3451303 ECO 550 FINAL EXAMS

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3451303 ECO 550 FINAL EXAMS Powered By Docstoc
					1. Which of the following statements concerning the long-run average cost curve of economic theory is
true?
Answer
  It is L-shaped
  It is ∩-shaped
 It is ∪-shaped
 It is ∧-shaped
 It is M-shaped
2.Economies of scale exist whenever long-run average costs:
Answer
 Increase as output is increased
 Remain constant as output is increased
 Decrease as output is increased
 Decline and then rise as output is increased
3.For a short-run cost function which of the following statements is (are) not true?
Answer
 The average fixed cost function is monotonically decreasing.
 The marginal cost function intersects the average fixed cost function where the average variable cost
 function is a minimum.
 The marginal cost function intersects the average variable cost function where the average variable cost
 function is a minimum.
 The marginal cost function intersects the average total cost function where the average total cost function
 is a minimum.
4.The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
Answer
 transportation costs
 imperfections in the labor market
 imperfections in the capital markets
 problems of coordination and control encountered by management
5.In which of the following econometric problems do we find Durbin-Watson statistic being far away from
2.0?
Answer
  the identification problem
  autocorrelation
  multicollinearity
  heteroscedasticity
  agency problems
6.The method which can give some information in estimating demand of a product that hasn’t yet come to
market is:
Answer
 the consumer survey
 market experimentation
 a statistical demand analysis
 plotting the data
 the barometric method
7.The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____
change in Y for a one ____ change in X.
Answer
 percentage, unit
 percentage, percent
 unit, unit
 unit, percent
 none of the above
8.All of the following are reasons why an association relationship may not imply a causal relationship
except:
Answer
  the association may be due to pure chance
  the association may be the result of the influence of a third common factor
  both variables may be the cause and the effect at the same time
  the association may be hypothetical
9. Income tax payments are an example of ____.
Answer
  implicit costs
  explicit costs
  normal return on investment
  shareholder wealth
10.Recently, the American Medical Association changed its recommendations on the frequency of pap-
smear exams for women. The new frequency recommendation was designed to address the family histories
of the patients. The optimal frequency should be where the marginal benefit of an additional pap-test:
Answer
  equals zero.
  is greater than the marginal cost of the test
  is lower than the marginal cost of an additional test
  equals the marginal cost of the test

11.Various executive compensation plans have been employed to motivate managers to make decisions that
maximize shareholder wealth. These include:
Answer
 cash bonuses based on length of service with the firm
 bonuses for resisting hostile takeovers
 requiring officers to own stock in the company
 large corporate staffs
12.Economic profit is defined as the difference between revenue and ____.
Answer
 explicit cost
 total economic cost
 implicit cost
 shareholder wealth
13.Trading partners should specialize in producing goods in accordance with comparative advantage, then
trade and diversify in consumption because
Answer
  out-of-pocket costs of production decline
 free trade areas protect infant industries
 economies of scale are present
 manufacturers face diminishing returns
 more goods are available for consumption
14.The optimal currency area involves a trade-off of reducing transaction costs but the inability to use
changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency
(the Peso-Dollar) we would tend to see all of the following EXCEPT:
Answer
  Even more intraregional trade of goods across the three countries.
  Lower transaction costs of trading within North America.
  A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
  Less migration of workers across the three countries.
  An elimination of correlated macroeconomic shocks across the countries.
15.The purchasing power parity hypothesis implies that an increase in inflation in one country relative to
another will over a long period of time
Answer
 increase exports
 reduce the competitive pressure on prices
 lower the value of the currency in the country with the higher inflation rate
 increase foreign aid
 increase the speculative demand for the currency
16.An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of
motorcycles?
Answer
 domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
 domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
 domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
 domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
17.Time-series forecasting models:
Answer
 are useful whenever changes occur rapidly and wildly
 are more effective in making long-run forecasts than short-run forecasts
 are based solely on historical observations of the values of the variable being forecasted
 attempt to explain the underlying causal relationships which produce the observed outcome
18.For studying demand relationships for a proposed new product that no one has ever used before, what
would be the best method to use?
Answer
 ordinary least squares regression on historical data
 market experiments, where the price is set differently in two markets
 consumer surveys, where potential customers hear about the product and are asked their opinions
 double log functional form regression model
19.An example of a time series data set is one for which the:
Answer
 data would be collected for a given firm for several consecutive periods (e.g.,
 months).
 data would be collected for several different firms at a single point in time.
 regression analysis comes from data randomly taken from different points in time.
 data is created from a random number generation program.
20.Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern
to be found in the historical values of a variable that is being forecast.
Answer
  opinion polling
  barometric forecasting
  econometric forecasting
  time-series forecasting
21.Generally, investors expect that projects with high expected net present values also will be projects
with
Answer
 low risk
 high risk
 certain cash flows
 short lives
22.The net present value of an investment represents
Answer
 an index of the desirability of the investment
 the expected contribution of that investment to the goal of shareholder wealth maximization
 the rate of return expected from the investment
 the rate of return on equity
23.The standard deviation is appropriate to compare the risk between two investments only if
Answer
 the expected returns from the investments are approximately equal
 the investments have similar life spans
 objective estimates of each possible outcome is available
 the coefficient of variation is equal to 1.0
24.The primary difference(s) between the standard deviation and the coefficient of variation as measures
of risk are:
Answer
 the coefficient of variation is easier to compute
 the standard deviation is a measure of relative risk whereas the coefficient of variation is a measure of
 absolute risk
 the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of
 absolute risk
 the standard deviation is rarely used in practice whereas the coefficient of variation is widely used
25.When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in
____ demanded, the net result being a constant total consumer expenditure.
Answer
 elastic; price; quantity
 unit elastic; price; quantity
 inelastic; quantity; price
 inelastic; price; quantity
26.If demand were inelastic, then we should immediately:
Answer
 cut the price.
 keep the price where it is.
 go to the Nobel Prize Committee to show we were the first to find an upward sloping demand curve.
 stop selling it since it is inelastic.
 raise the price.
27.An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by
____.
Answer
 one percent; quantity supplied; two units
 one unit; quantity supplied; two units
 one percent; quantity demanded; two percent
 one unit; quantity demanded; two units
 ten percent; quantity supplied; two percent
28.Marginal revenue (MR) is ____ when total revenue is maximized.
Answer
 greater than one
 equal to one
 less than zero
 equal to zero
 equal to minus one
29.Marginal revenue product is:
Answer
 defined as the amount that an additional unit of the variable input adds to the total revenue
 equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the
 increase in output obtained
 equal to the marginal product of the variable factor times the marginal product resulting from the increase
 in output obtained
 equal to the unknown variable
30.Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.
Answer
 marginal cost
 variable cost
 marginal rate of technical substitution
 total cost
31.Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this
industry would have:
Answer
  increasing returns to scale
  constant returns to scale
  decreasing returns to scale
  negative returns to scale
32.In a production process, an excessive amount of the variable input relative to the fixed input is being
used to produce the desired output. This statement is true for:
Answer
 stage II
 stages I and II
when Ep = 1
stage III

				
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