ECOS3003 Questions for practice and fun
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Questions for practice and fun - ECOS3003
Multiple-choice questions
1. Specific knowledge is:
a. only valuable to one organisation
b. often held only by central planners
c. not important for properly allocating resources
d. inexpensive to transfer
e. expensive to transfer
2. When a manager is faced with opposition to a proposal, the organisational architecture framework suggests that (to gain support) she can:
a. identify non-supportive employees and grant them more decision rights
b. identify supportive employees and grant them more decision rights
c. alter the preferences of non-supportive employees by using charisma
d. assume the right for decision management and decision control
e. none of the above
3. Which statement is true?
a. Logrolls are easier to create when reputations for credible promises are weak.
b. When faced with uncertain proposals, a risk-averse employee’s utility increases with the expected payoffs and increases with the standard deviation.
c. When faced with opposition to a new proposal from employees, to win acceptance for the new proposal, a manger could argue the status quo involved impending financial disaster for the firm.
d. Maintaining flexibility in proposal design effectively demonstrates managerial commitment to the proposal.
e. None of the above
4. Now consider another game between Boeing and Airbus shown below, again relating to the choice between wide and long aircraft. What are the Nash equilibria in this game? (The first
action in the brackets is the strategy of Boeing, while the second is Airbus’s strategy.
Boeing
WIDE
Airbus
LONG
LONG
50 for Airbus
50 for Boeing |
30 for Airbus
60 for Boeing |
60 for Airbus
30 for Boeing |
40 for Airbus
40 for Boeing |
a. (WIDE, WIDE) for Boeing and Airbus respectively) and (WIDE, LONG)
b. (WIDE, WIDE)
c. (WIDE, WIDE) and (LONG, LONG)
d. (LONG, LONG)
e. (LONG, WIDE) and (WIDE, LONG)
5. A firm is more likely to have an internal labour market when:
a. It is in a high-tech industry.
b. Specific investments are relatively important.
c. Effective managers require general skills.
d. There are low turnover costs.
e. the firm is informed about potential employees’ productivity.
The following set-up applies to the next three questions. In a firm there is a manufacturing division and a retail division. The manufacturing division builds television sets and the retail division sells them to the public. The marginal cost of production for each television produced of $4 per unit. The retail division has zero costs of production. Consumer demand is given by ½q = 20 – P, where P is price and q is the quantity demanded.
6. What is the optimal price and quantity sold by the firm?
a. q* = 16 units; P* = $12
b. q* = 8 units; P* = $16
c. q* = 10 units; P* = $15
d. q* = 20 units; P* = $5
e. None of the above
7. Now consider the case when the managers of each division are rewarded on division profits. What will be transfer price for a television between the divisions (t), the quantity sold (q) and the price consumers face (P)
a. t = $12; q = 16 units; P = $16
b. t = $6; q = 8 units; P = $12.
c. t = $4 q = 10 units; P = $15
d. t = $12 q = 8 units; P = $16
e. None of the above.
8. If the manufacturing division can use a two-part tariff, given the head manager of the manufacturing division is rewarded on the basis of profits, what is the fixed fee (F), the per- unit charge per television set (c), the manufacturing division profit ( m) and the retail division profit (r)?
a. F = $0; c = $4; m = $0; r = $128
b. F = $128; c = $4; m = $128; r = $0
c. F = $64; c = $4; m = $64; r = $34
d. F = $48; c = $12; m = $64; r = $64
e. None of the above
9. A buyer of a product knows that 20 percent of sellers are dishonest and will sell a defective product (if they can get away with it). The seller has to pay $15 to buy the product. One problem for the buyer is that she cannot tell if the product is defective until after she has bought it and all sellers look identical to the buyer ex ante. The seller has two choices. The buyer can get a contract written up that ensures that she receives a quality product (from all sellers), but the writing up the contract costs her $10. Alternatively she can not get a contract
written up, in which case she will always receive a defective product if she is unlucky enough to trade with a dishonest seller.
What is the minimum benefit B for which the seller will choose to have a contract written?
a. 30
b. 40
c. 50
d. 60
e. None of the above.
10. Consider the following game to be played by firm A and firm B. The timing of the game is as follows: A chooses to take action L or R; if A chooses L the game ends and the payoffs are 10 to firm A and 50 to firm B; if A chose action R, firm B then must choose between L or R, with the payoffs in the case when B chooses L (after A chose R) being 30 to each firm; if B chooses R (after A chose R) the payoffs are 5 and 20 to firms A and b respectively. The game tree is illustrated below.
A
(10,50)
(30,30)
What is the subgame perfect equilibrium (or equilibria) in the game?
a. (R, L) – that is A plays R and B plays L.
b. (L, R) - that is A plays L and B plays R.
c. (R, L) and (L, R)
d. (R, R)
e. None of the above
Short answer
Look at all the tutorial questions and review the models studied in class.
2022-06-10