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 government unit that wants to achieve “revenue enhancement” will find it
considerably more favorable to enact an excise tax on goods whose demand is
A) highly elastic.
B) relatively elastic.
C) highly inelastic.
D) unitary elastic.
If a monopolist sets a low price to discourage potential competitors from entering the
market, it is referred as
A) price skimming.
B) predatory pricing.
C) penetration pricing.
D) limit pricing.
The demand curve, which assumes that competitors will follow price decreases but not
price increases, is called
A) an industry demand curve.
B) an inelastic demand curve.
C) a kinked demand curve.
D) a competitive demand curve.
Which of the following is true for a monopoly?
A) P = MC
B) P = MR
C) P > MR
D) P < MR
The F-test is used in forecasting to
A) establish confidence intervals for testing regression coefficients.
B) examine the degree of multicollinearity among independent variables.
C) determine how well a regression equation can account for dependent variable values.
D) determine whether an identification problem exists.
Which of the following is the best example of opportunity cost?
A) a company’s expenditures on a training program for its employees
B) the rate of return on a company’s investment
C) the amount of money that a company can earn by depositing excess funds in a
money market fund
D) the profit that a company forgoes when it decides to drop one product line in favor
of another one
When total revenue reaches its peak (elasticity equals 1), marginal revenue reaches
A) 1.
B) zero.
C) -1.
D) Cannot be determined from the information provided
Which of the following would be an example of FDI?
A) A Brazilian investor buys German government bond.
B) An American buys a new Swedish car.
C) An Italian firm builds a plant in Nebraska.
D) A Canadian investor buys a French equity.
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
The term Production Function refers to the
A) use of machinery and equipment in production.
B) relationship between costs and output.
C) relationship between inputs and output.
D) role of labor unions.
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.
In order for price discrimination to exist
A) markets must be capable of being separated.
B) markets must be interdependent.
C) different demand price elasticities must exist in different markets.
D) demand price elasticities must be identical in all markets.
E) Both A and C
Average fixed cost is
A) AC minus AVC.
B) TC divided by Q.
C) AVC minus MC.
D) TC minus TVC.
Answer the questions based on the following information.
Number of Workers Units of Output
0 0
1 40
2 90
3 126
4 150
The marginal product of the fourth worker is
A) 150 units of output.
B) 24 units of output.
C) negative.
D) 36 units of output.
Managerial economics is best defined as
A) the study of economics by managers.
B) the study of the aggregate economic activity.
C) the study of how managers make decisions about the use of scarce resources.
D) All of the above are good definitions.
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.
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
A one-tail test of significance would be used to determine whether
A) demand for a good is price elastic.
B) two goods are substitutes for each other in supply.
C) two goods are unrelated to each other in demand.
D) supply of a good is price inelastic.
A good’s Demand Curve is QD = 50 – 2P, and its Supply Curve is QS = 40 + P.
a. When P = $10, what is the difference, if any, between QD and QS?
b. When P = $2, what is the difference, if any, between QD and QS?
c. What are the equilibrium values of P and Q?
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.
One of the series included among the lagging indicators is
A) the change in sensitive material prices.
B) the index of industrial production.
C) employees on non-agricultural payrolls.
D) average duration of unemployment.
Which of the following markets comes closes to the model of perfect competition?
A) automobile industry
B) information technology industry
C) aerospace industry
D) agriculture
A monopolistic firm operates in two separate markets. No trade is possible between
market A and market B. The firm has calculated the demand functions for each market
as follows:
Market A p = 15 – Q; Market B p = 11 – Q
The company estimates its total cost function to be TC = 4Q. Calculate:
a. quantity, total revenue and profit when the company maximizes its profit and charges
the same price in both markets
b. quantity, total revenue and profit when the company charges different prices in each
market and maximizes its total profit
Industry demand is given by:
QD = 1000 – P
All firms in the industry have identical and constant marginal and average costs of
$50/unit.
a. If the industry is perfectly competitive, what will industry output be? What will be
the equilibrium price? What profit will each firm earn?
b. Now suppose that there are five firms in the industry, and that they collude to set
price. What price will they set? What will be the output of each firm? What will be the
profit of each firm?
For each of the following cost functions, if possible, find minimum AC and minimum
AVC.
a. TC = 40,000 + 20 Q
b. TC = 1000 + 2Q + 0.1 Q2
Which of the following is a leading economic indicator?
A) average hours, manufacturing
B) money supply M2
C) stock prices, 500 common stocks
D) All of the above
The delay between when a problem occurs and when it is recognized is referred to as
the
A) recognition lag.
B) action lag.
C) effectiveness lag.
D) policy lag.
When the slope of the total revenue curve is equal to the slope of the total cost curve
A) profit is maximized.
B) marginal revenue equals marginal cost.
C) the marginal cost curve intersects the total average cost curve.
D) the total cost curve is at its minimum.
E) Both A and B
Which of the following correctly completes this statement? The monopolist’s marginal
revenue
A) will be greater than price.
B) will be less than price.
C) will be equal to price.
D) will be greater than total revenues.
Long-run cost functions are estimated using
A) time-series regression analysis.
B) cross-sectional regression analysis.
C) cost accounting data.
D) None of the above
You win the $20 million state lottery, and you have a choice of taking an amount of
money per year for the next 20 years or a flat payment now. The flat payment that the
state offers you is $9.82 million.
a. What discount rate is the state using?
b. Should you take the money or the annuity?
In the text, the key question in the “economics of a business” is
A) whether the need to grow revenues is being met.
B) should the firm be in the business in which it is operating.
C) whether the firm faces rising labor costs.
D) can the firm affect its market share.
