Eco550 midterm exam | Economics homework help

•      Question 1
    A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
           
•      Question 2
     The level of an economic activity should be increased to the point where the ____ is zero.
•      Question 3
     The ____ is the ratio of ____ to the ____.
•      Question 4   
     The standard deviation is appropriate to compare the risk between two investments only if
•      Question 5
     The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
           
•      Question 6
     An closest example of a risk-free security is
•      Question 7   
     In the shareholder wealth maximization model, the value of a firm’s stock is equal to the present value of all expected future ____ discounted at the stockholders’ required rate of return.           
•      Question 8
     The form of economics most relevant to managerial decision-making within the firm is:
microeconomics           
•      Question 9
 
   
     Shirking of one’s duties is often encountered in team production settings because
Answer           
    Selected Answer:      
teammates face a dilemma posed by a dominant strategy to shirk
Correct Answer:      
teammates face a dilemma posed by a dominant strategy to shirk
           
•      Question 10
 
   
     A Real Option Value is:           
•      Question 11
     Economic profit is defined as the difference between revenue and ____.           
•      Question 12
     The Saturn Corporation (once a division of GM) was permanently closed in 2009.  What went wrong with Saturn?   
•      Question 13   
     An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.           
•      Question 14   
     An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:           
•      Question 15
     Which of the following would tend to make demand INELASTIC?
•      Question 16

     When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.           
•      Question 17
     Songwriters and composers press music companies to lower the price for music downloads because
•      Question 18
        A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.           
•      Question 19
     If demand were inelastic, then we should immediately:           
•      Question 20
     The standard deviation of the error terms in an estimated regression equation is known as:
•      Question 21
     In testing whether each individual independent variables (Xs) in a multiple regression equation is statistically significant in explaining the dependent variable (Y), one uses the:           
•      Question 22
     When two or more “independent” variables are highly correlated, then we have:           
•      Question 23
    One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.           
•      Question 24
    Even though insignificant explanatory variables can raise the adjusted R2 of a demand function, one    should not interpret their effects on the regression when
•      Question 25
 
   
     All of the following are reasons why an association relationship may not imply a causal relationship except:           
Tuesday, May 6, 2014 10:54:27 PM EDT

•      Question 1
     Income tax payments are an example of ____.   
•      Question 2   
     The moral hazard in team production arises from
•      Question 3
    Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t   + Real Option Value.           
•      Question 4
    In the shareholder wealth maximization model, the value of a firm’s stock is equal to the present value of all expected future ____ discounted at the stockholders’ required rate of return.
•      Question 5
    Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test:
•      Question 6
     The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?
           
•      Question 7
     An closest example of a risk-free security is
•      Question 8
 
   
     A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
•      Question 9
    The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
•      Question 10
    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?           
•      Question 11
    The ____ is the ratio of ____ to the ____.
•      Question 12
    The level of an economic activity should be increased to the point where the ____ is zero.
•      Question 13
    The factor(s) which cause(s) a movement along the demand curve include(s):           
•      Question 14
    Iron ore is an example of a:
Answer           
    Selected Answer:      
producers’ good
Correct Answer:      
producers’ good
           
•      Question 15
 
   
     Suppose we estimate that the demand elasticity for fine leather jackets is .7 at their current prices.  Then we know that:
•      Question 16
    Producers’ goods are:
•      Question 17
    When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.
           
•      Question 18
    When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.
•      Question 19
    A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.           
•      Question 20
The method which can give some information in estimating demand of a product that hasn’t yet come to market is:
•      Question 21
    When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to represent an economic relationship, estimates of the parameters (a, and the b’s) using linear regression analysis can be obtained by first applying a ____ transformation to convert the function to a linear relationship.
           
