Flag question: Question 18

A shoe store sells 250 pairs of sneakers per month at a per-unit price of $115. This is the price and quantity at which profits are maximized. The owner needs to pay a monthly rent of $5,500 whether the store stays open or not, and the rental contract cannot be canceled in the near future. The total variable cost (TVC) of the shoe store is $25,000 per month. What should the owner of the store do in the short run?

Group of answer choices

Sell fewer pairs of shoes

Continue to produce even in the long run, as the store is making positive profits

Keep the store open even though negative profits are being made

Close the store

Decrease the price and sell more shoes

Flag question: Question 19

DaisyCo is an amusement park company using geographical segment pricing to increase profits. It charges different prices for its park entrance tickets in different countries. Marginal costs are identical in the two countries. After investigating the demand in country A and in country B, DaisyCo decided to charge a higher price in country B. Which of the following statements is consistent with this decision?

Group of answer choices

DaisyCo has lower fixed costs in country B as compared to country A

Consultants concluded that the demand for amusement parks is more elastic in country B than in country A

Consumers in country A have a more elastic demand for amusement parks than consumers in country B

There are many similar amusement parks in country B, whereas there is only little competition in country A

None of the other answers

Flag question: Question 20

Boston High Speed Rail (BHSR) is considering entering the high-speed train market. If BHSR decides to enter, it will face competition from the incumbent, Amtrak. Based on the following matrix of payoffs, what is the expected outcome (the Nash equilibrium):

Group of answer choices

A: Exit, B: Not enter

A: Maintain, B: Enter

There is no Nash equilibrium in pure strategies

A: Exit, B: Enter

A: Maintain, B: Not enter

Flag question: Question 21

The price of sugar (a substitute for corn syrup) decreased. At the same time, the price of corn starch (one of the main ingredients of corn syrup) increased. These two effects together will lead to the following change in the price and quantity of corn syrup:

Group of answer choices

A decrease in price and an increase in quantity

An increase in price and an ambiguous effect on quantity

A decrease in quantity and an ambiguous effect on price

An increase in both price and quantity

An increase in quantity and an ambiguous effect on price