30) 30) A firm will increase its spending on advertising unti A) it has deterred

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30) 30) A firm will increase its spending on advertising unti A) it has deterred all future entry ) the marginal benefit of advertising equals the marginal cost of advertisin C) it has monopolized the market D) the marginal benefit of advertising is zero 31) Under which one of the following contracts does an agent have the least incentive to 31) opportunistically? A) The agent pays a fixed fee to the principal for the right to all future payoffi. B) The agent works for the principal on a per unit basis C) The agent receives a share of the profit D) The agent works for the principal on an hourly basis 32) Which of the following games involving the roll of a single die le a fair bet? 32) A) Bet $1 and receive $4 if 6 comes up. B) Bet $1 and receive $1 if 3, 4, or 5 comes up C) Bet $1 and receive $1 if 3 or 4 comes up D) None of the bets is a fair bet. 33) A game includes A) a strategy C) rules. B) payoffs. D) All of the above 34) If Ben values good X more than good Y and Catherine values good Y more than good X a firm can 34) increase its profits by B) selling the goods in a competitive market. A) charging one price per good. C) bundling the goods D) charging the same price for both goods 35) Sarah eams $40,000 per year working for a large corporation. She is thinking of quiting this job to 35)- work full time in her own business. She will invest her savings of $50,000 (which currently has an annual 10% rate of return) into the business. Her annual opportunity cost of this new busine is A) so. B) $90,000 C) $40,000. D) 545,000 36) 36) Someone who is risk-averse has A) diminishing marginal utility of wealth B) constant marginal utility of wealth C) increasing marginal utility of wealth. D) less marginal utility of wealth than someone who is risk-neutral 37 37) Price discrimination A) is illegal in the U.S B) is a form of pricing where consumers pay different prices for a good. C) allows firms to set a single intermediate price between consumers low and high willingness to pay D) is when consumers use prices to discriminate between different quality products B-6

Explanation / Answer

30. The correct answer is: B)

Reason: Advertising is profitable untill and unless the additional revenue generated through advertisement equals its marginal cost. If advertising is stopped before this then the additional net revenue due to advertising can be lost and if it is continued after the equilibrium level, then there will be a met loss. Hence, equilibrium is when MR from advertising equals MC from advertising.

P.S.: As per Chegg's policy, if nothing is being mentioned then only the firs question is to be answered.

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