All monopolies exist because of:
a. firms' desire to maximize profits.
b. failure of antitrust laws.
c. barriers to entry.
d. natural selection.
QUESTION 2Which of the following items is (are) not considered as part of the net investment calculation?
a. installation and shipping charges
b. acquisition cost of new asset
c. salvage value of old equipment that is being replaced
d. first year's net cash flow
e. c and d
QUESTION 3A risk averse individual
a. values a lottery at more than its expected value
b. values a lottery at exactly its expected value
c. values a lottery at less than its expected value
d. tends to play lots of lotteries
QUESTION 4In an exchange economy A's utility is given by UA = x + y and B's by UB = minx, 2y. The initial endowment for A is x = 10, y = 8 and for B, x = 8, y = 4 . To reach the contact curve, these individuals must:
a. trade 1x for 1y.
b. trade 2x for 1y.
c. trade 1x for 2y.
d. do nothing, since they are already on the contract curve.
QUESTION 5Which of the following is (are) a basic principle(s) when estimating a project's cash flows?
a. cash flows should be measured on a pre-tax basis
b. cash flows should ignore depreciation since it is a non-cash charge
c. only direct effects of a project should be included in the cash flow calculations
d. cash flows should be measured on an incremental basis
e. all of the above
QUESTION 6To attract more bidders, and more aggressive bidders, to your auction
a. withhold relevant information about the value of the object
b. don't allow bidders to know how others are bidding
c. do not allow potential bidders to examine the object too closely
d. hold oral auctions
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