Which of the following is a Leading Economic Indicator?
A) commercial and industrial loans outstanding
B) industrial production
C) average weekly duration of unemployment
D) None of the above
The existence of a kinked demand curve under oligopoly conditions may result in
A) price flexibility.
B) price rigidity.
C) competitive pricing.
D) None of the above
Financial risk is associated with changes in
A) the demand for a firm’s products.
B) a firm’s debt.
C) a firm’s labor costs.
D) government regulations of a firm’s activities.
A manager will have the least confidence in an explanatory variable that
A) does not pass the F-test.
B) is expressed as a dummy variable.
C) does not pass the t-test.
D) constitutes only a small part of R2.
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.
If a perfectly competitive firm incurs an economic loss, it should
A) shut down immediately.
B) try to raise its price.
C) shut down in the long run.
D) shut down if this loss exceeds fixed cost.
The certainty equivalent approach to accounting for risk in capital budgeting involves
A) adjusting the discount rate used to calculate net present values.
B) adjusting the expected cash flows.
C) estimating the coefficient of variation.
D) estimating the standard deviation of the net present values.
John takes out a student loan at a bank but spends his money in Las Vegas to play at the
casino. This situation is an example of
A) moral hazard.
B) moral suasion.
C) adverse selection.
D) fraud.
The t-statistic is computed by
A) dividing the regression coefficient by the standard error of the estimate.
B) dividing the regression coefficient by the standard error of the coefficient.
C) dividing the standard error of the coefficient by the regression coefficient.
D) dividing the R2 by the F-statistic.
The use of sensitivity analysis will generally result in
A) the calculation of a certainty equivalent NPV.
B) the calculation of a best case, a base case and a worst case.
C) the calculation of the coefficient of variation.
D) the calculation of the probability of the maximum profit.
The t-test is a statistical measure which
A) tests the true value of a variable.
B) tests the statistical significance of a regression coefficient.
C) tests the statistical significance of a regression equation.
D) None of the above
The pricing of a product at each stage of production as the product moves through
several stages is called
A) transfer pricing.
B) cost plus pricing.
C) penetration pricing.
D) monopolistic pricing.
Third-degree price discrimination exists when
A) the seller knows exactly how much each potential customer is willing to pay and
will charge accordingly.
B) different prices are charged by blocks of services.
C) when the seller can separate markets by geography, income, age, etc., and charge
different prices to these different groups.
D) when the seller will bargain with buyers in each of the markets to obtain the best
possible
price.
At the point at which P=MC, suppose that a perfectly competitive firm’s MC = $100, its
AVC = $80 and its AC = $110. This firm should
A) shut down immediately.
B) continue operating in the short run.
C) try to take advantage of economies of scale.
D) try to increase its advertising and promotion.
In the estimation of demand, the “identification problem” refers to
A) the problem of selecting the proper level of significance.
B) the problem of deciding whether to use time series or cross-sectional data.
C) the problem of separating out the effects of price on the quantity demanded when
supply cannot be held constant.
D) the problem of having insufficient variation in prices.
A proposed project should be accepted if the net present value is
A) positive.
B) negative.
C) larger than the internal rate of return.
D) smaller than the internal rate of return.
If the consumption of sugar does not change at all following a price increase from 50
cents per pound to 65 cents per pound, the demand for sugar is considered to be
A) relatively inelastic.
B) perfectly elastic.
C) perfectly inelastic.
D) unitary elastic.
Demand and supply in the wheat market are given by:
QD = 2000 – 1000 P and QS = -500 + 1000 P
where Q is millions of bushels and P is price per bushel.
a. Find the equilibrium price and quantity.
b. Suppose that the government wishes to support farm income and thus sets a price
floor of $1.50/bushel. Find the size of the farm surplus.
c. What is the cost of this program to the government?
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
Which of the following statements about the short-run production function is true?
A) MP always equals AP at the maximum point of MP.
B) MP always equals zero when TP is at its maximum point.
C) TP starts to decline at the point of diminishing returns.
D) When MP diminishes, AP is at its minimum point.
E) None of the above is true.
Economic profit equals accounting profit minus
A) explicit costs.
B) implicit costs.
C) fixed costs.
D) variable costs.
The rationing function of price
A) occurs when there is a movement of resources into or out of markets as a result of
changes in the equilibrium market price.
B) is also known as the guiding function of price.
C) occurs when consumers change their tastes and preferences.
D) occurs only when the market experiences severe shortages.
Capital budgeting projects include all of the following except
A) the purchase of a six-month treasury bill.
B) the expansion of a plant.
C) the development of a new product.
D) the replacement of a piece of equipment.
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.
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
In long-run equilibrium a perfectly competitive firm will operate where the price is
A) greater than MR but equal to MC and minimum ATC.
B) greater than MR and MC, but equal to minimum ATC.
C) greater than MC and minimum ATC, but equal to MR.
D) equal to MR, MC and minimum to ATC.
Risks faced by multinational corporations include
A) changes in exchange rates.
B) restrictions on ownership.
C) repatriation of funds.
D) cultural and religious philosophies.
E) All of the above
The cross-price elasticity of demand for coffee and caskets is likely to be
A) less than zero.
B) greater than zero.
C) zero.
D) infinity.
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 perfect substitution of two inputs implies that
A) two inputs can be substituted at a ratio of 1 to 1.
B) one input can be substituted for another up to some point.
C) two inputs can be substituted at some constant ratio.
D) one input can be substituted for another.
If banks face a problem in loan markets when bad credit risks are the ones most likely
to seek bank loans, it is described as
A) moral hazard.
B) moral suasion.
C) adverse selection.
D) fraud.
If an item has several good substitutes, the demand curve for that item is likely to be
A) relatively inelastic.
B) relatively elastic.
C) perfectly inelastic.
D) unit elastic.
Which of the following is a common determinant of both supply and demand?
A) income
B) future expectations
C) tastes and preferences
D) sales tax
Among the advantages of the ________ technique of forecasting are ease of calculation,
relatively little requirement for analytical skills, and the ability to provide the analyst
with information regarding the statistical significance of results and the size of
statistical errors.
A) least-squares trend analysis
B) compound growth rate
C) visual trend-fitting
D) expert opinion
Which of the following would cause a leftward shift in the demand curve for a good?
A) an increase in income
B) an increase in the price of a complementary good
C) an increase in the price of a substitute
D) the expectation that there will be a shortage in the availability of the good