•      Question 22
 
   
     In regression analysis, the existence of a significant pattern in successive values of the error term constitutes:
•      Question 23
    Even though insignificant explanatory variables can raise the adjusted R2 of a demand function, one    should not interpret their effects on the regression when
•      Question 24
    The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X.
•      Question 25
    The Identification Problem in the development of a demand function is a result of:
=========================================
•      Question 1
     Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:           
•      Question 2
    The primary objective of a for-profit firm is to ___________.           
•      Question 3
    Income tax payments are an example of ____.
•      Question 4
    Economic profit is defined as the difference between revenue and ____.           
•      Question 5
    A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
•      Question 6
 
   
     The standard deviation is appropriate to compare the risk between two investments only if
•      Question 7
    The level of an economic activity should be increased to the point where the ____ is zero.           
•      Question 8
    The net present value of an investment represents
•      Question 9
    An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.           
•      Question 10
     A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.           
•      Question 11
 
     Marginal revenue (MR) is ____ when total revenue is maximized.           
•      Question 12
    An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:           
•      Question 13
    When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to represent an economic relationship, estimates of the parameters (a, and the b’s) using linear regression analysis can be obtained by first applying a ____ transformation to convert the function to a linear relationship.           
•      Question 14   
     The method which can give some information in estimating demand of a product that hasn’t yet come to market is:
           
•      Question 15
    When two or more “independent” variables are highly correlated, then we have:
•      Question 16
    One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.
•      Question 17
    Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
•      Question 18   
     Time-series forecasting models:
•      Question 19
     The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:           
•      Question 20
    Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?           
•      Question 21
    The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time           
•      Question 22
    If the British pound (₤) appreciates by 10% against the dollar:          
•      Question 23
    Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
•      Question 24
   
     Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would
•      Question 25
    Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.
•      Question 1
    Economies of Scope refers to situations where per unit costs are:           
•      Question 2
    For a short-run cost function which of the following statements is (are) not true?
•      Question 3
    According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:           
•      Question 4
    Economies of scale exist whenever long-run average costs:           
•      Question 5
    The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
•      Question 6
    If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:           
•      Question 7
Decrease the demand for yen and decrease the supply of the yen.                         
•      Question 8
    An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
•      Question 9
0 out of 4 points
   
     In a recession, the trade balance often improves because           
•      Question 10
    The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time           
•      Question 11
    Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
•      Question 12
    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
•      Question 13
    Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
•      Question 14
    Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.           
•      Question 15
    The marginal product is defined as:
•      Question 16
    The isoquants for inputs that are perfect complements for one another consist of a series of:
•      Question 17
     The primary purpose of the Cobb-Douglas power function is to:       
•      Question 18
    Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:
           
•      Question 19
 
   
     In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:
•      Question 20
     An example of a time series data set is one for which the:
•      Question 21
    Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.

•      Question 22
     For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
•      Question 23
    Time-series forecasting models:           
•      Question 24
    The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:
•      Question 25
    Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
•      Question 26
    Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:
•      Question 27
    In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:           
•      Question 28
 
   
     The primary purpose of the Cobb-Douglas power function is to:
•      Question 29   
     Which of the following statements concerning the long-run average cost curve of economic theory is true?       
•      Question 30
    The cost function is:
   
•      Question 31
    What method of inventory valuation should be used for economic decision-making problems?           
•      Question 32
     According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:

•      Question 1

     Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?.
           
•      Question 2
    The use of quarterly data to develop the forecasting model Yt = a +bYt−1 is an example of which forecasting technique?
•      Question 3
 
   
     Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
•      Question 4
    The type of economic indicator that can best be used for business forecasting is the:
   
•      Question 5
    An example of a time series data set is one for which the:
•      Question 6   
     If two alternative economic models are offered, other things equal, we would           
•      Question 7
     European Union labor costs exceed U.S. and British labor costs primarily because
•      Question 8   
     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?
•      Question 9
    If the British pound (₤) appreciates by 10% against the dollar:
•      Question 10
    An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
•      Question 11
    Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
•      Question 12
   
     In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will
•      Question 13   
     Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
•      Question 14
    Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.   
•      Question 15
    The marginal product is defined as:
•      Question 16
    Which of the following is never negative?
           
•      Question 17
    The combinations of inputs costing a constant C dollars is called:
•      Question 18
    The marginal rate of technical substitution may be defined as all of the following except:

•      Question 19
    Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.
   
