Question 1

When a variable can take on different values

Accepted Answer

A) it is a random variable 
B) it is a dependent variable 
C) it is an independent variable 
D) it is an exogenous variable 
A) it is a random variable 
B) it is a dependent variable 
C) it is an independent variable 
D) it is an exogenous variable A

Question 2

You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about the "representativeness" with your control group,a poor comparison menu item would be

Accepted Answer

A) soft drink sales 
B) the bacon burger without cheese 
C) the bacon-lettuce-and-tomato sandwich 
D) the regular cheeseburger 
A) soft drink sales 
B) the bacon burger without cheese 
C) the bacon-lettuce-and-tomato sandwich 
D) the regular cheeseburger A

Question 3

We worry that false negatives occur too often relative to false positives due to

Accepted Answer

A) most hypotheses being false 
B) it being appropriate to set a high standard for acceptance of a hypothesis 
C) managers having an incentive to make a false negative conclusion because they are harder for superiors to observe 
D) they are not too common 
A) most hypotheses being false 
B) it being appropriate to set a high standard for acceptance of a hypothesis 
C) managers having an incentive to make a false negative conclusion because they are harder for superiors to observe 
D) they are not too common C

Question 4

Half of all potential customers would pay $10 for your product but half would only pay $8 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

Accepted Answer

A) $3 
B) $4 
C) $5 
D) $6 
A) $3 
B) $4 
C) $5 
D) $6

Question 5

The expected value is

Accepted Answer

A) the product of the sums of the probability and the values in different states 
B) the sum of the products of the probability and the values in different states 
C) the difference between the products of the probability and the values in different states 
D) the difference between the sums of the probability and the values in different states 
A) the product of the sums of the probability and the values in different states 
B) the sum of the products of the probability and the values in different states 
C) the difference between the products of the probability and the values in different states 
D) the difference between the sums of the probability and the values in different states

Question 6

Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

Accepted Answer

A) $15 
B) $16 
C) $17 
D) $18 
A) $15 
B) $16 
C) $17 
D) $18

Question 7

You want to run a difference-in-difference experiment with a price increase for your lawn chairs in Miami.If you are worried about the "representativeness" of your control group,a good comparison city would be

Accepted Answer

A) Boston 
B) San Francisco 
C) St.Paul 
D) Tampa Bay 
A) Boston 
B) San Francisco 
C) St.Paul 
D) Tampa Bay

Question 8

Half of all potential customers would pay $10 for your product but half would only pay $8 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $8,the expected profit is:

Accepted Answer

A) $3 
B) $4 
C) $5 
D) $6 
A) $3 
B) $4 
C) $5 
D) $6

Question 9

Heads and tails are equally likely but you win $3.00 on heads and lose $1.00 on tails

Accepted Answer

A) the expected value is $0.50 
B) the expected value is -$0.50 
C) the expected value is $1.00 
D) the expected value is $0.00 
A) the expected value is $0.50 
B) the expected value is -$0.50 
C) the expected value is $1.00 
D) the expected value is $0.00

Question 10

Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $40,$30,$20,and $10 respectively.The expected value is:

Accepted Answer

A) $22 
B) $24 
C) $26 
D) $28 
A) $22 
B) $24 
C) $26 
D) $28

Question 11

You can invest in either project A or B.Project A has value $150 with probability 0.1 and value $75 with probability 0.9.Project B has value $110 with probability 0.2 and value $65 with probability 0.8.

Accepted Answer

A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented 
A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented

Question 12

You increase your advertising buy for your product in market A but not in market B.Sales in A rise from 1140 units per week to 1180 while sales in B fall from 1270 to 1230.The Difference-in-difference estimate of the effect of the increased advertising is:

Accepted Answer

A) 80 units 
B) 100 units 
C) 120 units 
D) 140 units 
A) 80 units 
B) 100 units 
C) 120 units 
D) 140 units

Question 13

Half of all potential customers would pay $16 for your product but half would only pay $10 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $16,the expected profit is:

Accepted Answer

A) $3 
B) $4 
C) $5 
D) $6 
A) $3 
B) $4 
C) $5 
D) $6

Question 14

A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $10 million and a failure would cost $90 in lost profits.At what probability of expected success should she fund the project?

Accepted Answer

A) 0)10 
B) 0)20 
C) 0)80 
D) 0)90 
A) 0)10 
B) 0)20 
C) 0)80 
D) 0)90

Question 15

You can invest $100,000 into either project A or B.You estimate that A succeeds with probability 0.5 in which case it doubles in value.If it fails,the scrap value is worth $50,000.Project B succeeds with probability 0.8,has value $150,000 if it succeeds and value of $30,000 if not.

