The Nash equilibrium in a Bertrand game of price setting where all firms have different marginal cost is:
a. efficient because all mutually beneficial transactions will occur.
b. efficient because of the free entry assumption.
c. inefficient because some mutually beneficial transactions will be foregone.
d. inefficient because of the uncertainties inherent in the game.
QUESTION 2The cost of capital is:
a. concerned with what a firm has to pay for the capital
b. the rate of return required by investors
c. determined in the capital markets
d. all of the above
e. b and c only
QUESTION 3Which firm is not dealing with adverse selection
a. a manufacturer requires a 90 day probationary period for new employees
b. a temporary clerical agency hires without verifying typing skills
c. a manufacturer requires suppliers to be ISO 900 . certified
d. Smokers get the worse life insurance rates as non-smokers
QUESTION 4The Nash equilibrium in a Bertrand game in which firms produce perfect substitutes and have equal marginal costs is:
a. efficient because all mutually beneficial transactions will occur.
b. efficient because of the free entry assumption.
c. inefficient because some mutually beneficial transactions will be foregone.
d. inefficient because of the uncertainties inherent in the game.
QUESTION 5Typically, a capital expenditure project will result in:
a. a cash flow stream to the firm
b. a cash outflow from the firm
c. an initial (one-year) outflow followed by a series of cash inflows
d. for long projects, an initial five-year outflow followed by a series of cash inflows
QUESTION 6Which firm is not dealing with adverse selection
a. a manufacturer forgoes a usual 90 day probationary period for new employees
b. a temporary clerical agency requires a typing test
c. a manufacturer requires suppliers to be ISO 900 . certified
d. Smokers get the worse life insurance rates as non-smokers
QUESTION 7In a Cournot equilibrium, each firm chooses an output level which:
a. maximizes joint profits.
b. maximizes the price received.
c. maximizes profits given what the other firms produce.
d. maximizes revenue given what the other firms produce.
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