One reason why a consumer might buy from a high-priced local hardware store instead of going to a big discount store several miles away in another community is that
a. the local store will still have lower money prices
b. the time cost of going to the local store is equal to going to the discount store
c. comparing the sum of money prices and time cost, the local hardware store is a bargain for people who value time highly
d. comparing the sum of money prices and time cost, the local hardware store is a bargain for people who earn low hourly wages
e. the time cost of going to the discount store is less than going to the local hardware store
C
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Refer to Scenario 13.16. If the firms must choose their prices simultaneously,
A) both firms will buy gelato. B) both firms will buy yogurt. C) two pure strategy equilibria exist, one in which Gooi alone buys a gelato machine and one in which Ici alone buys a gelato machine. D) the game has no pure strategy equilibrium. E) the game has no mixed strategy equilibrium.
Some firms provide stock options to managers as an incentive to work hard and increase the value of the firm. A typical option contract gives the manager the right to buy the firm's stock at a set price (known as the exercise price)
If the firm's stock value increases and moves above the exercise price, then the manager's option becomes more valuable. What is the potential problem with this incentive scheme? A) The incentive does not include a performance benchmark, so it cannot be optimal. B) There is a dynamic incentive problem --- the manager may focus too much on the firm's short-run stock value and not on actions that are in the best interest of the firm for the long run. C) The incentive value depends on the firm's stock value, which cannot be influenced by the amount of work or effort exerted by the manager. D) There are no problems with this incentive scheme.