31) Under which one of the following contracts does an agent have the least ince

Question

31) Under which one of the following contracts does an agent have the least incentive to behave 31) opportunistically? principal for the right to all future payoffi. A) The agent pays a fixed fee to the B) The agent w C) The agent receives a share of the profit. D) The agent works for the principal on an hourly basis. on a 32) Which of the following games involving the roll of a single die is 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 33) 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 A) charging one price per good. C) bundling the goods B) selling the goods in a competitive market. D) charging the same price for both goods 35) Sarah earns $40,000 per year working for a large corporation. She is thinking of quitting this to 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 business is A) so. B) $90,000. C) $40,000 D) $45,000. 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) 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

31. a is correct ans

In first case agent has least incentive to be opportunistic it is because he is paying the fixed amount.

32. b is correct answer

expected wealth in each case is not zero but in option b it is zero hence its a fair bet

expected wealth= 3/6×-1+3/6×1= 0

33. b is correct

Game is a strategy that includes different players and payoffs.

34. c is correct answer

With bundle pricing sellers lowers the variance on this willingness to pay and increases its profit by selling bundles of product instead of selling single product.

35. d is correct

next best earning = $40000

earning from $50000 saving = 10%of $50000=$ 5000

hence opportunity cost = 40000+5000= $45000

36. a is correct

Risk averse people don't like risk and their diminishing marginal utility.

37 b is correct.

Price discrimination is a situation in which different prices are charged from different consumers for the same good there are generally Three Types of price discrimination.

thanks

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