BUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITY
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Course
BUS 620 (BUSI620)
Institution
Liberty University
BUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITYBUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITYBUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITYBUSI 620 TEST 2 / BUSI620 TEST 2:LATEST-LIBERTY UNIVERSITY
Question 1
A movie theater that charges a lower price for matinees than for evening showings
is
engaging in third degree price discrimination
Question 2
The market demand curve for a perfectly competitive industry is QD=122P. The
market supply curve is QS=3+P. The market will be in equilibrium if P=3 and
Q=6
Question 3
An individual is indifferent between a certain payment of $20 and a game that will
pay $50
or nothing with equal probabilities. The individual has a certainty equivalent
coefficient of 0.80
Question 4
A market is comprised of five firms and their market shares are 30%, 25%, 20%,
15%, and
10%. What is the Herfindahl index for the industry? 2,250
Question 5
An investment opportunity will pay $10 with a 20% probability, $20 with a 40%
probability,
$30 with a 30% probability, and $40 with a 10% probability. What is the standard
deviation
of the investment? 9
Question 6
The fully allocated cost of a product is $45. If the firm wants to use a markup of
30%, then it
should charge a unit price of. $58.5
, Question 7
Investment A has an expected value of 5 and a standard deviation of 2. Investment
B has an
expected value of 10 and a standard deviation of 5. Using the coefficient of
variation
approach to comparing these two investments, Investment A would be selected
because it has the smaller coefficient of variation.
Question 8
Suppose that the firms in an oligopolistic market engage in a price war and, as a
result, all firms earn lower profits. Game theory would describe this as a
prisoners’ dilemma.
Question 9
Identify the Nash equilibrium in the following game. 0,0
Question 10
The fully allocated cost of a product is $10. If the price elasticity of demand for the
product is -2, then the firm's optimal markup is 100%
Question 11
A firm plans to raise $4 million by borrowing at an interest rate of 16% and to raise
$1 million by issuing common stock. The firm's stock has a beta coefficient of 2,
the risk free interest rate is 6%, the average rate of return on stocks is 9%, and the
marginal tax rate is 25%. What is the firm's composite cost of capital? 12%
Question 12
A firm that uses profits earned in one market to sell a product or service below its
average
variable cost in another market is engaged in predatory pricing
Question 13
In game theory, a dominant strategy refers to a choice that is the best response
regardless of the strategy selected by another player
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