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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
The derived demand curve for a good component will be more inelastic
A) the larger is the fraction of total cost going to this component.
B) the more inelastic is the demand curve for the final good.
C) the more elastic are the supply curves of cooperating factors.
D) the less essential is the component in question.
The law of diminishing returns begins first to affect a firm's short-run cost structure
when
A) average variable cost begins to increase.
B) marginal cost begins to increase.
C) average cost begins to increase.
D) average fixed cost begins to decrease.
Probabilities, which are based on past data or experience, are called
A) a priori.
B) objective.
C) uncertain.
D) statistical.
When a firm has the power to establish its price
A) P = MR.
B) P = MC.
C) P > MR.
D) P < MR.
To an economist, total costs include
A) explicit, but not implicit costs.
B) implicit, but not explicit costs.
C) explicit and implicit costs.
D) neither explicit nor implicit costs.
When mark-up equals 50% and AC = MC, then demand elasticity will be
A) -1.
B) -1.5.
C) -2.
D) -3.
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, Tony's income elasticity of demand for pizzas is
A) 0.
B) less than zero.
C) greater than 1.0.
D) 1.0.
As a firm attempts to increase its production, its long-run average costs eventually rise
because of
A) the law of diminishing returns.
B) diseconomies of scale.
C) fixed capital.
D) insufficient demand.
For each of the following cost functions, if possible, find minimum AC and minimum
AVC.
a. TC = 20,000 + 10 Q
b. TC = 18,000 + Q + 0.2 Q2
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.
A large corporation's profit objective may not be profit or wealth maximization, because
A) stockholders have little power in corporate decision making.
B) management is more interested in maximizing its own income.
C) managers are overly concerned with their own survival and may not take all prudent
risks.
D) All of the above
R2 is a statistical measure which
A) determines how important one variable is in explaining the value of another
variable.
B) tests the true value of a variable.
C) determines how well an equation can estimate the relationship between one variable
and a set of other variables.
D) All of the above
In the short run a firm should shut down if it cannot
A) make normal profits.
B) make economic profits.
C) cover its variable costs.
D) cover its fixed costs.
An example of a cost externality occurs when a mining company
A) dumps waste in river upstream from a popular fishing spot.
B) produces coal that is not in demand in a recession.
C) underpays its employees.
D) overwork its employees.
A monopolist's demand function is P = 1624 - 4Q, and its total cost function is
TC = 22,000 + 24Q -4Q2 + 1/3 Q3, where Q is output produced and sold.
a. At what level of output and sales (Q) and price (P) will total profits be maximized?
b. At what level of output and sales (Q) and price (P) will total revenue be maximized?
c. At what price (P) should the monopolist shut down?
If the risk adjusted discount rate method and the certainty equivalent methods are to
give the same results, then the certainty equivalent factor (at) must equal (where rf is
the risk-free interest rate, and "k" is the risk adjusted cost of capital)
A) (1 + rf)t times (1 + k)t.
B) (1 + k)t divided by (1 + rf)t.
C) (1 + rf)t divided by (1 + k)t.
D) (1 + k)t minus (1 + rf)t.
The fact that a perfectly competitive firm has a perfectly elastic demand curve means
A) there is no limit to the firm's profits.
B) there is no limit to the firm's revenues.
C) that it can sell all it wants at any price.
D) None of the above
Answer the following question(s) based on the following regression equation (Standard
errors in parentheses, n = 150):
QD = 1000 - 50PA + 10PB + .05I, (20) (7) (.04)
where QD= quantity demanded of good A, PA= price of good A, PB= price of a
competing good B, and I = per capita income.
For which of the following variables should a "two tail" t-test be applied?
A) PA
B) I
C) PB
D) Should be applied for all.
How would each of the following affect the firm's marginal, average, and average
variable cost curves?
a. An increase in wages
b. A decrease in material costs
c. The government imposes a fixed amount of tax.
d. The rent that the firm pays on the building that it leases decreases.
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.
Why does each of the following facilitate the creation and stability of a cartel?
a. High barriers to entry
b. An identical product
c. Similar costs
In the Baumol model, the total quantity sold will usually be larger than
A) if perfect competition prevailed.
B) if total costs were minimized.
C) if profit were maximized.
D) if companies were interdependent.
How would each of the following affect the firm's marginal, average, and average
variable cost curves?
a. An increase in wages
b. A decrease in material costs
c. The government imposes a fixed amount of tax.
d. The rent that the firm pays on the building that it leases decreases.
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
Which of the following represents a way in which multinational corporations can
protect themselves from exchange rate risks?
A) forward markets
B) futures markets
C) currency options
D) All of the above
When state universities charge higher tuition fees to out-of-state students than to local
students, the universities are practicing
A) first-degree discrimination.
B) second-degree discrimination.
C) third-degree discrimination.
D) fourth-degree discrimination.
The price elasticity of demand is a measure of
A) the responsiveness of the quantity demanded to price changes.
B) the quantity demanded at a given price.
C) the shift in the demand curve when price changes.
D) the demand for a product holding price constant.
Which of the following examples best illustrates the concept of derived demand?
A) An increase in the price of beef results in an increase in the demand for fish.
B) The higher the demand for automobiles, the greater the demand for steel.
C) The demand for Pepsi varies directly with the price of Coke.
D) The demand for a good varies inversely with its price.
A source of business risk is a change in
A) technology.
B) consumer preferences.
C) input prices.
D) All of the above
When analyzing a capital budgeting project, the analyst must include in his calculation
all of the following except
A) all revenues and costs in terms of cash flows.
B) only those cash flows that will change if the proposal is accepted (i.e., incremental
cash flows).
C) interest payments on debt financing connected with the project.
D) any effect (impact) the acceptance of the project under consideration will have on
other projects now in operation.
