Industrial Organization - Industrial Economics | ECON 4350, Exams of Managerial Economics

Download Industrial Organization - Industrial Economics | ECON 4350 and more Exams Managerial Economics in PDF only on Docsity! Tuesday, February 22,2000 Dr. David R. Kamerschen ' 2:00 - 3:15 p.m. 212 Sanford Hall ' ECONOMICS 4350; 6350 Spring Semester - Second Examination Jeffrey Church and Roger Ware, Industrial Or$rnization: A Strategic Approach (New York: Irwin McGraw-Hill, 2000) N.B. READ THE FOLLOWING BEFORE STARTING THIS EXAMINATION (1) There are 50 objective questions on this examination. Each question counts 2.4 points for a total of 120.0 points. To calculate your grade, multiply the number of correct answers by 2.4. Mark your answers carefully on the answer sheet that has been provided for you. In answering the multiole choice questions select the best sinqle alternative answer. In answering the true-false questions remelqber that if a statement is not always true. then it should be considered false. On vour answer sheet indicate True = A. False : B. ' .\. "" (2) P{.J"t YOUR NAME, COURSE (ECN 4350) AND DATE ON YOUR ANSWER SIIEET. . You do not need to put anything else or fill in'any bubbles. Make sure that jrou have answered ' . each question. Do not fail to transfer an answer from your examination to the answer sheet. (3) At the end of the examination, turn in your answer sheet. You may keep your copy of the exainination. The answer sheet will be returned to you and the answe$ will be discussed at our next class mee1ing so be sure to bring your copy of the examination with you. (4) You are strbngly advised against academic dishonesty in any foim, as the iixtructor will iollow strictly the prevaiiing University of Georgia policy regarding honesty and integrity. This policy is' set out in the manual entitled A Culture of Holestv: Policies and Pro'cedures on Academic Honesty (Athens: UGA, 1994). "Academic hcinesty is defined broadly and simply-the ' performance of all academic work without cheating, lying, stealing, or receivirig assistance from .r any other person or using any source of informaiion not appropriately authorized or attributed" (&td., p. 3). During the examinations you may lbok gp for inspiration, or down"in desperation--' but'not.to the side for information! r. (5) Allocate your time wisely, according to marginalist principles. -r ,t(6j The answers to the objective questioni will be posted outside 212 Sanford Hall following the . completion time of the exaniination. Please do not mingle outside the classroom after the ' examination as the p€ople in the nbxt class need to get into their seats. SHOW CONSIDERATION FOR'YOI.JR CLASSMATES AND DO NOT TEAR TIM ANSWER, SIIEETS OFF TIIE WALL. (7) cooD LUCK. BE SURE TO CHECK THAT YOUR'EXAMINATION HAS 50 QUESTIONS AND 9 PAGES To be successful, the ur" of udu"itising to signal high quality requires a. repeat sales' b. must be accompanied by a low price c. must be accompanied by a high price d. None of these are correct 2. a. b,. ' \.o \. a J, Among the basic elements of a game are the rules. Wrich is something not specified by the rules of a game? The payoffs associated with each move The information a player has at each move The actions available to a player at each move The timing of all players moves , Nohe of these are correct Is a static game of complete knowledge players know the payoffs ofopponents eaOh player moves once and does not know what action the olher player takes; this may be because players niove simultaneously c. can be played simultaneously or sequentially d. aand b e. AII of these are corrict j= Consider the game with tt19 following payoff matrix . This game . a. Has no dominant strategy b. Has a dominantpayoff (4,2) c. Has a dominant payoff(l, 4). d- Is irrational because the three highest payoffs.entail ionflicting strategies e. None of these are correct 5. A Nash equilibrium is a. a strategy profile srich that every player's strategy is a best response to the strategic of all other playersl b. is always unirlue c. can lead to a solution that a player regrets " d. All of these are corect - e. None of these are correct , 6. ' Consider a pair of Cournot competitors. "If firm one expects to produce X2 quantity at - irrice P. "The residual demand curve for firm two rvould bea. that portion of the demand curve below P and to the right of X2 b. that portion of the supply curve above P and to the right of X2 c. tliat portion of the demand'curve above P and to the left of X2 Pd. that portion of the supply curve belorv P and to the left of X2 e. can't tell, not enough inforrhation a"; \. 4. Left Middle Right up' (1,4) (3,3) (2,2) Down (0,3) (4,2) (5,1 ) L ff r / i- ECN 4350;6350; EXAM 2; Feb. 22,2000 t 20. If tlie Herfindahl-Hirshman Index number of equal size firms is _. numbers equivalent (N) shorving .