Homework answers / question archive / Grand Canyon University - ECN 601 Use the following case from questions 1-4 A couple gets into an argument deciding where they would go out together

Grand Canyon University - ECN 601 Use the following case from questions 1-4 A couple gets into an argument deciding where they would go out together

Economics

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Grand Canyon University - ECN 601

Use the following case from questions 1-4

A couple gets into an argument deciding where they would go out together. Both like to spend like with each other and have the payoffs as below                                        

Sally        Sam

                                Balle t    Boxing

                Ballet     5,10        0,0

                Boxing   0.0          10,5

               

1)What would be the Nash equilibrium of this simultaneous game?                                  

                a.            Boxing, boxing    

                b.            Ballet, ballet       

                c.             Boxing, ballet     

                d.            Both A&B            

               

2. If Sally decides to go to the boxing match, what is Sam’s best response                                      

                a.            Go to the ballet  

                b.            Go to the boxing match   

                c.             Run away             

                d.            Hide      

               

 

3. If the boxing match will be the “fight of the century” which has dramatically increased Sally’s payoffs for going to the fights, even without Sam, and Sam knows that, what would the Nash equilibrium be now?                    

                a.            Boxing, boxing

                b.            Ballet, ballet

                c.             Ballet, boxing

                d.            Boxing, boxing

 

4. Someone who values a lottery at less than the expected value is                  

                a.            a risk lover

                b.            risk neutral

                c.             risk averse

                d.            one who tends to play lots of lotteries

 

5. Someone who values a lottery at more than the expected value is                

                a.            a risk lover

                b.            risk neutral

                c.             risk averse

                d.            one who tends to play lots of lotteries

 

6. Most people buy insurance because they                              

                a.            are risk lovers

                b.            enjoy the gamble

                c.             are risk neutral

                d.            are risk averse

 

 

7. Individuals who are more risk averse                      

                a.            buy less insurance

                b.            buy more insurance

                c.             are not more or less inclined to buy insurance

                d.            are philosophically opposed to insurance

 

8. The reason some insurance customers are more eager to purchase insurance is                     

                a.            they are more risk averse

                b.            they are less risk averse

                c.             they have a greater risk of making a claim

                d.            Both A&C

 

9. The following is not an example of risk aversion                  

                a.            you lock your garage when you have expensive workshop tools

                b.            you are more careful when you buy a more expensive car

                c.             Individuals tend to gamble more with their money when the future is certain

                d.            you only go swimming when the lifeguard is not on duty

 

 

10. Someone who values a lottery at its expected value is                    

                a.            A risk lover

                b.            Risk neutral

                c.             Risk averse

                d.            most likely to play a lottery

 

11. Trades between risk lovers and risk takers                                         

                a.            Move assets to lower-value use   

                b.            Move assets to higher value use  

                c.             Create wealth    

                d.            Both B & C          

               

12. Acquiring a firm that sells a substitute good would make the demand curve for your original product

 

 

a.            More inelastic    

                b.            More elastic       

                c.             Unchanged          

                d.            None of the above             

               

13. The general rule to increase profits when two close substitute brands are jointly owned is

                a.            Increase prices for both brands    

                b.            Decrease prices for both brands   

                c.             Increase prices on one brand, decreasing it for the other     

 

                d.            Increase prices on one brand, keeping the prices of the second brand constant            

               

 

 

 

 

14. After acquiring closely substitutable product brands, a firm can successfully raise prices on both of the brands without losing much of its total sales because

                a.            Customers are insensitive to price changes              

                b.            None of these sales would be captured by its other brand    

                c.             Some of these sales lost by one brand would be captured by the other            

                d.            All of the above  

               

15. After acquiring a close substitute, to increase profits the firm must

                a.            Raise prices on all the products equally      

                b.            Raise the prices only on products with high margins, while reducing prices on products with low margins               

                c.             Raise prices only on products with high margins, while keeping prices constant on products with low margins               

                d.            Raise prices on both the products, but raise the prices more for products with higher margins

               

16. In a multi-product firm, cannibalization is

                a.            An increase in the quality of both the brand’s products         

                b.            A decrease in the quality of both the brands products           

                c.             An increase in both the brand’s sales          

 

 

d.            An increase in one of the brand’s sales due to the decrease in sales of the other.        

               

17. If an ice-cream manufacturer acquires a frozen yogurt producer, you would likely see

                a.            Lower prices for both the ice cream and the frozen yogurt   

                b.            Higher prices for both the ice cream and the frozen yogurt  

 

 

                c.             Higher prices for ice cream, but lower prices for frozen yogurt           

                d.            Higher prices for frozen yogurt but lower prices for ice cream            

               

 

 

 

18. If a hot dog manufacturer acquires a bakery that primarily bakes hot dog buns, you would likely see

                a.            Higher prices for the hot dogs but lower prices for the buns

                b.            Higher prices for the buns but lower prices for the hot dogs

                c.             Higher prices for both the hot dogs and the buns    

                d.            Lower prices for both the hot dogs and the buns     

19. Which of the following is true?               

                a.            To reduce cannibalization among products, reposition a product so that it does not directly compete with the other

                b.            After acquiring a substitute product, raise prices on both the products

                c.             After acquiring a complementary product, lower prices on both the products

                d.            All of the above

20. For jointly owned substitute products, cannibalization leads to MR             MC        

                a.            Being higher than              

                b.            Being lower than               

                c.             Equaling               

                d.            None of the above             

                21. For products like parking lots and hotels, the relevant costs and benefits to determine

how much capacity to build are

                a.            LRMR and LRMC

                b.            LRMR and SRMC

                c.             SRMR and SRMC

                d.            SRMR and LRMC

22. All of the following are true, except      

                a.            Some consumers may infer high quality from high price

                b.            Low prices can indicate lower quality given that no other information is available

 

                c.             Promotional campaigns do not affect consumer’s perception on quality

                d.            It makes more sense to raise price when advertising makes demand less elastic