Which of the following is the exponential trend equation to forecast sales (S)?
A) S = a + b(t)
B) S = a + bt
C) S = a + b(t) + c(t)2
D) None of the above
Which of the following industries is most likely to represent the monopolistic
competition market structure?
A) automobiles
B) tobacco products
C) restaurants
D) farm equipment
Assume a profit maximizing firm’s short-run cost is TC = 700 + 60Q. If its demand
curve is P = 300 – 15Q, what should it do in the short run?
A) shut down
B) continue operating in the short run even though it is losing money
C) continue operating because it is earning an economic profit
D) Cannot be determined from the above information
The method of forecasting with leading indicators can be criticized for
A) occasionally forecasting a recession when none ensues.
B) forecasting the direction of the economy but not the size of the change in economic
activity.
C) frequent revisions of data after original publication.
D) All of the above
Firms in monopolistic competition would
A) persistently realize economic profits in both the short and long run.
B) may realize economic profits in the long run and normal profits in the short run.
C) tend to incur persistent losses in both the short and long run.
D) tend to realize economic profits in the short run and normal profits in the long run.
Globalization has depressed wages in western industrialized countries, particularly
those for
A) highly skilled workers.
B) highly educated workers.
C) semi-skilled workers.
D) low skilled workers.
In general, there is a(n) ________ relationship between the height/strength of the
barriers and the number of firms in an industry.
A) direct
B) inverse
C) constant
D) random
McDonald’s charges a higher price for a Big Mac in New York City than it does in a
small town in Iowa. Is this an example of third-degree price discrimination? Explain.
The owner of a produce store found that when the price of a head of lettuce was raised
from 50 cents to $1, the quantity sold per hour fell from 18 to 8. The arc elasticity of
demand for lettuce is
A) -0.56.
B) -1.15.
C) -0.8.
D) -1.57.
________ maximization is achieved when a company manages its business in such a
way that its cash flows over time, discounted at the appropriate discount rate, will cause
the value of the company’s common stock to be at a maximum.
A) Profit
B) Stockholder wealth
C) Asset
D) None of the above
Which of the following is a test of the statistical significance of the entire regression
equation?
A) t-test
B) R2
C) F-test
D) Durbin-Watson test
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.
If firms are earning economic profit in a monopolistically competitive market, which of
the following is most likely to happen in the long run?
A) Some firms will leave the market.
B) Firms will join together to keep others from entering.
C) New firms will enter the market, thereby eliminating the economic profit.
D) Firms will continue to earn economic profit.
When future events cannot be assigned probabilities, we are talking about
A) risk.
B) uncertainty.
C) a clouded future.
D) financial risk.
In perfect competition, if firms enter the market in the long run
A) total supply will increase causing market price to increase.
B) total supply will decrease causing market price to decrease.
C) total supply will decrease causing market price to increase.
D) total supply will increase causing market price to decrease.
In using regression analysis to estimate demand, which of the following problems is
most directly a result of insufficient data?
A) the identification problem
B) the problem of a low R2
C) the problem of high standard errors
D) the problem of insignificant F-statistics
In a zero-sum game
A) the gains of one player are less than the gains of the other player.
B) the gains of one player are greater than the gains of the other player.
C) the gains of one player directly reflect the losses of another player.
D) the gains and losses of players are all expressed in zeros.
Which of the following is most likely to indicate a statistically significant regression
coefficient?
A) |t| > R2
B) R2 > .90
C) |t| > 2
D) |t| > 4
Answer the following questions on the basis of the following regression equation.
(Standard errors in parentheses, n = 200.)
Q = -6,500 – 100PA + 50PB + .3I + .2A; R2 =.12, (2,500) (50) (30) (.1) (.08)
where Q is the quantity demanded of good A; PA= $10, price of good A; PB= $8, price
of good B; I = $12,000, per capita income; and A = $20,000, monthly advertising
expenditures.
Which of the variables does not pass the t-test at the .05 level of significance?
A) PA
B) PB
C) A
D) I
E) All the variables pass the t-test.
Average weekly claims for unemployment insurance, money supply and the index of
stock prices are all examples of
A) leading indicators.
B) coincident indicators.
C) lagging indicators.
D) None of the above
“Localvores” refers to food products which are
A) organically produced.
B) imported from foreign countries.
C) grown in places which are close to the point of consumption.
D) provide health and nutritional benefits in combating diseases.
The main difference between perfect competition and monopolistic competition is
A) the number of sellers in the market.
B) the ease of exit from the market.
C) the difference in the firm’s profits in the long run.
D) the degree of product differentiation.
Tying arrangements that lessen competition were made illegal by
A) the Sherman Anti-Trust Act.
B) the Clayton Act.
C) the Celler-Kefauver Act.
D) the Robinson-Patman Act.
Assume that a multinational company produces components in country A and ships
them to a subsidiary in country B. In order to increase its profits
A) the company should charge a high transfer price for the components if income taxes
in country B are higher than in country A.
B) the company should charge a low transfer price for the components if income taxes
in country B are higher than in country A.
C) the company should charge a high transfer price for the components if income taxes
in country A are higher than in country B.
D) None of the above
Which of the following is a reason for economies of scale?
A) Fixed costs are spread out as volume increases.
B) The law of diminishing returns does not take effect.
C) Input productivity increases as a result of greater specialization.
D) There is greater savings in transportation costs.
Which of the following is most likely a fixed cost?
A) expenditures for raw materials
B) wages for unskilled labor
C) fuel cost
D) property taxes
The pricing of a product at each stage of production as the product moves through
several stages is called
A) transfer pricing.
B) cost plus pricing.
C) penetration pricing.
D) monopolistic pricing.
As the U.S. population ages, the structure of the demand for food products will change
with
A) an increase in the demand for red meat products and a decrease in the demand for
fish and poultry.
B) an increase in the demand for dairy products and a decrease in the demand for red
meat.
C) an increase in the demand for fruits, vegetables and fish and a decrease in demand
for fried foods, dairy products and items that contain a lot of sugar.
D) an increase in the demand for beverages and drinks and a decrease in the demand for
solid food.
If a perfectly competitive firm incurs an economic loss, it should
A) shut down immediately.
B) try to raise its price.
C) shut down in the long run.
D) shut down if this loss exceeds fixed cost.
Which of the following will not cause a short-run shift in the supply curve?
A) a change in the number of sellers
B) a change in the cost of resources
C) a change in the price of the product
D) a change in future expectations
Table 1
The following information is provided for Tony Romo’s income and expenditures.
Quantity Purchased per Month
Monthly Income Steaks Pizzas
$2,000 2 8
$3,000 4 6
In Table 1, steaks are classified as a(n)
A) normal good.
B) positive good.
C) inferior good.
D) marginal good.