•      Question 20
    If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:

•      Question 21
 
   
     The cost function is:
•      Question 22
    What method of inventory valuation should be used for economic decision-making problems?
•      Question 23
    For a short-run cost function which of the following statements is (are) not true?
•      Question 24
    According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
•      Question 25
    ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.
           
Tuesday, May 6, 2014 6:27:16 PM EDT

•    Question 1
     Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t   + Real Option Value.
•    Question 2
     The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?           
•    Question 3
    Income tax payments are an example of ____.
•    Question 4
 
   
     Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:       
•    Question 5
    Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test:
•    Question 6    
     The moral hazard in team production arises from
•    Question 7
    A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.   
•    Question 8
    The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
•    Question 9
    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?
•    Question 10
    Generally, investors expect that projects with high expected net present values also will be projects with
   
•    Question 11
 
     The ____ is the ratio of ____ to the ____.
•    Question 12
 
   
     The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
•    Question 13
     An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:
•    Question 14
    Marginal revenue (MR) is ____ when total revenue is maximized.   
•    Question 15
    Producers’ goods are:
•    Question 16
    Iron ore is an example of a:   
•    Question 17
    Auto dealers slash prices at the end of the model year in response to deficient demand/excess inventory but restaurants facing the same problem slash production because
•    Question 18
    When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.
•    Question 19
    When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.
•    Question 20
     The standard deviation of the error terms in an estimated regression equation is known as:           
•    Question 21
     When two or more “independent” variables are highly correlated, then we have:
•    Question 22    
     Even though insignificant explanatory variables can raise the adjusted R2 of a demand function, one    should not interpret their effects on the regression when
•    Question 23
     In testing whether each individual independent variables (Xs) in a multiple regression equation is statistically significant in explaining the dependent variable (Y), one uses the:   
•    Question 24
     In regression analysis, the existence of a high degree of intercorrelation among some or all of the explanatory variables in the regression equation constitutes:   
•    Question 25
    Demand functions in the multiplicative form are most common for all of the following reasons except:
MULTIPLE CHOICE
    1.    The form of economics most relevant to managerial decision-making within the firm is:
    2.    If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
    3.    In the shareholder wealth maximization model, the value of a firm’s stock is equal to the present value of all expected future ____ discounted at the stockholders’ required rate of return.
    4.    Which of the following statements concerning the shareholder wealth maximization model is (are) true?
    5.    According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits
    6.    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.
    7.    According to the managerial efficiency theory of profit, above-normal profits can arise because of high-quality managerial skills.
    8.    Which of the following (if any) is not a factor affecting the profit performance of firms:
    9.    Agency problems and costs are incurred whenever the owners of a firm delegate decision-making authority to management.

    10.    Economic profit is defined as the difference between revenue and ____.

    11.    Income tax payments are an example of ____.

    12.    Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:

    13.    The common factors that give rise to all principal-agent problems include the
14.    The Saturn Corporation (once a division of GM) was permanently closed in 2009.  What went wrong with Saturn?
15.  A Real Option Value is:
16.    Which of the following will increase (V0), the shareholder wealth maximization model of the firm:
    V0∙(shares outstanding) = t=1 ( t ) / (1+ke)t   + Real Option Value.
17.    The primary objective of a for-profit firm is to ___________.
18.    Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
19.    The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?
20. To reduce Agency Problems, executive compensation should be designed to:
21.Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test:

  Question 1
 
If two alternative economic models are offered, other things equal, we would
  Question 2
 Time-series forecasting models:
  Question 3
 Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
  Question 4
 An example of a time series data set is one for which the:
  Question 5
 For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
  Question 6
 Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?
  Question 7
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?
  Question 8
 An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
  Question 9
 The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
  Question 10
 
In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will
  Question 11
 An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
  Question 12
 The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions.  If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
  Question 13
 Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would
  Question 14
 The isoquants for inputs that are perfect complements for one another consist of a series of:
  Question 15
 The combinations of inputs costing a constant C dollars is called:
  Question 16
 In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:
  Question 17
 If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?
  Question 18
 The isoquants for inputs that are perfect substitutes for one another consist of a series of:
  Question 19
 Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.

