Deck 15: Managerial Decisions About Information

Question 1

In the absence of property rights, inventors have incentive to invest in innovations and incentive to disclose how to use and make their innovations.

A)more; less
B)more; more
C)less; less
D)less; more

Answer 1

C

Question 2

In order for a patent to be considered useful, it must meet which of the two criteria?

A)It works as intended and has downward sloping demand curve.
B)It serves some minimal human need and has a downward sloping demand curve.
C)It minimally works as intended.
D)It works as intended and serves some minimal human need.

Answer 2

D

Question 3

A copyright gives the owner all of the following exclusive rights except which one?

A)trade secret rights
B)public performance rights
C)distribution rights
D)adaptation rights

Answer 3

A

Question 4

All of the following are considered trade secrets except which one?

A)plans for future expansion
B)product recipes
C)customer lists
D)the creation of a new product

Question 5

Firms can protect information in the form of inventions and other industrial know- how under which two types of laws?

A)trade secrets and copyrights
B)trade secrets and trademarks
C)patents and trade secrets
D)patents and copyrights

Question 6

In the United States, a patent gives the patent holder exclusive rights to an invention for typically how many years?

A)20
B)5
C)lifetime of patent holder
D)15

Question 7

Suppose a trademark's owner has successfully proven in court that an infringer has illegally infringed on the trademark. If the infringer has earned $9 million in profit as a result of illegally infringing on the trademark and the trademark's owner has suffered $2 million in damages, the trademark's owner will be awarded .

A)$7 million
B)$2 million
C)$11 million
D)$9 million

Question 8

Suppose a trade secret's owner has successfully proven in court that an infringer has illegally used the trade secret. If the trade secret's owner has lost $10 million in profits because of the infringement and the infringer has earned $6 million in profit as a result of illegally using the trade secret, the trade secret's owner will be awarded .

A)$10 million
B)$6 million
C)$4 million
D)$16 million

Question 9

The nature of patents attempts to balance the social gain from the product against the .

A)temporary; deadweight loss to society
B)permanent; competitive firm's economic profit from the product
C)temporary; competitive firm's economic profit from the product
D)permanent; deadweight loss to society

Question 10

From an economist's perspective, information is a product, but differs from other goods and services in all of the following ways except which one?

A)It is expensive to produce, but cheap to copy.
B)Information created by firms cannot be protected through government laws.
C)It is expensive to produce, but cheap to communicate.
D)One firm's use of information does not prevent other firms from simultaneously using the exact same information.

Question 11

Suppose a copyright's owner has successfully proven in court that an infringer has illegally reproduced the copyrighted material. If the copyright's owner has lost $8 million in profits because of the infringement and the infringer has earned $5 million in profit as a result of illegally reproducing the copyrighted material, the copyright's owner will be awarded .

A)$8 million
B)$13 million
C)$3 million
D)$5 million

Question 12

Intellectual property refers to the creations of intelligence.

A)intangible; technical
B)tangible; human
C)tangible; technical
D)intangible; human

Question 13

A copyright for works created by corporations run for _ years from first publication or years from the creation, whichever is .

A)70; 120; shorter
B)95; 70; longer
C)95; 120; shorter
D)95; 120; longer

Question 14

Trade secret law the owner from making any public disclosure about the trade secret and trade secret protection has a(n)definition.

A)discourages; definite
B)encourages; indefinite
C)encourages; definite
D)discourages; indefinite

Question 15

To qualify for patent protection, an invention must meet all of the following statutory criteria except which one?

A)nonobviousness
B)usefulness
C)novelty
D)interest

Question 16

A creator of a sculptural work who wants to protect their intellectual property would apply for which of the following?

A)a copyright
B)a patent
C)a trademark
D)a trade secret

Question 17

Patents permit investors to have a monopoly on their innovation and _ permit them to earn economic profit.

A)do; do
B)do not; do
C)do; do not
D)do not; do not

Question 18

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

A)a symbol
B)a secret recipe
C)a word
D)a device

Question 19

A copyright is a legal grant to the holder of exclusive rights for a(n)period of time for a(n) .

A)unspecified; work of authorship
B)unspecified; innovation
C)specified; work of authorship
D)specified; innovation

Question 20

A copyright for works created by individuals are in effect for the life of the creator plus years.

A)95
B)120
C)100
D)70

Question 21

A creator of an action movie who wants to protect their intellectual property would apply for which of the following?

A)a trade secret
B)a patent
C)a trademark
D)a copyright

Question 22

The R2 of a regression ranges from to _.

A)- 2; 2
B)- 1; 1
C)0; 1
D)0; 2

Question 23

If a perfectly competitive firm has a 70 percent probability of a high demand of $5 and a 30 percent chance of a low demand of $4, what is the firm's expected marginal revenue?

A)$3.50
B)$4.50
C)$4.70
D)$1.20

Question 24

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

A)1; more; more
B)0; less; more
C)0; more; more
D)1; less; less

Question 25

Each of the following factors determine the value of a forecast except which one?

A)the accuracy of the forecast
B)the slope of the average fixed cost curve
C)the slope of the marginal cost curve
D)the variability of the firm's demand

Question 26

If a company is associated with a green lizard and the company wants to protect the green lizard symbol, the company would consider the green lizard to be which of the following?

A)a patent
B)a copyright
C)a trade secret
D)a trademark

Question 27

If a firm has invented a new cancer drug, the firm would seek which of the following to protect their intellectual property?

A)a trademark
B)a copyright
C)a trade secret
D)a patent

Question 28

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 .

A)$9.20
B)$8.00
C)$10.00
D)$9.60

Question 29

If the _ _ of a forecast outweighs its _ _, the forecast can a firm's profit.

A)cost; benefit; double
B)benefit; cost; decrease
C)cost; benefit; increase
D)benefit; cost; increase

Question 30

If a firm has a developed a list of clients who consistently purchase the firm's product, the firm would consider the list of clients to be which of the following?

A)a patent
B)a trademark
C)a trade secret
D)a copyright

Question 31

If a firm's demand is subject to random fluctuations, the firm's _ will also be random.

A)average variable cost
B)average total cost
C)marginal cost
D)marginal revenue

Question 32

The greater the accuracy of a forecast, the its value as the firm faces a increase in expected profit.

A)smaller; smaller
B)greater; larger
C)greater; smaller
D)smaller; larger

Question 33

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

A)infinity
B)zero
C)the actual profit the firm earns from having the forecast
D)the amount of profit the firm would lose from not having the forecast

Question 34

If a firm has developed a very popular chocolate bar recipe, the firm would consider the chocolate bar recipe to be which of the following?

A)a copyright
B)a patent
C)a trade secret
D)a trademark

Question 35

A patent request will meet the nonobviousness condition if it is not obvious to a person with ordinary skill working in the area.

Question 36

Trade secrets confer more robust protection that patents.

Question 37

Trade secrets do not need governmental approval to protect it.

Question 38

In the absence of patent rights, society can still achieve the optimal amount of innovation.

Question 39

An expected value is the average of outcomes.

A)unweighted; all possible
B)weighted; the most likely
C)unweighted; the most likely
D)weighted; all possible

Question 40

An important difference between a patent and a trade secret is that a patent holder must disclose the workings of the patent and the trade secret owner is not required to disclose the trade secret.

Question 41

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.

Question 42

If a firm maximizes its expected profit, it will never produce the quantity that maximizes actual profit.

Question 43

A perfect forecast of demand allows a profit- maximizing manager to produce where marginal revenue is the marginal cost.

A)actual; greater than
B)expected; equal to
C)actual; equal to
D)expected; greater than

Question 44

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. Relative to Free Cows, the quantity that maximizes the expected profit for Happy Cows is _ sensitive to demand changes, which makes an accurate forecast valuable to the managers of Happy Cows.

A)more; more
B)more; less
C)less; less
D)less; more

Question 45

The R2 of a regression measures how closely the predicted values match the actual values.

Question 46

All else equal, the flatter the marginal cost curve, the _ sensitive quantity produced is to changes in demand and, thus the valuable an accurate forecast is to the firm.

A)more; more
B)less; less
C)more; less
D)less; more

Question 47

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. Suppose the perfectly competitive market for dairy products had a 40 percent chance of a high price of $3.00 and a 60 percent chance of a low price of $2.00. However, both Happy Cows and Free Cows have revised their probabilities and now believe that the probability of a high price of $3.00 is 80 percent and the probability of a low price of $2.00 is 20 percent. If the managers of Free Cows want to maximize expected profit based on the new probabilities by how much will they change the quantity produced?

A)Free Cows will decrease their production by 40 units
B)Free Cows will increase their production by 20 units.
C)Free Cows will increase their production by 40 units.
D)Free Cows will decrease their production by 20 units.

Question 48

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

Question 49

Suppose Happy Cows has a marginal cost equal to 0.5Q and Free Cows has a marginal cost equal to 2Q.

A)All else equal, neither Free Cows nor Happy Cows can benefit from an accurate forecast.
B)All else equal, an accurate forecast is more valuable to Free Cows than Happy Cows.
C)All else equal, an accurate forecast is more valuable to Happy Cows than Free Cows.
D)All else equal, an accurate forecast has the same value to both Free Cows and Happy Cows.

Question 50

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. The perfectly competitive market for dairy products has a 40 percent chance of a high price of $3.00 and a 60 percent chance of a low price of $2.00. To maximize expected profit, Happy Cows should produce units and Free Cows should produce units.

A)140; 120
B)120; 120
C)120; 140
D)140; 140

Question 51

The more variable a firm's demand, the the loss from uncertainty, which means the firm has _ to gain from a forecast.

A)smaller; less
B)larger; more
C)larger; less
D)smaller; more

Question 52

If a profit- maximizing manager is provided a forecast regression with a R2 equal to 1.00, this allows the manager to produce where marginal revenue is _ the marginal cost.

A)expected; equal to
B)actual; equal to
C)expected; greater than
D)actual; greater than

Question 53

Happy Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $5 and a 50 percent chance of a low demand of $4. Free Cows is a perfectly competitive dairy farm with a 50 percent chance of a high demand of $6 and a 50 percent chance of a low demand of $3. Which of the following statements is true?

A)All else equal, an accurate forecast is more valuable to Happy Cows than Free Cows.
B)All else equal, neither Free Cows nor Happy Cows can benefit from an accurate forecast.
C)All else equal, an accurate forecast has the same value to both Free Cows and Happy Cows.
D)All else equal, an accurate forecast is more valuable to Free Cows than Happy Cows.

Question 54

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

A)flat; more
B)steep; more
C)flat; less
D)steep; less

Question 55

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. Suppose the perfectly competitive market for dairy products had a 40 percent chance of a high price of $3.00 and a 60 percent chance of a low price of $2.00. However, both Happy Cows and Free Cows have revised their probabilities and now believe that the probability of a high price of $3.00 is 80 percent and the probability of a low price of $2.00 is 20 percent. If the managers of Happy Cows want to maximize expected profit based on the new probabilities by how much will they change the quantity produced?

A)Happy Cows will decrease their production by 20 units.
B)Happy Cows will increase their production by 20 units.
C)Happy Cows will decrease their production by 40 units.
D)Happy Cows will increase their production by 40 units.

Question 56

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. Relative to Free Cows, Happy Cows' marginal cost curve is _, which makes an accurate forecast valuable to the managers of Happy Cows.

A)steeper; more
B)steeper; less
C)flatter; more
D)flatter; less

Question 57

Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
Refer to the table above. Relative to Free Cows, Happy Cows' marginal cost curve is _, which makes its quantity produced sensitive to changes in demand.

A)flatter; less
B)steeper; more
C)flatter; more
D)steeper; less

Question 58

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.

A)less; less
B)less; more
C)more; less
D)more; more

Question 59

The flatter a firm's marginal cost curve, the more sensitive the quantity produced is to changes in the firm's demand.

Question 60

All else equal, a forecast regression with a R2 of is more valuable than a forecast regression with a R2 of .

A)0.50; 0.80
B)0.80; 0.50
C)0.85; 0.95
D)0.75; 0.90

Question 61

A Dutch auction is a(n)- bid auction in which participants observe each participant's bids.

A)ascending; do
B)descending; do
C)descending; do not
D)ascending; do not

Question 62

Which of the following goods is likely to be sold through an auction?

A)A brand new Ford Mustang automobile
B)an apple
C)A classic 1991 Buick Roadster automobile
D)apple juice

Question 63

The winner of a sealed- bid first- price auction is the participant who bid the and pays the amount of the _ .

A)second- highest; bid
B)second- highest; second- highest bid
C)highest; second- highest bid
D)highest; bid

Question 64

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 second- price auction, Bidder _ _ wins the auction and pays .

A)#3; $9 million
B)#5; $9.5 million
C)#3; $9.5 million
D)#3; $10 million

Question 65

In an independent private values sealed- bid second- price auction, if a participant bids more than their valuation this _ an inferior strategy because the high bid _.

A)is; can only lower the amount paid
B)is not; cannot affect the amount paid or raise the amount paid
C)is not; can only lower the amount paid
D)is; cannot affect the amount paid or raise the amount paid

Question 66

Suppose the U.S. government is auctioning the rights to mine for gold in a government- owned region on the West coast. Gold has been found in areas close to the region to be auctioned and gold has a fixed market price. The value of the rights to mine for gold in this region is an example of .

A)a public value
B)a common value
C)an independent private value
D)a correlated value

Question 67

An English auction is a(n)- bid auction in which participants observe other participants' bids.

A)descending; do not
B)descending; do
C)ascending; do
D)ascending; do not

Question 68

In an English auction, the bidder wins the auction and pays .

A)second- highest; the amount of the bid
B)highest; the amount of the second- highest bidder
C)second- highest; the amount of the second- highest bidder
D)highest; the amount of the bid

Question 69

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 .

A)#3; $10 million
B)#3; $9.75 million
C)#5; $9.25 million
D)#5; $9.5 million

Question 70

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

A)Bidders usually know the price that causes other participants to drop out of the auction.
B)It is the most common type of auction in business settings.
C)Bidders have a substantial amount of information regarding how other participants value the item.
D)Bidders typically know who is participating in the auction.

Question 71

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 _ .

A)#5; 9.5 million
B)#5; a value less than $10 million and greater than $9.5 million
C)#3; a value less than $10 million and greater than $9.5 million
D)#3; $10 million

Question 72

Which of the following goods is likely to be sold through an auction?

A)a loaf of bread from a local bakery
B)a bag of flour
C)the rights to drill for oil on a specified 200 acres in Texas
D)an ear of corn

Question 73

Happy Cows is bidding on a large piece of farm equipment to process their dairy products. The managers of Happy Cows have estimated the additional profit Happy Cows will earn from the piece of equipment and have valued the equipment at $125,000. Happy Cows' value of the farm equipment is .

A)a public value
B)a common value
C)an independent private value
D)a correlated value

Question 74

In an independent private values Dutch auction, the more bidders there are in the auction, the the next- highest valuation and the each participant should reduce their bid.

A)farther away; more
B)closer; less
C)farther away; less
D)closer; more

Question 75

All of the following are true regarding a sealed- bid second- price auction except which one?

A)The winner of the auction pays what the second- highest participant bid.
B)The participant with the highest bid wins.
C)This kind of auction is common.
D)Participants submit sealed bids.

Question 76

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 Dutch auction, Bidder wins the auction and pays .

A)#5; 9.5 million
B)#3; a value less than $10 million and greater than $9.5 million
C)#5; a value less than $10 million and greater than $9.5 million
D)#3; $10 million

Question 77

A manager bidding in an auction with independent private values for a large piece of industrial equipment has estimated that the expected profit from the equipment is $10 million. If the manager is indifferent about the uncertainty surrounding the expected profit of the equipment, the manager is and the manager's value of the truck is _ .

A)risk averse; $10 million
B)risk neutral; less than $10 million
C)risk neutral; $10 million
D)risk averse; less than $10 million

Question 78

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, the participants are bidding in a sealed- bid second- price auction and each participant will submit bids using their optimal strategy, except Bidder #5 who submits a bid of $10.25 million. If the rest of the participants submit bids according to their optimal strategy, Bidder wins the auction and pays .

A)$3; $10 million
B)#5; $10 million
C)$3; $10.25 million
D)#5; $10.25 million

Question 79

In which of the following auction types do participants have substantial information about competitors' bids?

A)sealed- bid second- price auction
B)sealed- bid first- price auction
C)English auction
D)Dutch auction

Question 80

A sealed- bid first- price auction common in business settings, and participants in this kind of auction observe other participants' bids.

A)is; do not
B)is not; do
C)is; do
D)is not; do not