{ /v (Hi{I) is 2,000. the ,ryI the a. b. c. d. e. I 5 10 20 None of these are correct. 21. There are.presently?bout ' 4-digit SIC indirshies inthe according to the Bureau of the Census. a. 20-30. b. i00 - 200 c. 400 - 500 d. 1,000 - 1,500 e. 4.000 - 6.000' U.S. manufacturing sector E A weakness of a four-firmisellers' concentration ratio is that it . a. may not accurately reflect economic markets and the presence of potential entrants. b is based on national figures and ignores exports and imports. c. does not describe the entire number and size of firms and provides no information about the relative size of these four-firms. d. " fails to reflect tumover and involves only structural elements and does not necessarily predict conduct. e. All of tliese are correct 23. A merger of two rivals with rfrarkets share of 20 and 10 percent respeictively, increases the HHI 22. by a. b. c. d. e. 100 200 400. 600 None of these are correct J Joo .. ' :rl['/) 24.The-measureofconcentrationisbasedontheLorenzcurve a. four-firin sellers , b. entropyc. HHI .3 :iffff3:ii?'"o,."", * '. ' 25. There has"been little change in sellers'market concentration in,the U.S. since the 1920s and even less since World War II. '. a. True b. False ECN 4350; 6350; EXAM 2; Feb. 22, 2000 1 26. The smallest output'that a plant can produce such that its" lone-run ave'rage costs are minimized is called its a. sunk costs b. " optimal output rate c. economies of scale d. economies of scope e. minimum efficient*scale ,27. itt" it1 weighted (ty value-added) average four-firm seilers' concehtration ratio for .all " manufacturing in 1982 'is Yo and the (2) propiirtion. of manufaituring value-added originating in industries with four-firm selleri' concedtration ratio of 50% or higher in 1982 is r%. \4, b. a 31;25 ':'\ )<.?,1 55;67. None of these are correct 28. 29. A mechanism that firms can employ to convince the consumer that an experience good is of high quality is a. reputation b. commitment c. All of these are correct d. None of these are correct , With experience goods, by producers crbates a iendency to lower product quality if consumers cannot immediaiely observe the change. a. moral hazard b: . adv'erse selection \* reputation " i d-- cominitment e. None of these are correct , 30. In -discriminating equilibrium, the quality of loiv-quality items is ieaucld by a monopolist to prevent other consumers from,switching away from her high-quality product. \ + price- b. quality B. inferiority N, lemons e. All of these are correct A'game has this element a. ' players and rulesb. oiltcomes and payoffs 'c. All of these"are correct d. None of these are correct 31. J!- We can distingui3h as a game a. static and dynamic games oTcomplete information , 'r b. static and dynamic games of incomplete information c. All of these are correct d- .'None of these are correct Game-theoretic analysis is Uuilt on the fundamental assumption-of rationality common knowledge All of these ar€ correct Nonb of these are correct ;-equilibrium'thestrategychosenbyeachplayerisabestiesponsetothe strategies of all other players and is the most common and'most useful of all equilibrium concepts applied to industrial economic problems. ? a. short-run b. long-run c. Prisoners'dilemrfia d. Nash e. focal point ' One rule/assumption of Cournot's static duopoly mbdel of complete information is 33. )+. a. b. c. d., ^?5 1 36. a. products aie hom ogeneous b. firni s choose output \. firms compete with each other just once and they make their production decisions' simultaneously d" there is no entry by other producerS \. All of these are correct i_ This is a propbrty of a Cournot equilibrium \. The Cournot duopolists will exercise market power. The Cournot equilibrium price will exceed the marginal cost of either firm. - b. The market power of a Cournot dluopolist is limited by tlie market price elastitity of demand. The more elastic demand (the greater q), the lesS the markup of price over marginal cost. Cournot markups are less than monbpoly markups since market shares (s,) will be less than l. \ There is an endogenous relationship betweeh marginal cost and market share. , Firms with lower marginal costs lvill have greater market shares: more efficient firms ivill be larger. - 61. The greater the number of competitors, the smaller each firm's market share and ..the less its market power. The elasticity of firm i's residual demand curve is q/s;. By reducing its market share (s,), increases in the number of firms increase tlre .. eldsticity of a firm's residualdemand, reducing'its market po\,\'er. This indicates the importance of barriers to entry on a firm's market power: The higher barriers to entry, the felver the number of competitors and the greater a firm's market power. e. All of these are correct t