Eco550 Assignment 3 and final exam Eco550 Assignment 3 and final exam Question Assignment 3: Long-Term Investment Decisions Due Week 9 and worth 300 points Assume that the low-calorie microwavable food company from Assignments 1 and 2 wants to expand and has to make some long-term capital budgeting decisions. Use the Internet and Strayer databases to research government policies and regulation. Write a six to eight (6-8) page paper in which you: 1. Outline a plan that managers in the low-calorie microwaveable food company could follow when selecting pricing strategies for making their products as inelastic as possible. Provide a rationale for your response. 2. Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company. 3. Determine whether or not government regulation to ensure fairness in the low-calorie microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response. 4. Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities. 5. Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response. 6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.Final exam Eco550 final exam part 1 Question 1 Save your time! Proper editing and formatting Free revision, title page, and bibliography Flexible prices and money-back guarantee ORDER NOW A ____ total cost function implies that marginal costs ____ as output is increased. Answer Make sure you submit a unique essay Our writers will provide you with an essay sample written from scratch: any topic, any deadline, any instructions. 100% ORIGINAL ORDER NOW linear; increase linearly quadratic; are constant cubic; increase linearly linear; are constant Question 2 Which of the following is not an assumption of the linear breakeven model: Answer constant selling price per unit decreasing variable cost per unit fixed costs are independent of the output level a single product (or a constant mix of products) is being produced and sold Question 3 Break-even analysis usually assumes all of the following except: Answer in the short run, there is no distinction between variable and fixed costs. revenue and cost curves are straight-lines throughout the analysis. there appears to be perfect competition since the price is considered to remain the same regardless of quantity. the straight-line cost curve implies that marginal cost is constant. Question 4 George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year. Answer 10,000 customers 20,000 customers 30,000 customers 40,000 customers 50,000 customers Question 5 The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____. Answer percentage; sales; percentage; EBIT unit; sales; unit; EBIT percentage; EBIT; percentage; sales unit; EBIT; unit; sales Question 6 In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by: Answer one minus the variable cost ratio contribution margin per unit selling price per unit standard deviation of unit sales Question 7 Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long distance service is: Answer Governmental pressure to lower the price Reduced demand for long distance service Entry into this industry pushes prices down Lower price for a barrel of crude oil Increased cost of providing long distance service Question 8 In the long-run, firms in a monopolistically competitive industry will Answer earn substantial economic profits tend to just cover costs, including normal profits seek to increase the scale of operations seek to reduce the scale of operations Question 9 In the purely competitive case, marginal revenue (MR) is equal to: Answer cost profit price total revenue Question 10 An "experience good" is one that: Answer Only an expert can use Has undetectable quality when purchased Can be readily experienced simply by touching or tasting Improves with age, like a fine wine Question 11 Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will Answer deliver high quality products consistent with expectations not attempt to establish any warranty enforcement mechanisms offer several prices and qualities produce only one quality Question 12 Asset specificity is largest when Answer value in first best use is large value in second best use is large customers choose their supplier at random very valuable assets are non-redeployable customers are loyal to a particular seller Question 13 In the short-run for a purely competitive market, a manufacturer will stop production when: Answer the total revenue is less than total costs the contribution to fixed costs is zero or less the price is greater than AVC operating at a loss Question 14 Regulatory agencies engage in all of the following activities except _______. Answer controlling entry into the regulated industries overseeing the quality of service provided by the firms setting federal and state income tax rates on regulated firms setting prices that consumers will pay Question 15 Of the following, which is not an economic rationale for public utility regulation? Answer production process exhibiting increasing returns to scale constant cost industry avoidance of duplication of facilities protection of consumers from price discrimination Question 16 ____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility's plant over a larger number of units of output. Answer Peak load pricing Inverted block pricing Block pricing First degree price discrimination Question 17 In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates. Answer similar, similar elastic, lower elastic, higher inelastic, lower inelastic, higher Question 18 The demand curve facing the firm in ____ is the same as the industry demand curve. Answer pure competition monopolistic competition oligopoly pure monopoly Question 19 The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of: Answer inverted block pricing second-degree price discrimination peak-load pricing first-degree price discrimination none of the above Question 20 In a kinked demand market, whenever one firm decides to lower its price, Answer other firms will automatically follow. none of the other firms will follow. one half of the firms follow and one half of the firms don't follow the price cut. other firms all decide to exit the industry all of the other firms raise their prices. Question 21 In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm's ____ will not change. Answer price output marketing strategy inventory Question 22 “Conscious parallelism of action” among oligopolistic firms is an example of ____. Answer intense rivalry a formal collusive agreement informal, or tacit, cooperation a cartel Question 23 If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical. Answer average total cost average profit marginal profit marginal cost