Prices under an ideal cartel situation will be equal to
A) monopoly prices.
B) competitive prices.
C) prices under monopolistic competition.
D) marginal cost.
The demand for products that provide benefit externalities is generally ________ the
demand for products that do not.
A) greater than
B) less than
C) the same as
D) greater or less (depending on the market) than
When the exponents of a Cobb-Douglas production function sum to more than 1, the
function exhibits
A) constant returns.
B) increasing returns.
C) decreasing returns.
D) either increasing or decreasing returns.
Diseconomies of scale can be caused by
A) the law of diminishing returns.
B) bureaucratic inefficiencies.
C) increasing advertising and promotional costs.
D) All of the above
One school of anti-trust thought argues that, rather than ensuring efficiency, anti-trust
laws are really aimed at
A) protecting small independent firms against large corporations.
B) outlawing all monopolies whether they perform “bad acts” or not.
C) price differentiation due to differences in quality and cost.
D) restricting interlocking directorates.
Which of the following is the best example of “how goods and services should be
produced?”
A) complying with the technical specifications in the production of an aircraft
B) the production of jet aircraft for the air force or for a commercial airline
C) the use of additional workers versus the use of machines in the production of goods
D) the production of a new manufacturing facility
Which of the following is not one of the leading indicators?
A) index of consumer expectations, U. of Michigan
B) change in consumer price index for services
C) vendor performance, slower deliveries diffusion index
D) manufacturers’ new orders, nondefense capital goods
A dummy variable is also called
A) an approximate variable.
B) a discrete variable.
C) a zero-sum variable.
D) an improper variable.
Which of the following distinctions does not help to explain the difference between
relevant and irrelevant cost?
A) historical vs. replacement cost
B) sunk vs. incremental cost
C) variable vs. fixed cost
D) out-of-pocket vs. opportunity cost
E) All help to explain the difference.
Capital rationing
A) exists when a company sets an arbitrary limit on the amount of investment it is
willing to undertake, so that not all projects with an NPV higher than the cost of capital
will be accepted.
B) generally does not permit a company to achieve maximum value.
C) seems to occur quite frequently among corporations.
D) All of the above
All of the following are conditions which are favorable to the formation of cartels
except
A) the existence of a small number of firms.
B) geographic proximity of firms.
C) homogeneity of the product.
D) easy entry into the industry.
The marginal product of the variable input
A) is always positive.
B) typically falls then rises.
C) is equal to the total product divided by the total amount of the variable input
employed.
D) None of the above
Which of the following characteristics is most important in differentiating between
perfect competition and all other types of markets?
A) whether or not the product is standardized
B) whether or not there is complete market information about price
C) whether or not firms are price takers
D) All of the above are equally important.
Probabilities, which can be obtained by repetition or are based on general mathematical
principles, are called
A) statistical.
B) empirical.
C) a priori.
D) subjective.
When cost externalities exist, an optimal equilibrium can be attained if the government
A) restricts production.
B) levies a tax for the difference between private costs and social costs.
C) prohibits production.
D) All three above
E) Both A and B
A critical element of entrepreneurship (as opposed to managerial skills) is
A) leadership skills.
B) risk taking.
C) technology.
D) political skills.
________ risk involves variation in returns due to the ups and downs of the economy,
the industry and the firm.
A) Structural
B) Fluctuational
C) Business
D) Financial
When a firm experiences increasing returns to scale
A) its AFC will decrease.
B) its AFC will increase.
C) its AC will increase.
D) its AC will decrease.
The difference between the short-run and the long-run is
A) three months, or one business quarter.
B) the time it takes for firms to change all inputs in the production process.
C) the time it takes for firms to change only their variable inputs.
D) More information is required to answer this question.
Firms undertake multinational operations in order to
A) hire low-wage workers.
B) manufacture in nations they have difficulty exporting to.
C) obtain necessary factor inputs.
D) All of the above
If government imposes an excise tax on a good and the tax burden is borne equally by
buyers and sellers, then
A) price elasticity of demand is unitary.
B) price elasticity of supply is unitary.
C) the absolute values of price elasticities of demand and supply are equal.
D) None of the above
When a firm increased its output by one unit, its AC decreased. This implies that
A) MC < AC.
B) MC = AC.
C) MC < AFC.
D) the law of diminishing returns has not yet taken effect.
The demand equation for the Widget Company has been estimated to be:
Q = 20,000 + 10 I – 50P + 20 PC
where Q = monthly number of widgets sold, I = average monthly income, P = price of
widgets, and PC = average price of competing goods.
a. If next month’s income is forecast to be 2,000, the price of competing goods is
forecast to be $20, and the price of widgets will be set at $30, forecast sales.
b. What will sales be if the price is dropped to $20?
A fall in the price of pesticide use in the production of cotton will
A) decrease the supply of cotton, causing the supply curve of cotton to shift to the left.
B) increase the supply of cotton, causing the supply curve of cotton to shift to the left.
C) cause a downward movement along the supply curve of cotton.
D) have no effect on the supply of cotton.
E) None of the above
MC increases because
A) MC naturally increases as the firm nears capacity.
B) labor is paid overtime wages when volume increases.
C) in the short run, MC always increases.
D) the law of diminishing returns takes effect.
Which of the following is an example of risk in capital budgeting on a global basis?
A) exchange rate changes
B) tariff changes
C) expropriation
D) All of the above
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.
As the manager of good A, which of the following would be of greatest concern (based
on the regression results above)?
A) None of the factors below would be of concern.
B) an impending recession
C) pressure on you by your salespersons to lower the price so that they can boost their
sales
D) a price reduction by the makers of good B
Which of the following is the best example of the “traditional process”?
A) commercial bank mergers
B) minimum age limits for the purchase of alcoholic beverages
C) auctioning U.S. Treasury bills
D) colleges and universities give admissions preferences to children of alumni
Domestic demand for a good is QD = 3000 – 25P. The domestic supply of the good is
QS = 20P. Foreign producers can supply any quantity at a price (P) of $30.
a. What is the domestic equilibrium price and quantity?
b. At this domestic equilibrium price, how much of the good will be supplied by
domestic producers and how much by foreign producers?
For a linear demand curve that is downward sloping, the marginal revenue curve
A) will be to the left of the demand curve and twice as steep.
B) will be to the right of the demand curve and twice as steep.
C) will be to the left of the demand curve and half as steep.
D) will be the same as the demand curve.
A tax that is imposed as a specific amount per unit of a good is a(n)
A) excise or specific tax.
B) sales or ad valorem tax.
C) compound duty.
D) income tax.
A good’s Demand Curve is QD = 25 – P, and its Supply Curve is QS = 10 + 2P.
a. When P = $20, what is the difference, if any, between QD and QS?
b. When P = $3, what is the difference, if any, between QD and QS?
c. What are the equilibrium values of P and Q?
