Final Mock Sol

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Mock Final Examination Managerial Economics Prof. Volker Hoffmann Prof. Thomas Rutherford Florian Landis February 10, 2012 N.B. Mock questions related to Professor Hoffmann’s case studies are not included here. 1 Multiple Choice Note the one correct answer on your answer sheet. 1. Which of the following statements is most likely true regarding economic and accounting profits? A. Economic profits minus accounting profits generally equal zero. B. Economic profits plus accounting profits generally equal zero. C. Economic profits are generally less than accounting profits. D. Economic profits are generally greater than explicit costs. 2. If the interest rate is 2.5%, $870 received at the end of 8 years is worth how much today? A.…show more content…
14. Which of the following industry structures would you expect to have the highest Rothschild index score? A. Monopoly. B. Perfect competition. C. Monopolistic competition. D. Oligopoly. 15. You are the manager of a firm that produces output in two plants. The demand for your firm’s product is P = 80 - Q, where Q = Q1 + Q2 . The marginal cost associated with producing in the two plants are M C1 = Q1 and M C2 = 8. How much output should be produced in plant 1 in order to maximize profits? A. 2. B. 4. C. 8. D. 14. 16. You are the manager of a firm that sells its product in a competitive market at a price of $150. Your firm’s cost function is C = 125 + 5Q2 . Your firm’s maximum short-run profits are A. $0. B. $500. C. $750. D. $1000. Page 3 17. Which of the following types of oligopoly competition would you expect to result in the lowest market output, other things equal? A. Collusion. B. Betrand. C. Cournot. D. Stackelberg. 18. Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 150 - 2Q. The cost function for each firm is C(Q) = 6Q. The total industry output will be A. 6. B. 12. C. 32. D. 48. 19. Consider the following information for a simultaneous-move game: Strategy Advertise Firm A Don’t advertise Firm B Advertise Don’t advertise 90,90 500,50 50,500 150,150 If both firms play the advertising game year-after-year into the unforeseeable future, then a Nash equilibrium when the interest rate is zero is A. for
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