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Based on risk-return tradeoffs observable in the financial marketplace, which of the
following securities would you expect to offer higher expected returns than corporate
bonds?
a. U.S. Government bonds
b. municipal bonds
c. common stock
d. commercial paper
e. none of the above
Beta in the CAPM is ____.
a. one measure of the systematic risk of a stock
b. estimated as the slope of a regression line between an individual security's returns
and returns for the market index.
c. useful in estimating the firm's cost of debt capital
d. a and b only
e. a, b, and c
The following are possible examples of price discrimination, EXCEPT:a. prices in
export markets are lower than for identical products in the domestic market.
b. senior citizens pay lower fares on public transportation than younger people at the
same time.
c. a product sells at a higher price at location A than at location B, because
transportation costs are higher from the factory to A.
d. subscription prices for a professional journal are higher when bought by a library
than when bought by an individual.
In a zero-sum game
a. all players receive a $0 payoff
b. all players can simultaneously win
c. the gains to the winners equal the losses of the losers
d. none of the above
The correlation coefficient ranges in value between 0.0 and 1.0.
a. true
b. false
The distinctive characteristic of an oligopolistic market structure is that there are
recognizable interdependencies among the decisions of the firms.
a. true
b. false
Concerning the maximization of output subject to a cost constraint, which of the
following statements (if any) are true?
a. At the optimal input combination, the slope of the isoquant must equal the slope of
the isocost line.
b. The optimal solution occurs at the boundary of the feasible region of input
combinations.
c. The optimal solution occurs at the point where the isoquant is tangent to the isocost
lines.
d. all of the above
e. none of the above
Iron ore is an example of a:
a. durable good
b. producers' good
c. nondurable good
d. consumer good
e. none of the above
If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy
by raising US interest rates next year, what is the likely impact on the value of the
dollar?
a. The value of the dollar falls when US interest rates rise.
b. The value of the dollar rises when US interest rates rise.
c. The value of the dollar is not related to US interest rates.
d. This is known as Purchasing Power Parity or PPP.
e. The Federal Reserve has no impact at all on interest rates.
The sentiment for increased deregulation in the late 1970's and early 1980's has been
felt most significantly in the price regulation of
a. coal
b. grain
c. transportation
d. automobiles
e. electric power generation
Economic profit is defined as the difference between revenue and ____.
a. explicit cost
b. total economic cost
c. implicit cost
d. shareholder wealth
e. none of the above
Cost-benefit analysis is the public sector counterpart to ____ used in private,
profit-oriented firms.
a. ratio analysis
b. break-even analysis
c. capital budgeting techniques
d. economic forecasting
e. none of the above
If one-time gains from defection are always less than the discounted present value of an
infinite time stream of cooperative payoffs at some given discount rate, the
decision-makers have escaped
a. the Folk Theorem
b. the law of large numbers
c. the Prisoner's dilemma
d. the paradox of large numbers
e. the strategy of recusal
The standard deviation is appropriate to compare the risk between two investments only
if
a. the expected returns from the investments are approximately equal
b. the investments have similar life spans
c. objective estimates of each possible outcome is available
d. the coefficient of variation is equal to 1.0
e. none of the above
In comparing rules for serving a queue, last-come first-served has all of the following
effects except
a. reduces the waiting time
b. causes few customers to arrive and depart more than once
c. increases the side payments among those yet to be served
d. hastens the adoption of a lottery system for deciding who should get the tickets
Which of the following statements concerning the short-run average cost curve of
economic theory is true?
a. It is L-shaped
b. It is -shaped
c. It is -shaped
d. It is -shaped
e. It is M-shaped
An illustration of a non-credible commitment is the promise
a. to not increase capacity in a declining industry
b. to match a new entrant's discount price
c. to enter a profitable industry
d. to restrain output to the quota assigned by a cartel
e. to exit in the face of projected losses.
Hanna Corporation markets a compact microwave oven. In 2010 they sold 23,000 units
at $375 each. Per capita disposable income in 2010 was $6,750. Hanna economists have
determined that the arc price elasticity for this microwave oven is -1.2. (a) In 2011
Hanna is planning to lower the price of the microwave oven to $325. Forecast sales
volume for 2011 assuming that all other things remain equal.
(b) However, in checking with government economists, Hanna finds that per capita
disposable income is expected to rise to $7,000 in 2011. In the past the company has
observed an arc income elasticity of +2.5 for microwave ovens. Forecast 2011 sales
given that the price is reduces to $325 and that per capita disposable income increases
to $7,000. Assume that the price and income effects are independent and additive.
Credibility in threats and commitments in sequential games is based on
a. randomizing one's actions so they are unpredictable
b. explicit communications with competitors
c. effective scenario planning
d. analyzing best reply responses
e. none of the above
Songwriters and composers press music companies to lower the price for music
downloads because
a. demand for on-line music is inelastic
b. profits are maximized where price elasticity of demand is -1.0
c. songwriter royalties are a percentage of sales revenue
d. profits and total revenue are maximized at different quantities
e. profits are maximized at the same prices as sales revenue
