Exam 15: Managerial Decisions About Information

The closer the R2 of a regression is to_______ , the_______ _ accurate and _ valuable the forecast.

Suppose an insurance company has estimated that 20 percent of all of its potential policy owners are high- cost and sets a price for their insurance policy with the understanding that 20 percent of its policy owners will be high- cost. If the true percentage of high- cost potential policy owners is 40 percent, the insurance company is likely to face _______.

Happy Cows is a perfectly competitive dairy farm that has consistently faced a 50 percent chance of a high demand of $5 and a 50 percent chance of a low demand of $4. The managers of Happy Cows learn that there is now a 50 percent chance of a high demand of $8 and a 50 percent chance of a low demand of $2. All else equal, the change in the high and low demand values makes an accurate forecast _______valuable to Happy Cows as the firm stands to gain_______ profit from an accurate forecast.

All of the following can be considered a trademark except which one?

If, in an auction with independent private values, a manager values an item at a price that is lower than the item's expected profit, the manager is risk neutral.

If a small change in output results in a large change in marginal cost, the marginal cost curve is _______, which makes accurate forecasts _______valuable.

In reality, obtaining a forecast regression with a R2 equal to 1 is possible.

The more variable a firm's demand, the smaller the difference between the quantity produced with no information about demand and quantity produced with a perfect forecast of the demand.

The table above lists the independent private values of five participants in an auction. Each of the bidders only knows their o value and does not know the private values of the other participants. -Refer to the table above. Recall that the bidders only know their own private value of the item and they do not know the other participants' private values. Further, assume each participant will submit bids using their optimal strategy. If the participants are bidding in an English auction and the auctioneer sets the opening bid $6 million and increases the bids by $0.25 million until no one submits a higher bid, Bidder_______ wins the auction and pays_______ .

Trade secrets confer more robust protection that patents.

A restaurant owner hires a waiter to serve food to customers and clear the tables. The owner wants the waiter to be prompt in bringing out the food and clearing the table once the guests are finished with their meal. The waiter is paid a salary and cannot accept tips. The waiter would prefer to check their Facebook account and take their time waiting the tables. If the waiter does spend considerable time checking their Facebook while the owner is not at the restaurant, the owner can motivate the waiter to be prompt waiting tables (and stop checking Facebook)in each of the following ways except which one?

A participant's optimal bidding strategy is dependent on how the product is valued.

A perfectly competitive firm has an 80 percent probability of a high demand of $10 and a 20 percent chance of a low demand of $8. To maximize expected profit, the firm should produce the quantity that sets the marginal cost equal to_______ .

Suppose a firm can estimate its demand with 100 percent accuracy. In this case, the value of the forecast is equal to_______ _.

Being a very careful apartment renter (always locking the door, making sure the stove and iron are off when leaving, etc.)is an example of _______.

Suppose an insurance company has estimated that 20 percent of all of its potential policy owners are high- cost and sets a price for their insurance policy with the understanding that 20 percent of its policy owners will be high- cost. If the true percentage of high- cost potential policy owners is 40 percent, the insurance company has set its price too ________ and will have_______ high- cost policy owners than expected.

The table above lists the independent private values of five participants in an auction. Each of the bidders only knows their o value and does not know the private values of the other participants. -Refer to the table above. Recall that the bidders only know their own private value of the item and they do not know the other participants' private values. Further, assume each participant will submit bids using their optimal strategy. If the participants are bidding in a sealed- bid first- price auction, Bidder ________ wins the auction and pays ________ .

All of the following are true regarding an English auction except which one?

When an item being auctioned has correlated values and bidders use their optimal strategies, a(n) _______auction has the highest expected revenue as it has the _______reduction in bidders' valuations.

The R2 of a regression ranges from_______ to ________.