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Generally, investors expect that projects with high expected net present values also will
be projects with
a. low risk
b. high risk
c. certain cash flows
d. short lives
e. none of the above
In regression analysis, the existence of a significant pattern in successive values of the
error term constitutes:
a. heteroscedasticity
b. autocorrelation
c. multicollinearity
d. nonlinearities
e. a simultaneous equation relationship
When a manufacturer's home currency appreciates substantially,
a. domestic sales decline
b. foreign sales decline
c. company-owned foreign plant and equipment will increase
d. margins often decline
e. all of the above
Non-redeployable durable assets that are dependent upon unique complementary and
perfectly redeployable assets to achieve substantial value-added will typically be
organized as
a. an export trading company
b. a spot market contract
c. a vertically integrated firm
d. an on-going relational contract
e. a joint stock company.
Cooperation in repeated prisoner's dilemma situations seems to be enhanced by all of
the following except
a. limited punishment schemes
b. clarity of conditional rewards
c. grim trigger strategy
d. provocability--i.e., credible threats of punishment
e. tit for tat strategy
To maximize profits, a monopolist that engages in price discrimination must allocate
output in such a way as to make identical the ____ in all markets.
a. ratio of price to marginal cost
b. ratio of marginal cost to marginal utility
c. ratio of price to elasticity
d. marginal revenue
e. none of the above
Patents have been defended by some on the grounds that they stimulate inventive
activity. Others have argued for changes in current patent laws because:
a. resources are misallocated by the grant of a patent monopoly
b. patents may not be necessary to encourage inventive activity
c. the current patent monopoly period (17 years) is too short to encourage any inventive
activity.
d. a and b only
e. all of the above
The isoquants for inputs that are perfect substitutes for one another consist of a series
of:
a. right angles
b. parallel lines
c. concentric circles
d. right triangles
e. none of the above
In the constant-growth dividend valuation model, the required rate of return on common
stock (i.e., cost of equity capital) can be shown to be equal to the sum of the dividend
yield plus the ____.
a. yield-to-maturity
b. present value yield
c. risk-free rate
d. dividend growth rate
e. none of the above
Property taxes are the product of the tax rate (T) and the assessed value (V). The total
property tax collected in your city (P) is: P = T'¢V. If the value of properties rise 4% and
if Mayor and City Council reduces the property the tax rate by 2%, what happens to the
total amount of property tax collected? [HINT: the percentage rate of change of a
product is approximately the sum of the percentage rates of change.}
a. It rises 6 %.
b. It rises 4 %.
c. It rises 3 %.
d. It rises 2 %
e. If falls 2%.
According to the innovation theory of profit, above-normal profits are necessary to
compensate the owners of the firm for the risk they assume when making their
investments.
a. true
b. false
In the first-order exponential smoothing model, the new forecast is equal to a weighted
average of the old forecast and the actual value in the most recent period.
a. true
b. false
The existence of diseconomies of scale (size) for the firm is hypothesized to result
from:
a. transportation costs
b. imperfections in the labor market
c. imperfections in the capital markets
d. problems of coordination and control encountered by management
e. All of the above
In a recession, the trade balance often improves because
a. service exports exceed manufactured good exports
b. banks sell depressed assets
c. fewer households can afford luxury imports
d. direct investment abroad declines
e. the capital account exceeds the current account
A strategy game is
a. any pricing competition among firms
b. a situation arising from independent decision making among economic participants
c. interpendent choice behavior by individuals or groups who share a common goal
d. none of the above
Which of the following would not be classified as a capital expenditure for
decision-making purposes?
a. purchase of a building
b. investment in a new milling machine
c. purchase of 90-day Treasury Bills
d. investment in a management training program
e. all of the above are capital expenditures