  Question 20
 What method of inventory valuation should be used for economic decision-making problems?
  Question 21
 The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
  Question 22
 ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.
  Question 23
 The cost function is:
  Question 24
 For a short-run cost function which of the following statements is (are) not true?
  Question 25
 According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
  Question 1 .
 The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:Answer
   Question 2
Time-series forecasting models:Answer
   Question 3
 If two alternative economic models are offered, other things equal, we wouldAnswer
  Question 4 .
Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.Answer
   Question 5 .
The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:Answer

.   Question 6 .
For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?Answer
    Question 7 .
 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?Answer
  Question 8 .
Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire toAnswer
   Question 9 .
An increase in the exchange rate of the U.S. dollar relative to a trading partner can result fromAnswer
  Question 10 .
 Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption becauseAnswer
  Question 11 .
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?Answer
.   Question 12 .
 If the British pound (₤) appreciates by 10% against the dollar:Answer
  Question 13 .
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 becauseAnswer
.   Question 14 .
If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?Answer
  Question 15 .
In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:Answer
  Question 16 .
Which of the following is never negative?Answer
  Question 17 .
The combinations of inputs costing a constant C dollars is called:Answer
   Question 18 .
The marginal rate of technical substitution may be defined as all of the following except:Answer
  Question 19 .
In a relationship among total, average and marginal products, where TP is maximized:Answer
  Question 20 .
Economies of Scope refers to situations where per unit costs are:Answer
  Question 21 .
Economies of scale exist whenever long-run average costs:Answer
  Question 22 .
What method of inventory valuation should be used for economic decision-making problems?Answer
  Question 23 .
For a short-run cost function which of the following statements is (are) not true?Answer
  Question 24 .
 The cost function is:Answer
  Question 25 .
According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:Answer
ANSWER TO VERSION 2

1] For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?

         2] The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:
3] If two alternative economic models are offered, other things equal, we would
4] Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.
 5] The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:
6] Which of the following barometric indicators would be the most helpful for forecasting future sales for an industry?
7] European Union labor costs exceed U.S. and British labor costs primarily because
8] Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
9] The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
10] In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will
11] The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions.  If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
12] An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
13] 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?
14] The combinations of inputs costing a constant C dollars is called:
15] The isoquants for inputs that are perfect substitutes for one another consist of a series of:
16] The marginal product is defined as:
17] The isoquants for inputs that are perfect complements for one another consist of a series of:
18] Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.
19] Marginal factor cost is defined as the amount that an additional unit of the variable input adds to ____.
20] Economies of scale exist whenever long-run average costs:
21] What method of inventory valuation should be used for economic decision-making problems?
22] Economies of Scope refers to situations where per unit costs are:
23] For a short-run cost function which of the following statements is (are) not true?
24] The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
25] The cost function is:
  Question 1
To reduce Agency Problems, executive compensation should be designed to:
  Question 2
Economic profit is defined as the difference between revenue and ____.
  Question 3
Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
  Question 4
Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include:
  Question 5
ncome tax payments are an example of ____.
   Question 6
The moral hazard in team production arises from
  Question 7
The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
  Question 8
The ____ is the ratio of ____ to the ____.
  Question 9
Generally, investors expect that projects with high expected net present values also will be projects with
  Question 10
The standard deviation is appropriate to compare the risk between two investments only if
  Question 11
 The level of an economic activity should be increased to the point where the ____ is zero.
  Question 12
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?
  Question 13
An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.
  Question 14
An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:
  Question 15
Which of the following would tend to make demand INELASTIC?
  Question 16
If demand were inelastic, then we should immediately:
  Question 17
Marginal revenue (MR) is ____ when total revenue is maximized.
   Question 18

