Which of the following statements is (are) true concerning a pure competition situation?
a. Its demand curve is represented by a vertical line.
b. Firms must sell at or below market price.
c. Marginal revenue is equal to price.
d. both b and c
e. both a and b
Aspen Industries currently pays an annual common stock dividend of $5.00 per share.
The company’s dividend has grown steadily over the past 10 years at a 7 percent rate
and this rate is expected to continue for the foreseeable future. The company’s stock
currently sells for $70 per share. The company can issue new common stock at a net
price of $65 per share.
(a) Determine the firm’s cost of internal equity capital using the dividend capitalization
(constant-growth) model.
(b) Determine the firm’s cost of external equity capital using the dividend capitalization
(constant-growth) model.
Examine the plot of data.
Sales
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Time
It is likely that the best forecasting method for this plot would be:
a. a two-period moving average
b. a secular trend upward
c. a seasonal pattern that can be modeled using dummy variables or seasonal adjustments
d. a semi-log regression model
e. a cubic functional form
Demand is given by QD= 620 ‘“ 10·P and supply is given by QS= 100 + 3·P. What is
the price and quantity when the market is in equilibrium?
a. The price will be $30 and the quantity will be 132 units.
b. The price will be $11 and the quantity will be 122 units.
c. The price will be $40 and the quantity will be 220 units.
d. The price will be $35 and the quantity will be 137 units
e. The price will be $10 and the quantity will be 420 units.
The decision by the Municipal Transit Authority to either refurbish existing buses, buy
new large buses, or to supplement the existing fleet with mini-buses is an example of:
a. independent projects
b. mutually exclusive projects
c. contingent projects
d. separable projects
e. none of the above
For a monopolist that engages in price discrimination, when the price elasticity in
market 1 is less (in absolute value) than in market 2, the optimal price in market 1 will
exceed the optimal price in market 2.
a. true
b. false
If one defines incremental cost as the change in total cost resulting from a decision, and
incremental revenue as the change in total revenue resulting from a decision, any
business decision is profitable if:
a. it increases revenue more than costs or reduces costs more than revenue
b. it decreases some costs more than it increases others (assuming revenues remain
constant)
c. it increases some revenues more than it decreases others (assuming costs remain
constant)
d. all of the above
e. b and c only
In regression analysis, the existence of a high degree of intercorrelation among some or
all of the explanatory variables in the regression equation constitutes:
a. autocorrelation
b. a simultaneous equation relationship
c. nonlinearities
d. heteroscedasticity
e. multicollinearity
A firm in pure competition would shut down when:
a. price is less than average total cost
b. price is less than average fixed cost
c. price is less than marginal cost
d. price is less than average variable cost
The Winston Tobacco Company feels that it is faced with the following segmented
demand function for its cigarettes: where Q is the
number of cartons sold and P is the price per carton. (a) Why is such a segmented
demand function likely to exist? What type of industry structure is indicated by this
relationship?
(b) Determine Winston’s marginal revenue function.
(c) Given that Winston’s total cost function (including a “normal” return to the owners)
is TC1= 80 + 2.6Q + .05Q2determine Winston’s profit maximizing price and output
level.
(d) Given that Winston’s total cost function increases to TC2= 90 + 3.4Q + .05Q2what is
their profit maximizing price and output level?
Non-cooperative sequential games can incorporate all the following features except
a. a single decision-maker in the endgame
b. no communication
c. finite or infinite time periods
d. third-party enforceable agreements
e. an explicit order of play
GE Appliance Division believes which of the following warrants shifting assembly of
appliances back from Shanghai to Louisville, KY:.
a. The negotiation of a two-tiered wage structure for union labor,
b. Faster innovations when product design engineers and assembly line team leaders are
located in the same place,
c. quicker delivery to retail dealers reduce inventory storage
d. none of the above,
e. all of the above.
The primary disadvantage of engineering methods for measuring cost functions is that
they deal with the managerial and entrepreneurial aspects of the production process or
plant.
a. true
b. false
Those goods having a calculated income elasticity that is negative are called:
a. producers’ goods
b. durable goods
c. inferior goods
d. nondurable goods
e. none of the above