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The "law" of demand can be best described by
A) people will buy things that they enjoy.
B) if incomes rise, people will buy more.
C) a rise in price will cause shortages.
D) a fall in price will increase quantity demanded.
Which of the following is not a drawback of forecasting using the compound growth
rate method?
A) only considers first and last observations
B) considers only equal absolute changes
C) disregards fluctuations between the original and terminal observations
D) does not consider any trends in the data
The term capital budgeting refers to decisions
A) which are made in the short run.
B) which concern the spreading of expenditures over a period lasting less than one year.
C) where expenditures and receipts for a particular undertaking will continue over a
relatively long period of time.
D) where a receipt of cash will occur simultaneously with an outflow of cash.
Unlike an accountant, an economist measures costs on a(n) ________ basis.
A) explicit
B) replacement
C) historical
D) conservative
In economic analysis, any amount of profit earned above zero is considered "above
normal" because
A) normally firms are supposed to earn zero profit.
B) this would indicate that the firm's revenue exceeded both its accounting and
opportunity cost.
C) this would indicate that the firm was at least earning a profit equal to its opportunity
cost.
D) this would indicate that the firm's revenue exceeded its accounting cost.
Select the group that best represents the basic factors of production.
A) land, labor, capital, entrepreneurship
B) land, labor, money, management skills
C) land, natural resources, labor, capital
D) land, labor, capital, technology
Holding supply constant, an increase in demand will
A) increase both the quantity and price.
B) increase the equilibrium price and decrease the equilibrium quantity.
C) decrease the equilibrium price and increase the equilibrium quantity.
D) decrease both the quantity and price.
A company which charges a lower price than may be indicated by economic analysis to
gain a foothold in the market is practicing
A) price skimming.
B) psychological pricing.
C) penetration pricing.
D) prestige pricing.
Firms are "price makers" if they
A) have sufficient market power to set their product price.
B) make the market price their product price.
C) make their product price competitive.
D) None of the above
When cost externalities exist, an optimal equilibrium can be attained if the government
A) restricts production.
B) levies a tax for the difference between private costs and social costs.
C) prohibits production.
D) All three above
E) Both A and B
Which of the following will change only the quantity demanded of oranges?
A) an increase in the population
B) a change in the price of tangerines
C) a change in the price of oranges
D) a decrease in the taste and preferences for oranges
Which of the following actions has the best potential for experiencing economies of
scope?
A) producing a product that has appeal to a wider segment of the market
B) producing computers and software
C) producing spaghetti and soft drinks
D) producing cars and trucks
When a government imposes a price floor on a good that is above the market
equilibrium price
A) a surplus will develop.
B) a shortage will develop.
C) producers will increase their sales price.
D) consumers will increase their demand for the good.
Answer the questions based on the following information.
Number of Workers Units of Output
0 0
1 40
2 90
3 126
4 150
The marginal product of the fourth worker is
A) 150 units of output.
B) 24 units of output.
C) negative.
D) 36 units of output.
If the price of a good is increased and total revenue received from the sale of this good
increases, then the price elasticity of demand for the good is
A) elastic.
B) inelastic.
C) unitary.
D) None of the above
Quantitative forecasting that projects past data without explaining the reasons for future
trends is called
A) scientific forecasting.
B) dumb forecasting.
C) empirical forecasting.
D) nave forecasting.
Which of the following would lead to a short-run market surplus for tomatoes?
A) The price of tomatoes increases.
B) A new government study shows that tomatoes have a greater risk of contamination
from salmonella.
C) An increase in the price of potatoes.
D) A decrease in the number of tomato growers.
Which of the following refers to a shift in the demand curve?
A) "This new advertising campaign should really increase our demand."
B) "Let's drop our price to increase our demand."
C) "We dare not raise our price because our demand will drop."
D) "If new sellers enter the market, the demand for the product is bound to increase."
A cartel price will be established at the quantity where
A) total cost equals the industry total revenue.
B) average cost equals the industry revenue.
C) the sum of the members' marginal costs equals industry marginal revenue.
D) marginal cost equals industry price.
The best definition of economics is
A) how choices are made under conditions of scarcity.
B) how money is used.
C) how goods and services are produced.
D) how businesses maximize profits.
Monopoly is characterized by
A) unique products.
B) market entry and exit are difficult or impossible.
C) non-price competition not necessary.
D) All of the above
Which of the following is true for a monopoly?
A) P = MC
B) P = MR
C) P > MR
D) P < MR
When a firm increased its output by one unit, its AC rose from $45 to $50. This implies
that its MC is
A) $5.
B) between $45 and $50.
C) greater than $50.
D) Cannot be determined from the above information
The t-test is a statistical measure which
A) tests the true value of a variable.
B) tests the statistical significance of a regression coefficient.
C) tests the statistical significance of a regression equation.
D) None of the above
The best example of an economic goal of a firm is
A) providing good products/services to its customers.
B) improving its public image.
C) increasing employee morale.
D) increasing shareholder wealth.
Which of the following is a test of the statistical significance of a particular regression
coefficient?
A) t-test
B) R2
C) F-test
D) Durbin-Watson test
Financial risk is associated with changes in
A) the demand for a firm's products.
B) a firm's debt.
C) a firm's labor costs.
D) government regulations of a firm's activities.
Simulation analysis
A) permits the calculation of expected value and standard deviation.
B) does not permit the calculation of expected value and standard deviation.
C) is too complex to ever be used in actual business situations.
D) does not consider probabilities.
The net present value of a project is calculated as
A) the future value of all cash inflows minus the present value of all outflows.
B) the sum of all cash inflows minus the sum of all cash outflows.
C) the present value of all cash inflows minus the present value of all cash outflows.
D) None of the above
The Widget Company has estimated the following revenue possibilities for the year:
Sales Probability
100 0.15
150 0.20
220 0.30
290 0.20
310 0.15
a. Find expected revenue.
b. Find the standard deviation.
c. Find the coefficient of variation.
The demand for U.S. produced packaged food products in foreign countries is expected
to
A) grow.
B) slow down.
C) remain constant.
D) fluctuate.
Economic profit equals accounting profit minus
A) explicit costs.
B) implicit costs.
C) fixed costs.
D) variable costs.
Transaction costs include
A) costs of negotiating contracts with other firms.
B) cost of enforcing contracts.
C) the existence of asset-specificity.
D) All of the above
How long is the "short-run" time period in the economic analysis of the market?
A) three months or one business quarter
B) total time in which sellers already in the market respond to changes in demand and
equilibrium price
C) total amount of time it takes new sellers to enter the market
D) total amount of time it takes original sellers to leave the market
