10 points The following table represents the payoffs to different decisions of Delta Airlines and American Airlines. They can choose either American Airlines Weekday Weekend Weekday (20, 25) (21, 18) Delta Airlines Weekend (10, 15) (22, 12) What is the Nash equilibrium in this interaction? Does one of the firms (or both) have a dominant strategy? Explain. Edit View Insert Format Tools Table 12pt * Paragraph p 2 4 points What is true regarding the risk that managers and shareholders are willing to take on? Managers tend to be less willing to take risks than shareholders Managers and shareholders tend to have the same approach towards risk. O Managers tend to be more willing to take risks, but only if the uncertainty in profits is high. O Managers tend to be more willing to take risks than shareholders. 3 4 points Which of the following statements is true comparing a market that is a monopoly versus a market that is perfectly competitive? There may be more firms in a monopoly O Quantity will be higher in a monopoly O Deadweight loss will be greater in a monopoly market Price will be lower in a monopoly 4 10 points What does price discrimination refer to? Provide on example and explain how managers can use price discrimination in order to increase profits. Edit View Insert Format Tools Table 12pt * Paragraph 5 4 points If a firm in perfect competition produces a quantity that is higher than the quantity where price is equal to marginal cost: Marginal cost will decrease Revenues may decrease Profits will be negative O Average total costs will increase 6 4 points f two firm are competing by setting price with differentiated products: O The price set by each firm has no correlation with the price set by the other firm The lower price one firm charges, the lower price the other firm will charge The lower price one firm charges, the higher price the other firm will charge 4 points Suppose an individual prefers $100 with certainty, to flipping a coin and receiving $180 if it lands on heads and $0 if it lands on tails. This individual is: Risk loving Risk neutral O Risk averse O There is not enough information to determine if the individual is risk-loving, risk-neutral, or risk-averseTo maximize profits, a monopolist will: O Maximize revenues O Set price equal to marginal cost O Set marginal revenue equal to marginal cost Minimize costs 4 points Which of the following ranks markets from most competitive to least competitive? O Oligopoly; Monopoly; Perfect competition O Monopoly; Oligopoly; Perfect competition O Perfect competition; Oligopoly; Monopoly O Perfect competition; Monopoly; Oligopoly 10 12 points t is generally assumed that most managers are risk-averse. What does it mean for managers to be risk-averse in terms of profits? How is risk-aversion depicted through the utility of managers? Explain. Edit View Insert Format Tools Table 12pt Paragraph 11 10 points What is a monopsony? How is it different than a monopoly market? How is it similar to a monopoly market? Explain. Edit View Insert Format Tools Table 12pt * Paragraph 12 12 points What is adverse selection? Describe a market where adverse selection is an issue. Are there ways that managers have been able to get around the adverse selection problem in this market? Explain Edit View Insert Format Tools Table 12pt ~ Paragraph ~ | B J U A ~ L ~ T' x # Y Ev Q V DY 6 6 # Y EV EV SV DB V VQ 13 10 points How are perfectly competitive markets different than markets that are monopolies? How is the decision of the manager in terms of profit-maximization different in these two markets? Explain. Edit View Insert Format Tools Table 12pt ~ Paragraph ~ |B I Y A ~ Z ~ T' x | f ~ BY Q V DY | 4 6 8 Y EV EV BV D BY VQ 14 4 points If firms are earning positive profits in a perfectly competitive industry, we would expect: Additional firms to enter the industry, leading to an increase in the profits of each firm.SEA A points If firms are earning positive profits in a perfectly competitive industry, we would expect: Additional firms to enter the industry, leading to an increase in the profits of each firm. Additional firms to enter the industry, leading to a decrease in the profits of each firm. Some firms to leave the industry, before profits start to decline. Additional firms to enter the industry, but it is unclear what will happen to the profits of each firm. i In which of the following markets would we expect seller to have more information than the buyer? Annuities market Used car market Health insurance market Car insurance market