The social discount rate used in cost-benefit analysis is equal to a weighted average of
the Treasury Bill rate and the long-term government borrowing rate.
a. true
b. false
In cost-benefit analysis, a low discount rate tends to favor projects with relatively ____
lives.
a. short
b. long
Various executive compensation plans have been employed to motivate managers to
make decisions that maximize shareholder wealth. These include:
a. cash bonuses based on length of service with the firm
b. bonuses for resisting hostile takeovers
c. requiring officers to own stock in the company
d. large corporate staffs
e. a, b, and c only
The demand for durable goods tends to be more price elastic than the demand for
non-durables.
a. true
b. false
Sources of positive net present value projects include
a. buyer preferences for established brand names
b. economies of large-scale production and distribution
c. patent control of superior product designs or production techniques
d. a and b only
e. a, b, and c
The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost
and $82 profit margin) adds more than it should to the U.S. trade deficit with China
because
a. Chinese assembly labor represents only 47 % of the wholesale cost
b. the iPad’s popularity has triggered an enormous number of unit sales
c. wholesale prices only count in the trade statistics if final product prices are higher
d. as with foreign-assembled minivans, most of the subassembly components come
from the U.S.
e. the Chinese yuan is a managed currency
When airlines post prices on an electronic bulletin board at 8:00 a.m. each morning, the
decision-makers are engaged in
a. a single play game
b. a sequential game
c. an entry decision
d. a simultaneous game
e. an infinite repetition game
A firm has decided to invest in a piece of land. Management has estimated that the land
can be sold in 5 years for the following possible prices:
(a) Determine the expected selling price for the land.
(b) Determine the standard deviation of the possible sales prices.
(c) Determine the coefficient of variation.
Possible sources of economies of scale (size) within a production plant include:
a. specialization in the use of capital and labor
b. imperfections in the labor market
c. transportation costs
d. a and b
e. a and c
The kinked demand curve model was developed to help explain:
a. fluctuations of prices in pure competition
b. rigidities observed in prices in oligopolistic industries
c. fluctuations observed in prices in oligopolistic industries
d. all of the above
e. none of the above
Governance mechanisms are designed
a. to increase contracting costs
b. to resolve post-contractual opportunism
c. to enhance the flexibility of restrictive covenants
d. to replace insurance
e. none of the above
In cost-effectiveness analysis, constant cost studies:
a. are rarely used
b. attempt to specify the output which may be achieved from a number of alternative
programs, assuming all are funded at the same level
c. are useless because they fail to adequately evaluate program benefits
d. try to find the least expensive way of achieving a certain objective
e. none of the above
The largest problem faced in cartel pricing agreements such as OPEC is:
a. detecting violations of quota barriers by cartel participants
b. arriving at a profit maximizing price
c. attracting participants in the cartel
d. none of the above
If the British pound (¤) appreciates by 10% against the dollar:
a. both the US importers from Britain and US exporters to Britain will be helped by the
appreciating pound.
b. the US exporters will find it harder to sell to foreign customers in Britain.
c. the US importer of British goods will tend to find that their cost of goods rises,
hurting its bottom line.
d. both US importers of British goods and exporters to Britain will be unaffected by
changes in foreign exchange rates.
e. all of the above.
An oligopoly is characterized by:
a. a relatively small number of firms
b. either differentiated or undifferentiated products
c. actions of any individual firm will affect sales of other firms in the industry
d. a and b
e. a, b, and c
____ is a new product pricing strategy which results in a high initial product price. This
price is reduced over time as demand at the higher price is satisfied.
a. Prestige pricing
b. Price lining
c. Skimming
d. Incremental pricing
e. None of the above