ever do a good job
Correct Answer
c. the company has a clear performance evaluation metric
Page 4 of 102
Correct Answers 100% Updated
Question 1
If an insurance company cannot distinguish between the riskiness of potential
customers, then:
a. Their risk pool will have relatively more high risk customers than the population at
large.
b. They primarily sell to low risk customers.
c. They earn more because they can overcharge the low risk customers.
d. They can break at least even if they charge a rate based on the average risk in the
population at large.
Correct Answer
a. their risk pool will have relatively more high risk customers than the population at
large
Question 2
When devising a strategy with considerable uncertainty:
a. develop a plan that is complex enough to handle every conceivable contingency.
b. develop a plan that leaves room for improvising when you experience an
eventuality you did not anticipate.
c. develop a plan that, when you experience an eventuality you did not anticipate, you
ignore it.
d. develop a plan that, when you experience an eventuality you did not anticipate, you
scrap the whole strategy.
Correct Answer
b. develop a plan that leaves room for improvising when you experience an
eventuality you did not anticipate
Page 1 of 102
,Question 3
For direct price discrimination to work effectively
a. the low valued customers should not be able to engage in arbitrage
b. you need to charge the same price to the different groups
c. both groups should have the same elasticity of demand
d. none of the above
Correct Answer
a. the low valued customers should not be able to engage in arbitrage
Question 4
Which one of the following is a way to get out of a repeated Prisoner's Dilemma Nash
Equilibrium?
a. Do not be forgiving
b. Be forgiving
c. Punish the competitors severely forever
d. All of the above
Correct Answer
b. be forgiving
Question 5
Consider a simultaneous move game between a union and a company. If both the
parties bargain hard, each would gain nothing. If only one party bargains hard the
accommodating party gets a profit of $1 million while the bargaining party gets a $5
million, while if they both accommodate, they each get $3 million.
Could either party do better?
a. Yes, both parties can do better without hurting each other if they cooperated
b. Yes, one party can do better, but only at the expense of the other
c. No, neither party can do better
d. No, each party has its best possible outcome
Correct Answer
b. Yes, one part can do better, but only at the expense of the other
Page 2 of 102
,Question 6
Three bidders with values of $5, $100, and $20,000 are participating in an oral English
auction. What is the likely resulting price?
a. $5
b. $100
c. $10,000
d. $20,000
Correct Answer
b. $100
Question 7
which of the following is FASE?
a. to reduce cannibalization among products, make the products more homogenous
b. after acquiring a substitute product, raise prices on both the products
c. after acquiring a complementary product, lower prices on both the products
d. all of the above
Correct Answer
a. to reduce cannibalization among products, make the products more
homogenous
Question 8
Transcendent Technologies is deciding between developing a complicated thought-
activated software, or a simple voice-activated software. Since the thought-activated
software is complicated, it only has a 30% chance of actually going through to a
successful launch, but would generate revenues of $50million if launched. The voice-
activated software is simple and hence has a 80% chance of being launched but only
generates a revenue of $10million. The complicated technology costs 10million,
whereas the simple technology costs 2million.
If the complicated technology costs $10million to develop, what is the expected gain
from developing the thought activated software
a. $5 million
b. $10 million
c. $25 million
d. $50 million
Correct Answer
a. $5 million
Page 3 of 102
, Question 9
If an insurance customer is risk averse, that the amount she would pay to avoid a 50%
probability of a loss of $100 at:
a. Less than $50.
b. Exactly $50.
c. More than $50.
d. None of the above.
Correct Answer
c. more than $50
Question 10
Purchasing a profitable supplier or customer may not make you more profitable
because:
a. The sellers have an incentive to unload their most profitable assets.
b. The sellers do not have as much information about his business as you do to set an
efficient price.
c. The buyer may become victim of adverse selection.
d. The buyer cannot convince the seller that his assessment of the value is more
accurate.
Correct Answer
c. the buyer may become victim of adverse selection
Question 11
anagers of profit centers are usually given a lot of discretion because
M
a. They always do an excellent job
b. The company can never judge their performance
c. The company has a clear performance evaluation metric
d. They rarely ever do a good job
Correct Answer
c. the company has a clear performance evaluation metric
Page 4 of 102
