ECON2410 Economics of Business Strategy Semester 2, 2020
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ECON2410 Semester Two Final Examination 2020
An industry is comprised of 10 irms, each with an equal market share. What is the four-irm concentration ratio of this industry? a. 0.80 b. 0.60 c. 0.20 d. 0.40 |
In a monopoly in the long-run equilibrium, the irm __________.
a. produces at the socially optimal level
b. is productively eicient
c. produces where marginal cost is less than marginal revenue
d. is allocatively ineicient
What is the diference between limit pricing and predatory pricing?
a. Predatory pricing is for the entrant and limit pricing for the incumbent.
b. Limit pricing is a preemptive strategy used to prevent entry,
whereas predatory pricing takes place after entry has taken
place.
Predatory pricing is for the incumbent and limit pricing
entrant.
d. Predatory pricing is a preemptive strategy used to prevent
entry, whereas limit pricing takes place after entry has taken
place.
If entry is blockaded or accommodated, then an incumbent irm
should not make any efort to deter entry because if blockaded, the
efort is ________ and, if accommodated, the efort is _______.
a. wasted; unnecessary
b. superluous; wasted
c. necessary; wasted
d. worthwhile; superluous
Which of the following is true?
a. In Bertrand oligopoly with diferentiated products, the reaction function of a irm is downward sloping.
b. In Cournot oligopoly irms produce an identical product at a constant marginal cost and set prices.
c. In Cournot oligopoly, the reaction function of a irm is upward sloping.
d. None of the above is true.
If a Cournot duopolist announced that it will double its output, then ___________.
a. the other irm does not view the announcement as credible
b. the other irm will shut down
c. the other irm will double output as well
d. it becomes the leader
What type of entry exists if structural entry barriers are low, and either (1) entry-deterring strategies will be inefective or, (2) the cost to the incumbent of trying to deter entry exceeds the beneits it could gain from keeping the entrant out?
a. Blockaded entry.
b. Deterred entry.
c. Accommodated entry.
d. Judo entry.
What is one diference between the Cournot and Stackelberg models?
a. Total output in Stackelberg is less than total output in Cournot.
b. Proits are zero in Cournot and positive in Stackelberg.
c. In Stackelberg, proit earned by the follower is less than proit
earned by irm 2 in Cournot.
d. Total output produced by the follower in Stackelberg is greater
than total output produced by irm 2 in Cournot.
Large irms ofer a price umbrella (to smaller irms) only if the amount of proit ________.
a. they lose, due to matching small irms’ lower price, is less than the amount of proit they lose when maintaining their higher price
b. they lose, due to matching small irms’ lower price, is greater than the amount of proit they lose when maintaining their higher price
c. they lose is less than 10%
d. they lose is greater than 10%
Assume irm 1 but not irm 2 is contemplating making a strategic commitment. Fudenberg and Tirole call it a ________ if the tactical variables are _______ and the commitment makes irm 1 __________.
a. fat-cat efect; strategic complements; tough
b. top-dog; strategic substitutes; soft
c. puppy-dog ploy; strategic complements; tough
d. lean and hungry look; strategic complements; soft
According to Porter, internal rivalry is likely to be more intense when ______.
a. consumer switching costs are low
b. product diferentiation is high
c. brand loyalty is signiicant
d. Both (a) and (b) are correct.
According to Porter, in order to be a beneit leader, a company shouldeither ______ or _______.
|
a.
b.
c.
d. |
undercut the rivals’ prices and sell more than the rivals; charge a price premium and attain higher price-cost margins than the rival undercut the rivals’ prices and sell more than the rivals; match the rivals’ prices and attain higher price-cost margins than the rivals can match the rivals’ prices and sell more than the rivals do; charge price premium and attain higher price-cost margins than the rival undercut the rivals’ prices and sell more than the rivals; match the rivals’ prices and sell more than the rivals |
Cost leadership as a strategy requires a irm to _________.
a. aggressively search out eiciencies to maintain the lowest cost structure
b. be unique in its product ofering
c. aim at a cost advantage in a niche market
d. aim to be similar to its competitors in most operations
Which of the following is valuable in a standards war?
a. Competitive advantage.
b. Early mover advantage.
c. Late mover advantage.
d. Technological advantage.
Which best describes consumer surplus?
a. The profits made by a firm.
b. The price consumers are willing to pay.
c. The diference between the price a consumer pays for an item
and the price he/she is willing to pay for it.
d. The cost of providing a unit.
Explain - in 4 to 6 sentences - the concepts of Technical and Agency
eiciency in the context of vertical integration of irms.
Name and explain - in 4 to 6 sentences - three make-or-buy fallacies in
the context of a irm's position within the vertical production chain.
Even if irms use strategies such as tit-for-tat, price coordination may
not be successful. Name and explain - in 4 to 6 sentences - three
impediments to price coordination in oligopolistic markets.
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Explain - in 4 to 6 sentences - the three entry conditions described by
Joseph Bain in his typology of entry conditions.
The demand curve for product x is given by
Qx = 330 - 0.2(Px)² - 0.1(Py)³ .
What is the cross-price elasticity of demand x with respect to y when
Px = $20 and Py = $10?
Please give the numerical value without dollar sign.
Suppose a irm has $300 million to invest in a new market. Given market uncertainty, the irm forecasts a good scenario where the present value of the investment is $600 million, and a bad scenario where the present value of the investment is $200 million. Assume the irm believes each scenario is equally likely. Suppose that by waiting, the irm can learn with certainty which scenario will arise. If the irm waits one year and learns that the good scenario will happen, its expected net present value of investment is $140 million.
Using the above information, calculate:
(a) the annual discount rate [2 marks] and
(b) the diference in the expected net present value of investment
between waiting a year and then invest and investing today [3 marks].
Consider an industry with two irms. Firm 1 is the Stackelberg leader and sets its quantity irst. Firm 2 is the Stackelberg follower. Suppose demand is D(p)=120-p. Firm 1 has total cost of TC 1(Q)=30Q and irm 2 has total cost of TC2(Q)=20Q.
Give the Stackelberg equilibrium quantities, market price and proits
for both irms. Show your workings for full credit.
There are six active irms in a market. One irm has a market share of 40%, a second 25%, a third 20%, and the other three 5% each.
What is the Herindahl index for this market?
Give your answer using two decimal places.
There are two sandwich sellers on Main Street in Linear City. Seller L is at the left end, seller R is at the right end of Main Street. Main Street is 10 kms long. A total of 100 consumers are equally spaced along the street with transportation cost of $0.5 per km. Seller R charges $8 for his sandwich.
Which price does seller L need to charge to secure a market share of
70%?
Enter the numerical value without dollar sign.
Consider price competition with diferentiated products. Firm 1 has a demand given by D 1=20-p1-0.5 p2. Firm 2 has a demand of D2=20-p2-0.5 p1. Both irms have a total cost function of TC(q)=4q.
Give the equilibrium price for irm 1 without dollar sign.
Specify any assumptions you have made in completing the exam and
to which questions those assumptions relate. You may also include queries you may have made with respect to a particular question, should you have been able to 'raise your hand' in an examination room. |
2023-06-05