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A firm in an oligopolistic industry has the following demand and total cost equations:
P = 600 - 20Q and TC = 700 + 160Q + 15Q2
Calculate:
a. quantity at which profit is maximized
b. maximum profit
c. quantity at which revenue is maximized
d. maximum revenue
e. maximum quantity at which profit will be at least $580
f. maximum revenue at which profit will be at least $580
In the short run, finding the optimal amount of variable input involves which
relationship?
A) MP = MC
B) AP = MP
C) MP = 0
D) MRP = MFC
Firms are organized to keep their costs as low as possible by
A) comparing external transactions costs with internal operating cost.
B) analyzing supply and demand conditions.
C) minimizing their use of borrowed funds.
D) utilizing the latest technology.
Opportunity cost is best defined as
A) the amount given up when choosing one activity over all other alternatives.
B) the amount given up when choosing one activity over the next best alternative.
C) the opportunity to earn a profit that is greater than the one currently being made.
D) the amount that is given up when choosing an activity that is not as good as the next
best alternative.
Which of the following are risks for multinational corporations but not risks for
domestic corporations?
A) changes in government rules and regulations
B) capital controls
C) changes in tax laws
D) government red tape and corruption
The expected value is
A) the total of all possible outcomes.
B) the arithmetic average of all possible outcomes.
C) the average of all possible outcomes weighted by their respective probabilities.
D) the total of all possible outcomes divided by the number of different possible
outcomes.
Comparative statics analysis in economics is best illustrated as
A) the comparison of equilibrium points before and after changes in the market have
occurred.
B) a comparison of two types of markets.
C) the comparison of the percentage of change in the one variable divided by the
percentage change in the other variable.
D) an analytical technique used to show best case scenarios of demand and supply
curves.
Which indicator shows how well a regression line fits through the scatter of data
points?
A) F-test
B) R2
C) t-test
D) Durbin-Watson test
Based on annual data from 2000-2010, the Gadget Company estimates that sales are
growing according to a linear trend:
Q = 50,000 + 200t
where t is time and t = 0 in 2000.
a. Forecast sales for 2013.
b. Do you see any problems with this forecasting method?
Which of the following would indicate that price is temporarily above its market
equilibrium?
A) There are a number of producers who are left with unwanted inventories.
B) There are a number of customers who are looking for a good but cannot find sellers.
C) New firms decide to enter the market.
D) The government must step in and impose a tax on the good.
If the income elasticity of a particular good is negative 0.2, it would be considered
A) a superior good.
B) a normal good.
C) an inferior good.
D) an elastic good.
The fact that a person with a forceful and persuasive personality but not necessarily the
greatest amount of knowledge and judgment can exercise a disproportionate amount of
influence is a major drawback of
A) the Delphi method of forecasting.
B) the market research method.
C) opinion polling.
D) the jury of executive opinion approach.
If government imposes a price ceiling on a good that is below the market equilibrium
price
A) a surplus will develop.
B) a shortage will develop.
C) producers will reduce their sales price.
D) consumers will reduce their demand for the good.
Opportunistic behavior is best described as a firm
A) gathering as much information as possible before dealing with another entity.
B) attempting to make a profit from its dealings with another entity.
C) firm trying to take advantage of another entity in its dealings with it.
D) selecting another entity to deal with.
The forecasting method that involves using an average of past observations to predict
the future (if the forecaster feels that the future is a reflection of some average of past
results) is the
A) moving average method.
B) econometric forecasting method.
C) exponential smoothing method.
D) Both A and B
E) Both A and C
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.
Coke and Pepsi are substitutes if
A) the demand for Coke increases when the price of Pepsi falls.
B) the demand for Coke increases when the price of Pepsi rises.
C) the supply of Coke increases when the price of Pepsi falls.
D) the demand for Coke and Pepsi rise and fall together.
If an industry could be organized either perfectly competitively or as monopoly, a
monopoly would
A) produce less output.
B) produce where P > MC.
C) charge higher prices.
D) All of the above
A company will strive to minimize
A) transaction costs.
B) costs of internal operations.
C) total costs of transactions and internal operations combined.
D) variable costs.
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, pizzas are classified as a(n)
A) normal good.
B) positive good.
C) inferior goods.
D) marginal good.
Dominant price leadership exists when
A) one firm drives the others out of the market.
B) the dominant firm decides how much each of its competitors can sell.
C) the dominant firm establishes the price at the quantity where its MR = MC, and
permits all other firms to sell all they want to sell at that price.
D) the dominant firm charges the lowest price in the industry.
Which of the following is not an argument in favor of the globalization of business?
A) More efficient use of resources lowers operating costs and selling prices.
B) More products are made available and new markets are opened.
C) Economic and political security are enhanced.
D) Technology transfers improve living standards in poorer countries.
Describe the difference between the Economic Value Added (EVA) and the Market
Value Added (MVA) approach to determining stockholder wealth.
Which of the following is not considered a rationale for the intervention of government
in the market process in the United States?
A) the redistribution of income
B) the reallocation of resources
C) the long-run planning of scarce resources
D) the short-run stabilization of prices
E) All of the above
When the survivorship method of cost estimating is used, an increase, over time, in the
proportion of industry product produced by medium size firms indicates the existence
of
A) continuing economies of scale.
B) continuing diseconomies of scale.
C) a U-shaped long-run average cost curve.
D) large technological changes.
In economic theory, if an additional worker adds less to the total output than previous
workers hired, it is because
A) there may be less that this person can do, given the fixed capacity of the firm.
B) he/she is less skilled than the previously hired workers.
C) everyone is getting in each other's way.
D) the firm is experiencing diminishing returns to scale.
Which of the following statements is false?
A) An increase in demand causes equilibrium price and quantity to rise.
B) A decrease in demand causes equilibrium price and quantity to fall.
C) An increase in supply causes equilibrium price to fall and quantity to rise.
D) A decrease in supply causes equilibrium price to rise and quantity to rise.
The forecasting technique which involves the use of the least squares statistical method
to examine trends, and takes into account seasonal and cyclical fluctuations, is known
as
A) compound growth rate projection.
B) the Delphi method.
C) time series projection.
D) exponential smoothing projection.
The internal rate of return equals the cost of capital when
A) NPV = 0.
B) NPV > 0.
C) NPV < 0.
D) None of the above
If the demand for a good is price inelastic and the good price is increased, then the
marginal revenue (MR) received by the seller will
A) not change.
B) decrease.
C) increase.
D) Cannot be determined from this information
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 will not cause the demand curve for good X to shift?
A) a change in the price of X
B) a change in the price of Y, a complement
C) a change in the price of Z, a substitute
D) an increase in average disposable real income
In order to maximize profits, multinationals typically use transfer pricing by showing
________ profits in the high-tax country and by showing ________ profits in the
low-tax country.
A) high; low
B) low; high
C) economic; normal
D) above-normal; accounting