When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.
  Question 19
Iron ore is an example of a:
  Question 20
The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:
  Question 21
When two or more “independent” variables are highly correlated, then we have:
  Question 22
One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.
   Question 23
The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X.
  Question 24
In regression analysis, the existence of a high degree of intercorrelation among some or all of the explanatory variables in the regression equation constitutes:
  Question 25
The method which can give some information in estimating demand of a product that hasn’t yet come to market is:
ANSWER TO THE SECOND VERSION PART 1
This midterm exam consist of 25 multiple choice   Questions and covers the material in Chapters 1 through 4.
  Question 1 .
Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t   + Real Option Value.Answer

  Question 2 .
Shirking of one’s duties is often encountered in team production settings becauseAnswer   Question 3 .
The Saturn Corporation (once a division of GM) was permanently closed in 2009.  What went
  Question 4 .
Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:Answer
  Question 5 .
Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test:Answer
  Question 6 .
The form of economics most relevant to managerial decision-making within the firm is:Answer
  Question 7 .
The level of an economic activity should be increased to the point where the ____ is zero.Answer
.   Question 8 .
The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:Answer
  Question 9 .
The ____ is the ratio of ____ to the ____.Answer 
  Question 10 .
The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)Answer
  Question 11 .
Generally, investors expect that projects with high expected net present values also will be projects withAnswer
.   Question 12 .

 The standard deviation is appropriate to compare the risk between two investments only ifAnswer
  Question 13 .
Marginal revenue (MR) is ____ when total revenue is maximized.Answer
   Question 14 .
If demand were inelastic, then we should immediately:Answer
  Question 15 .
Iron ore is an example of a:Answer
  Question 16 .

A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.Answer 
   Question 17 .
When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.Answer
  Question 18 .0 out of 4 points
When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.Answer
   Question 19 .
Suppose we estimate that the demand elasticity for fine leather jackets is .7 at their current prices.  Then we know that:Answer
  Question 20 .
 In regression analysis, the existence of a high degree of intercorrelation among some or all of the explanatory variables in the regression equation constitutes:Answer
   Question 21 .
 Even though insignificant explanatory variables can raise the adjusted R2 of a demand function, one    should not interpret their effects on the regression whenAnswer
   Question 22 .
The standard deviation of the error terms in an estimated regression equation is known as:Answer
  Question 23 .
The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:Answer
   Question 24 .
One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.Answer 
  Question 25 .
All of the following are reasons why an association relationship may not imply a causal relationship except:Answer
ANSWER TO THE THIRD VERSION
  Question 1
 Shirking of one’s duties is often encountered in team production settings because
  Question 2
 Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women.  The new frequency recommendation was designed to address the family histories of the patients.  The optimal frequency should be where the marginal benefit of an additional pap-test:
  Question 3
 A Real Option Value is:
  Question 4
The primary objective of a for-profit firm is to ___________.
  Question 5
 The form of economics most relevant to managerial decision-making within the firm is:

  Question 6
 Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t   + Real Option Value.
  Question 7
 The ____ is the ratio of ____ to the ____.
  Question 8
 The level of an economic activity should be increased to the point where the ____ is zero.
  Question 9
The standard deviation is appropriate to compare the risk between two investments only if
  Question 10
An closest example of a risk-free security is
  Question 11
A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
  Question 12
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?
  Question 13
 When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.
  Question 14
 An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.
  Question 15
If demand were inelastic, then we should immediately:
  Question 16
 A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.
  Question 17
 When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.
  Question 18
Songwriters and composers press music companies to lower the price for music downloads because
  Question 19
Suppose we estimate that the demand elasticity for fine leather jackets is .7 at their current prices.  Then we know that:
  Question 20
The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:
  Question 21
 The standard deviation of the error terms in an estimated regression equation is known as:
ANSWER TO 4 ADDED   QUESTIONS
1.Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
2.If the domestic prices for traded goods rises 5% in Japan and rises 7% the US over the same period, what would happened to the Yen/US dollar exchange rate?   HINT:  S1/S0 = (1+h) / (1+ f) where S0 is the direct quote of the yen at time 0, the current period.
3.The Cobb-Douglas production function is:  Q = 1.4*L0.6*K0.5.  What would be the percentage change in output (%∆Q) if labor grows by 3.0% and capital is cut by 5.0%?
[HINT: %∆Q = (EL * %∆L) + (EK * %)
4.Possible sources of economies of scale (size) within a production plant include:
1.Suppose that the firm’s cost function is given in the following schedule (where Q is the level of output):

