Which of the following is the best example of two inputs that would exhibit a constant
marginal rate of technical substitution?
A) trucks and truck drivers
B) natural gas and oil
C) personal computers and clerical workers
D) company-employed computer programmers and temporary supplemental computer
programmers
The Prisoner’s Dilemma is an example of
A) market signaling.
B) a zero-sum game.
C) a non-zero sum, non-cooperative game with a dominant strategy.
D) adverse selection.
Transfer pricing is a method used to
A) determine whether a firm should make or buy a component product.
B) determine the correct value of a product as it moves from one stage of production to
another.
C) minimize a multinational firm’s tax liabilities.
D) All of the above
Revenue maximization occurs when a firm sells at a price
A) that is equal to its minimum average variable cost.
B) where its marginal revenue is equal to its marginal cost.
C) where its marginal revenue is zero.
D) None of the above
When is it not in the best interest of a company to hire additional workers in the short
run?
A) when the average product of labor is decreasing
B) when the firm is in Stage II of the production process
C) when the marginal revenue product equals zero
D) when the wage rate is equal to or greater than labor’s marginal revenue product
When the slope of the total revenue curve is equal to the slope of the total cost curve
A) profit is maximized.
B) marginal revenue equals marginal cost.
C) the marginal cost curve intersects the total average cost curve.
D) the total cost curve is at its minimum.
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
If a firm used a combination of inputs that was to the left of its isocost line, it would
indicate that
A) it is exceeding its budget.
B) it is not spending all of its budget.
C) it is operating at its optimal point because it is saving money.
D) None of the above
Among the advantages of the least-squares trend analysis techniques is
A) the ease of calculation.
B) relatively little analytical skill required.
C) its ability to provide information regarding the statistical significance of the results.
D) All of the above
The learning curve
A) is really no different from a marginal cost curve.
B) calculates average cost at a particular point in time.
C) shows the decrease in unit cost as more of the same product is produced over time.
D) None of the above
The marginal cost will intersect the average variable cost curve
A) when the average variable cost curve is rising.
B) where average variable cost curve equals price.
C) at the minimum point of the average variable cost curve.
D) The two will never intersect.
The kinked demand curve model best reflects
A) mutual interdependence among sellers.
B) a game theory approach to price-output decisions.
C) price rigidities in oligopolistic markets.
D) All of the above
If a product which costs $8 is sold at $10, the mark-up is
A) $2.
B) 25%.
C) 20%.
D) None of the above
The calculation of stockholder wealth involves
A) the time-value of money concept.
B) the cash flow stream.
C) business and financial risk.
D) All of the above
A firm uses ________ for goods which the consumer takes pride in owning.
A) price skimming
B) prestige pricing
C) penetration pricing
D) predatory pricing
The t-statistic is computed by
A) dividing the regression coefficient by the standard error of the estimate.
B) dividing the regression coefficient by the standard error of the coefficient.
C) dividing the standard error of the coefficient by the regression coefficient.
D) dividing the R2 by the F-statistic.
Assume a firm employs 10 workers and pays each $15 per hour. Further assume that the
MP of the 10th worker is 5 units of output and that the price of the output is $4.
According to economic theory, in the short run
A) the firm should hire additional workers.
B) the firm should reduce the number of workers employed.
C) the firm should continue to employ 10 workers.
D) More information is required to answer this question.
Which of the following will not cause the demand curve for good X to shift?
A) a change in the price of X
B) a change in the price of Y, a complement
C) a change in the price of Z, a substitute
D) an increase in average disposable real income
If total cost equals $2,000 and quantity produced is 100 units, then
A) fixed cost is $200 and average variable cost is $18.
B) fixed cost is $600 and average variable cost is $14.
C) fixed cost is $500 and marginal cost is $15.
D) Either A or B can be correct.
All of the following are non-price determinants of demand except
A) tastes and preferences.
B) income.
C) technology.
D) future expectations.
If a good’s demand function is Q = 30 – 3P, then calculate the price elasticity of demand
when
a. good price is $3 using the point elasticity formula
b. good price is $4 using the point elasticity formula
c. good price decreases from $4 to $3, using the arc elasticity formula
d. good price is $5, using the point elasticity formula
e. good price increases from $4 to $5, using the arc elasticity formula
Which level indicates the point of maximum economic efficiency?
A) lowest point on AC curve
B) lowest point on AVC curve
C) lowest point on MC curve
D) None of the above
A drawback in the use of sensitivity analysis in capital budgeting decisions is that it
doesn’t
A) permit evaluating alternative outcomes.
B) provide estimates of net present values.
C) assign probability values to outcomes.
D) consider different possible rates of discount.
For each of the following cost functions, if possible, find minimum AC and minimum
AVC.
a. TC = 40,000 + 20 Q
b. TC = 1000 + 2Q + 0.1 Q2
Which of the following best describes the entire U. S. refreshment beverage market?
A) monopoly
B) oligopoly
C) monopolistic competition
D) perfect competition
Carefully explain if the following statements are true, false, or uncertain.
a. If average cost is increasing, marginal cost must be increasing.
b. If there are diminishing returns, the marginal cost curve must be positively sloped.
c. Marginal costs decrease as output increases because the firm can spread fixed costs
over more units.
In the short run, which of the following would indicate that a perfectly competitive firm
is producing an output for which it is receiving a normal profit?
A) P > AC
B) AVC < P < AC
C) P = AC
D) P = AVC
Suppose the price of crude oil drops from $150 a barrel to $120 a barrel. The quantity
bought remains unchanged at 100 barrels. The coefficient of price elasticity of demand
in this example would be
A) -0.5.
B) infinity.
C) -1.0.
D) 0.
In a call center, which of the following situations can be considered as a variable input
in the short run?
A) the level of computer software being utilized
B) the number of call center representatives on duty at the center
C) the number of call center managers or supervisors
D) the size (e.g., square footage) of the call center
Which of the following indicators will always improve when more variables are added
to a regression equation?
A) the magnitudes of the coefficients
B) the t-test
C) R2
D) the standard errors of the coefficients
Which of the following would cause a short-run decrease in the quantity supplied of
personal computers?
A) The price of CPUs decreases.
B) The price of software decreases.
C) The number of PC manufacturers decreases.
D) The cost of manufacturing PCs decreases.
In the short run, finding the optimal amount of variable input involves which
relationship?
A) MP = MC
B) AP = MP
C) MP = 0
D) MRP = MFC
The method of estimating long-run costs in which knowledgeable professionals familiar
with production facilities and processes calculate optimal combination of inputs to
produce given quantities and then estimate costs is known as
A) engineering cost estimating.
B) the survivorship method.
C) regression analysis.
D) None of the above
If a production function is given by the equation Q = 12X + 10X2 – X3, where Q =
Output and X = Input, then calculate the equations for
a. average product
b. marginal product
c. point of diminishing average returns
d. point of diminishing marginal returns
The sensitivity of the change in quantity consumed of one good to a change in the price
of a related good is called
A) cross-elasticity.
B) substitute elasticity.
C) complementary elasticity.
D) price elasticity of demand.