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Mba Econ

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1. (2) I have often heard people state "I have worked so hard to this point" or "I have spent this much money" to justify a future action. Explain why this analysis is faulty and what should go into the decision making process.

2. (2) Suppose a firm with market power is trying to figure out how to change its price to increase revenues by a given amount. What would the firm have to consider in this decision?

3. (3) Some firms pursue a strategy of growth because they think it will result in the most profits. Using the concepts of economies and diseconomies of scale, explain the benefits and costs of growth (include the potential causes) for a firm in the industry of your choice (thus I am asking you to choose an industry to use for this example, rather than just the general arguments).

4. (2) Some analysts conclude that existing firms have a cost advantage over potential entrants (assuming the size of the existing firm and potential entrant would be the same). Explain why this might be the case. Please provide a counter argument (you must argue that a potential entrant - still the same size - could operate at lower costs).

5. (3) One of the problems with performance based pay in the Financial Industry is that it created an incentive for individuals to conduct extremely risky transactions because the individuals themselves were not exposed to all of the risk. Using a principal-agent argument, explain this problem and how it can be overcome.

6. (4) The other day, someone told me that the problem associated with health care insurance is a moral hazard problem. Explain how the moral hazard problem can be related to the health insurance market. Explain whether or not you think this would be the case. Finally, assume that it is the case, are there any solutions to this moral hazard? If so, explain. If not, explain why not.

7. (4) Since the 1970s the United States has been pursuing strategies that have promoted globalization and deregulation. In your opinion, explain the two greatest benefits and the two greatest costs of pursuing this agenda of increased globalization and deregulation.



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