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When there is multicollinearity in an estimated regression equation,
a. the coefficients are likely to be small.
b. the t'“statistics are likely to be small even though the R2is large.
c. the coefficient of determination is likely to be small.
d. the problem of omitted variables is likely.
e. the error terms will tend to have a cyclical pattern.
In the shareholder wealth maximization model, the value of a firm's stock is equal to the
present value of all expected future ____ discounted at the stockholders' required rate of
return.
a. profits (cash flows)
b. revenues
c. outlays
d. costs
e. investments
According to the theory of cost, specialization in the use of variable resources in the
short-run results initially in:
a. decreasing returns and declining average and marginal costs
b. increasing returns and declining average and marginal costs
c. increasing returns and increasing average and marginal costs
d. decreasing returns and increasing average and marginal costs
e. none of the above
An efficient customer sorting rule is one in which
a. customers with high willingness to pay secure the discounted goods
b. customers are rationed randomly between the discounted and full price goods
c. no customer purchase below her willingness to pay
d. customers with the lowest willingness to pay secure the discount goods
e. brand loyalty allows the incumbent to retain its regular customers
Agency problems appear in many settings within a firm. All of the following are
examples, except which is NOT a good example of this problem?
a. Diversified stockholders are more enthusiastic on accepting business risks than are
firm managers.
b. Firm managers receive cash bonuses based on the performance of the firm.
Employees sometime take items from the store in which they work.
Lenders to firms want the managers to invest in safe projects to protect their collateral
in the project but managers want to invest in projects that will make a name for them
and warrant promotion.
Firm managers sometime want to relax on the job.
Which of the following items is (are) not considered as part of the net investment
calculation?
a. installation and shipping charges
b. acquisition cost of new asset
c. salvage value of old equipment that is being replaced
d. first year's net cash flow
e. c and d
The Cobb-Douglas production function has which of the following properties?
a. output is a linear increasing function of each of the inputs
b. it provides a good fit to the traditional S-shaped production function
c. the elasticity of production is constant and equal to 1 minus the exponent of the
appropriate variable
d. all of the above
e. none of the above
The ____ is the ratio of ____ to the ____.
a. standard deviation; covariance; expected value
b. coefficient of variation; expected value; standard deviation
c. correlation coefficient; standard deviation; expected value
d. coefficient of variation; standard deviation; expected value
e. none of the above
Essential components of a game include all of the following except:
a. players
b. payoffs
c. actions
d. an information set
e. cooperation
Barometric price leadership exists when
a. one firm in the industry initiates a price change and the others follow it as a signal of
changes in cost or demand in the industry.
b. one firm imposes its best price on the rest of the industry.
c. all firms agree to change prices simultaneously.
d. one company forms a price umbrella for all others.
e. the firms are all colluding.
Which of the following are not approaches to resolving the principal-agent problem?
a. ex ante incentive alignment
b. deferred stock options
c. ex post governance mechanism
d. straight salary contracts
e. monitoring by independent outside directors
Which of the following is an example of an oligopolistic market structure?
a. public utilities
b. air transport industry
c. liquor retailers
d. wheat farmers
e. none of the above
Marginal revenue product is:
a. defined as the amount that an additional unit of the variable input adds to the total
revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue
resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product
resulting from the increase in output obtained
d. a and b
e. a and c
The common factors that give rise to all principal-agent problems include the
a. unobservability of some manager-agent action
b. presence of random disturbances in team production
c. the greater number of agents relative to the number of principals
d. a and b only
e. none of the above
Evidence from empirical studies of long-run cost-output relationships lends support to
the:
a. existence of a non-linear cubic total cost function
b. hypothesis that marginal costs first decrease, then gradually increase over the normal
operating range of the firm
c. hypothesis that total costs increase quadratically over the ranges of output examined
d. hypothesis that total costs increase linearly over some considerable range of output
examined
e. none of the above
One commonly used test in checking for the presence of autocorrelation when working
with time series data is the ____.
a. F-test
b. Durbin-Watson test
c. t-test
d. z-test
e. none of the above
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S.
manufacturer of motorcycles?
a. domestic sales of HD motorcycles increase and foreign sales of HD motorcycles
increase
b. domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles
increase
c. domestic sales of HD motorcycles increase and foreign sales of HD motorcycles
decrease
d. domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles
decrease
e. only manufacturers who produce traded goods are affected
Which of the following pricing policies best identifies when a product should be
expanded, maintained, or discontinued?
a. full-cost pricing policy
b. target-pricing policy
c. marginal-pricing policy
d. market-share pricing policy
e. markup pricing policy