Output    Total
Q (units)    Cost
0      7
1    25
2    37
3    45
4    50
5    53
6    58
7    66
8    78
9    96
10      124 
Determine the (a) marginal cost and (b) average total cost schedules
Please use the following table – note, I completed the first 2 rows
2.Complete the following table. Note – I completed the first 2 rows
Total    Marginal    Average
Output    Profit    Profit    Profit
3.Suppose we estimate that the demand elasticity for fine leather jackets is  .7 at their current prices.  Then we know that:
5.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.}
6.Which of the following would tend to make demand INELASTIC?

7.Which of the following best represents management’s objective(s) in utilizing demand analysis?
8.Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.
10.An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.
11.The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store’s inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week.
12.    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?
13.An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
14.When a manufacturer’s home currency appreciates substantially,
15.    Fill in the missing data to solve this problem.
Variable        Total        Average    Marginal
Input        Product        Product        Product
4              280             70            —-
5              320           64            40
6                350           58.3                  30
What is the total product for 5 units of input, and what is the marginal product for 6 units of input?
16.Suppose you have a Cobb-Douglas function with a capital elasticity of output (α) of 0.28 and a labor elasticity of output (β) of 0.84.  What statement is correct? 
17.If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm? 
18.The law of diminishing marginal returns:
19.Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:   
20.Emco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule:
Crew Size    Total Output
(No. of Workers)    (No. of Units)
   
0     0
1    10
2    35
3    50
4    56
5    59
6    60
7    60
8    58

Determine the following schedules:  Note – I completed the first 2 rows
  Question 10
An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.


Answer
  Question 11
 An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:


Answer
  Question 12
When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.




  Question 13
The method which can give some information in estimating demand of a product that hasn’t yet come to market is:



  Question 14
The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X.



  Question 15
In regression analysis, the existence of a high degree of intercorrelation among some or all of the explanatory variables in the regression equation constitutes:



  Question 16
The standard deviation of the error terms in an estimated regression equation is known as:


.
  Question 17
  Question 18
 For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?



  Question 19
The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:



  Question 20
The type of economic indicator that can best be used for business forecasting is the:



  Question 21
The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time



  Question 22
Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would




  Question 23
In a recession, the trade balance often improves because



  Question 24
If the value of the U.S. dollar rises from  1.0 per dollar to  1.3 per dollar,



  Question 25
 Marginal revenue product is:



defined as the amount that an additional unit of the variable input adds to the total revenue
  Question 26
In a relationship among total, average and marginal products, where TP is maximized:



  Question 27
The combinations of inputs costing a constant C dollars is called:



  Question 28
Which of the following is never negative
  Question 29
Economies of scale exist whenever long-run average costs:


Answer
  Question 30
Which of the following statements concerning the long-run average cost curve of economic theory is true
1.The different methods by which the sellers inform their potential buyers about the product is called:
  Question 2
1.Jane regularly sends funds to organizations seeking to save endangered animal species. This is an example of:
        selfishness.
         self-interest.
  Question 3
1.Carla had received very low annual return from her investment portfolio comprising of stocks of five companies for two years. Her decision to continue holding the same portfolio of assets will be an example of:
  Question 4
1.In the example of Ireland described in the text, the country’s production set shifted outward over time because:
  Question 5
1.Suppose Zia spends her time picking berries and apples. Her production set is described by the equation  , where   is the number of berries and y
the number of apples. Which of the following statements will be true?
  Question 6
1.When the slope of a country’s production set declines, it implies:
  Question 7
1.Bankers supported the Federal Reserve Board’s Regulation Q because:
  Question 8
1.Suppose the adoption of a new software reduces the marginal cost of publishing books. For a given demand curve for books, this will be represented by:
  Question 9
1.Starting from a pure exchange equilibrium, an increase in the demand for a commodity will result in:
  Question 10
1.Let the marginal product of capital (MPK ) be 6; the marginal product of labor (MPL) be 2; the price of labor is given by $10. What will be the price of capital such that the isocost and the isoquant are tangent to each other?
  Question 11
1.     
Which of the following is a property of an isoquant?
10 points  
  Question 12
Which of the following conditions define the short-run for any industry?
  Question 15
1.     
Suppose beer producers in Munich became aware of the low price of one barrel of beer in the domestic market relative to that in the United States. What will be the impact of this price difference?

