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Managerial Economics

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Which of the following enhances the ability of waste companies to collude?

a) decals on waste receptacles

b) high interest rates

c) differentiated nature of products

d) large number of firms

When a worker announces that he plans to quit, say next month, the "threat" of being fired has no bite. The worker may find it in his interest to shirk. What can the manager do to overcome this problem?

a) "Fire" the worker as soon as he announces his plans to quit.

b) Provide the worker some rewards for good work that extend beyond the termination of employment with your firm.

c) Monitor the worker more frequently than usual and fire him when he is caught shirking.

d) Pay the worker some rewards when he announces his plan to quit.

Which of the following is the major means to signal good quality of goods by firms?

a) sales.

b) advertisement.

c) warranties/guarantees.

d) both a and b.

Which of the following is an example of a network?

a) Wireless telephone service.

b) Railroads.

c) Internet.

d) All of the above are networks.

In general, adding one more user to a two-way network tends to

a) benefit the new user more than the existing users.

b) benefit existing users more than the new user.

c) provide equal benefits to existing users and the new user.

Selling a product below cost to gain a foothold in the market in order to eliminate the inefficiencies introduced by lock-in is known as

a) predatory pricing.

b) limit pricing.

c) penetration pricing.

d) the price-cost squeeze.

Vertical foreclosure is an example of

a) a firm raising its rivals' costs.

b) a firm that merges with a rival firm with the intention of eliminating the rival firm's product from the market.

c) a firm that controls an essential upstream input refusing to sell to other downstream firms that need the input.

d) a and c.

A firm that engages in predatory pricing benefits from

a) having deeper pockets than its prey.

b) building a reputation for taking tough actions to drive a competitor out of the market.

c) having its prey stockpile its product.

d) a and b only.

e) all of the above.

When the average cost curve lies above the entrant's residual demand curve, an entrant

a) can profitably enter the market.

b) cannot profitably enter the market.

c) is indifferent between entering and not entering the market.

Nodes are

a) examples of positive network externalities.

b) examples of negative network externalities.

c) different points in geographic or economic space linked by a network.

d) None of the above.

Which of the following makes it more difficult for an incumbent to successfully engage in limit pricing?

a) Complete information.

b) Commitment mechanisms.

c) Learning curve effects.

d) A firm's past reputation for being tough on entrants.

Which of the following is true concerning negative externalities?

a) Firms tend to produce more than the efficient level of output?

b) Society gains because firms do not pay the external costs of production.

c) Perfect competition is better than monopoly from the viewpoint of society even in the presence of negative externalities.

d) With negative externalities, a monopoly will always produce an output level less than is socially efficient.

Which of the following is not a result of certification of skills?

a) A stated minimum standard of service is provided.

b) A price higher than that which would have been charged if there were no certification.

c) A bigger quantity exchanged than that which would have resulted if there were no certification.

d) A profession is formed.

Under the merger guidelines written by the DOJ and FTC a merger is may not be challenged if:

a) there is significant foreign competition.

b) the firms involved have monetary problems.

c) there is an emergence of new technology.

d) all of the above.

A price ceiling imposed on a monopoly may:

a) lead to a shortage.

b) lead to no shortage.

c) drive the monopolist out of business.

d) all of the above.

What is the immediate result of applying the Clean Air Act to a previously non-regulated industry?

a) price decreases and production is reduced.

b) price increases and production is reduced.

c) price decreases and production is enlarged.

d) price increases and production is enlarged.

Which of the following raises domestic prices only when demand is relatively low?

a) domestic subsidies.

b) lump sum tariff.

c) excise tariff.

d) both b and c.

Which of the following raises domestic prices when demand is relatively high?

a) domestic subsidies.

b) lump sum tariff.

c) excise tariff.

d) both b and c.

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