marginal revenue Question 24 A cartel is a situation where firms in the industry Answer have an agreement to restrict output. agree to produce identical products. obey the rules of dominant firm price leadership. experience the pain of a kinked demand curve. have a barometric price leader Question 25 Barometric price leadership exists when Answer one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry. one firm imposes its best price on the rest of the industry. all firms agree to change prices simultaneously. one company forms a price umbrella for all others. the firms are all colluding. part II Question 1 If one-time gains from defection are always less than the discounted present value of an infinite time stream of cooperative payoffs at some given discount rate, the decision-makers have escaped Answer the Folk Theorem the law of large numbers the Prisoner's dilemma the paradox of large numbers the strategy of recusal Question 2 Credibility in threats and commitments in sequential games is based on Answer randomizing one's actions so they are unpredictable explicit communications with competitors effective scenario planning analyzing best reply responses Question 3 A key to analyzing subgame perfect equilibrium strategy in sequential games is Answer predictable behavior an explicit order of play for at least some participants information sets that are known with certainty credible threats clearly communicated randomness Question 4 Consider the game known as the Prisoner's Dilemma. What's the dilemma? Answer By both not confessing, both get to the cooperative solution and minimize time in prison. By both confessing, both get to the noncooperative solution and both serve significant time in prison. As a group, they are better off cooperating by not confessing, but each player has an incentive to be first to confess in a double cross. The problem is that the spies should never have been caught; they should move to Rio. Question 5 Non-cooperative sequential games can incorporate all the following features except Answer a single decision-maker in the endgame no communication finite or infinite time periods third-party enforceable agreements an explicit order of play Question 6 Third-degree price discrimination exists whenever: Answer the seller knows exactly how much each potential customer is willing to pay and will charge accordingly. different prices are charged by blocks of services. the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups. the seller will bargain with buyers in each of the markets to obtain the best possible price. Question 7 Which of the following pricing policies best identifies when a product should be expanded, maintained, or discontinued? Answer full-cost pricing policy target-pricing policy marginal-pricing policy market-share pricing policy markup pricing policy Question 8 ____ is the price at which an intermediate good or service is transferred from the selling to the buying division within the same firm. Answer Incremental price Marginal price Full-cost price Transfer price Question 9 Firms that have a cover charge for their customers and charge for each item they purchase as well are exhibiting Answer universal access price discrimination declining block price discrimination. mixed bundling price discrimination. two-part price discrimination. uniform pricing Question 10 Electricity pricing that varies in its billing expense throughout the day is called Answer full pricing marginal cost pricing dynamic pricing variable pricing full cost pricing pricing Question 12 Which of the following is not among the functions of contract? Answer to provide incentives for efficient reliance to reduce transaction costs to discourage the development of asymmetric information to provide risk allocation mechanisms Question 13 Mac trucks and their dealers would likely have an organizational form of Answer fixed profit sharing franchise contracts spot market recontracting alliances vertical integration Question 14 When manufacturers and distributors establish credible commitments to one another, they often employ Answer vertical requirements contracts third-party monitoring credible threat mechanisms non-price tactics Question 15 When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____. Answer reliance relationships uncertainty moral hazard creative ingenuity insurance reliance Question 16 The sentiment for increased deregulation in the late 1970's and early 1980's has been felt most significantly in the price regulation of Answer coal grain transportation automobiles electric power generation Question 17 ____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model. Answer Baumol's sales maximization hypothesis The Pareto optimality condition The Cournot model The theory of contestable markets Question 18 The lower the barriers to entry and exit, the more nearly a market structure fits the ____ market model. Answer monopolistic competition perfectly contestable oligopoly monopoly Question 19 The antitrust laws regulate all of the following business decisions except ____. Answer collusion mergers monopolistic practices price discrimination wage levels Question 20 The ____ is equal to the some of the squares of the market shares of all the firms in an industry. Answer market concentration ratio Herfindahl-Hirschman index correlation coefficient standard deviation of concentration Question 21 Cost-benefit analysis is the public sector counterpart to ____ used in private, profit-oriented firms. Answer ratio analysis break-even analysis capital budgeting techniques economic forecasting uestion 22 Which of the following should not be counted in a cost-benefit analysis? Answer direct benefits and costs real secondary benefits technological secondary costs pecuniary benefits intangibles Question 23 In determining the optimal capital budget, one should choose those project's whose ____ exceeds the firm's ____ cost of capital. Answer internal rate of return, average internal rate of return, marginal internal rate of return, historic average rate of return, marginal Question 24 In the constant-growth dividend valuation model, the required rate of return on common stock (i.e., cost of equity capital) can be shown to be equal to the sum of the dividend yield plus the ____. Answer yield-to-maturity present value yield risk-free rate dividend growth rate Question 25 All of the following except ____ are shortcomings of cost-benefit analysis. Answer difficulty in measuring third-party costs difficulty in measuring third-party benefits failure to consider the time value of benefits and costs difficulty of accounting for program interactions