Accepted Answer

A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented 
A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented

Question 16

You can invest in either project A or B.Project A has value $150 with probability 0.1 and value $75 with probability 0.9.Project B has value $120 with probability 0.2 and value $75 with probability 0.8.

Accepted Answer

A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented 
A) You should invest in project A 
B) You should invest in project B 
C) You should not invest in either 
D) You cannot tell from the information presented

Question 17

You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about "leakage" with your control group,a good comparison menu item would be

Accepted Answer

A) soft drink sales 
B) the bacon burger without cheese 
C) the bacon-lettuce-and-tomato sandwich 
D) the regular cheeseburger 
A) soft drink sales 
B) the bacon burger without cheese 
C) the bacon-lettuce-and-tomato sandwich 
D) the regular cheeseburger

Question 18

You experiment by offering free warranties for your product in market A not in market B.Sales in A rise from 240 units per week to 360 while sales in B rise from 410 to 430.The Difference-in-difference estimate of the effect of the free warranty is:

Accepted Answer

A) 80 units 
B) 100 units 
C) 120 units 
D) 140 units 
A) 80 units 
B) 100 units 
C) 120 units 
D) 140 units

Question 19

Three possibilities have probabilities 0.4,0.4 and 0.2 and values $10,$20,and $30 respectively.The expected value is:

Accepted Answer

A) $15 
B) $16 
C) $17 
D) $18 
A) $15 
B) $16 
C) $17 
D) $18

Question 20

A movie executive has to decide to fund a new movie project.For this project,a success would earn $20 million and a failure would cost $60 in lost profits.At what probability of expected success should he fund the movie?

Accepted Answer

A) 0)20 
B) 0)25 
C) 0)50 
D) 0)75 
A) 0)20 
B) 0)25 
C) 0)50 
D) 0)75

Exam 17: Making Decisions With Uncertainty

When a variable can take on different values

You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about the "representativeness" with your control group,a poor comparison menu item would be

We worry that false negatives occur too often relative to false positives due to

Half of all potential customers would pay $10 for your product but half would only pay $8 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:

The expected value is

Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:

You want to run a difference-in-difference experiment with a price increase for your lawn chairs in Miami.If you are worried about the "representativeness" of your control group,a good comparison city would be

Half of all potential customers would pay $10 for your product but half would only pay $8 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $8,the expected profit is:

Heads and tails are equally likely but you win $3.00 on heads and lose $1.00 on tails

Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $40,$30,$20,and $10 respectively.The expected value is:

You can invest in either project A or B.Project A has value $150 with probability 0.1 and value $75 with probability 0.9.Project B has value $110 with probability 0.2 and value $65 with probability 0.8.

You increase your advertising buy for your product in market A but not in market B.Sales in A rise from 1140 units per week to 1180 while sales in B fall from 1270 to 1230.The Difference-in-difference estimate of the effect of the increased advertising is:

Half of all potential customers would pay $16 for your product but half would only pay $10 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $16,the expected profit is:

A pharmaceutical company executive has to decide whether to fund a new drug development project.For this project,a success would earn $10 million and a failure would cost $90 in lost profits.At what probability of expected success should she fund the project?

You can invest $100,000 into either project A or B.You estimate that A succeeds with probability 0.5 in which case it doubles in value.If it fails,the scrap value is worth $50,000.Project B succeeds with probability 0.8,has value $150,000 if it succeeds and value of $30,000 if not.

You can invest in either project A or B.Project A has value $150 with probability 0.1 and value $75 with probability 0.9.Project B has value $120 with probability 0.2 and value $75 with probability 0.8.

You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about "leakage" with your control group,a good comparison menu item would be

You experiment by offering free warranties for your product in market A not in market B.Sales in A rise from 240 units per week to 360 while sales in B rise from 410 to 430.The Difference-in-difference estimate of the effect of the free warranty is:

Three possibilities have probabilities 0.4,0.4 and 0.2 and values $10,$20,and $30 respectively.The expected value is:

A movie executive has to decide to fund a new movie project.For this project,a success would earn $20 million and a failure would cost $60 in lost profits.At what probability of expected success should he fund the movie?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Muchdecisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long-Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination Indirect Price Discrimination

Strategic Games

Bargaining

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters