Berkeley MBA 201A - FINAL EXAM (13 pages)

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FINAL EXAM



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FINAL EXAM

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Exam


Pages:
13
School:
University of California, Berkeley
Course:
Mba 201a - Economics for Business Decision Making

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WRITE YOUR NAME AND COHORT ONLY ON THE LAST PAGE UNIVERSITY OF CALIFORNIA BERKELEY Hass School of Business MBA 201A Economic Analysis for Business Decisions Fall 2009 Professors Steve Tadelis and Catherine Wolfram FINAL EXAM Instructions The number in brackets e g 5 indicates the points for each question Total 180 points Note that you have 180 minutes to do the exam so you should spend no more than 1 minute per point Please Write Legibly Briefly explain your answers that is don t just write yes or no and don t just write down a numerical answer without showing how you derived it Write only on this exam and not on other sheets of paper Please sign the honor code oath at the bottom of the back page Short answer questions The following three questions require only short answers 1 3 sentences Use any graphs that will help your explanation Be sure to label graphs clearly 1 10 Even with a very small number of competitors firms occasionally get locked in bitter price competition and drive prices down to their marginal costs Discuss two factors that help firms avoid the Bertrand Trap MBA 201A Professors Tadelis and Wolfram Fall 2009 Final 2 10 Alice is a contractor bidding in a sealed bid auction for a job to paint Bob s house Being an expert painter Alice knows for sure and is correct that it will cost her exactly 5 000 labor and material to paint Bob s house The auction rules state that the lowest bidder gets the job and gets paid the amount of the second lowest bid Explain to Alice who does not know economics why she should bid exactly 5 000 3 10 Two firms have to set their capacity in a market they are about to enter Their payoffs are described by the following matrix the lower left number in each cell is the payoff to Row Inc and the upper right number is the payoff to Column Ltd Column Ltd Small Small 6 7 Row Inc Mid 7 5 4 Mid 8 11 4 6 6 3 Large Large 10 5 5 4 5 2 3 What is or are the Nash equilibrium of this game 2 MBA 201A Professors Tadelis and Wolfram Fall 2009



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