  Question 18
1.     
Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?
  Question 19
1.    A country has a comparative advantage if:
2.    A country has an absolute advantage if:
3.    According to economists, trade is based on:
4.    Given that the import price of a commodity is lower than the equilibrium domestic price, international trade:
5.    A tax levied upon a good when it crosses a nation’s border is known as a (an):

6.    An upper limit on the amount of goods that may be imported during any time period is knows a (an):
7.    Agreements whereby exporting nations limit the amounts of goods that they ship to importing nations are known as:
   
8.    Which of the following arguments is sometimes used in support of free trade?
   
9.    Which of the following is used to support free trade?
10.    Which of the following is used as a case for protectionism?
11.    Arguments in support of protectionist measures include which of the following?
12.    Which of the following might be used to justify increased trade restrictions?
13.    Suppose that high wages in the United States resulted in an absolute disadvantage in the production of all goods.  This would mean that:
14.    Which of the following statements is correct?
15.    Which economist developed the idea of comparative advantage:
16.    The main trading partner of the United States is:
17.    In international trade based on the principle of comparative advantage:
18.    Which statement is correct?
19.    Which is not an argument for restricting trade?
20.    Which statement is false?
21.    Industries that use the infant industry argument often claim that:
22.    Why are environmental groups critical of the World Trade Organization (WTO)?   
Critical Thinking Multiple-Choice   Questions
23.    France can produce 2 bicycles with 6 units of inputs.  Italy can produce 1 bicycles with 6 units of inputs.  France is said to have:
24.    Pure Water Country has a (an):   
25.    Big Sky Country has a (an):
52.    Which is true about wages in America?
53.    Which is not a provision of the North American Free Trade Agreement?
54.    Which of the following is an example of trade negotiation on a global level?
55.    Which of the following is incorrect about the World Trade Organization (WTO)?
56.    Some individuals believe that trade agreements should also contain linkages to negotiations relating to:

1.  If A and B are complements, an increase in the price of good A would:
2.  If a shortage exists in a market, the natural tendency is for:
3.  If steak is a normal good, what do you suppose would happen to price and quantity during an economic recession?
4.  Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood.  What do you expect to happen to the equilibrium price and quantity of wooden desks?
5.  Suppose that supply increases and demand decreases.  What effect will this have on price and quantity?
6.  Suppose both supply and demand decrease.  What effect will this have on price?
7.  Suppose that good X is a substitute for good Y.  Then an increase in the price of good Y leads to 
8.  If consumers expect future prices to be higher 
9.  The demand function 
10. All else held constant, as additional firms enter an industry 
11. Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have on the equilibrium price?
12. The difference between a price decrease and an increase in income is that
13. Joe prefers a three pack of soda to a six-pack.  What properties does this preference violate?
14.  A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:
15. Given that income is $200 and the price of good Y is $40.  What is the vertical intercept of the budget line?
16.  How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?
17.  Along the same indifference curve, MRS is
18.  If income increases, then19.   The substitution effect reflects how a consumer will react to
 
20.  If an increase in income causes a decrease in the consumption of good Y we know that good Y is:
21. Which combination of the properties given below rules out indifference curves that intersect one another?
22.  If a firm’s production function is Leontief and the wage rate goes up
23.  Which of the following statements is incorrect:
24.  Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?
25.  If the last unit of input increases total product we know that the marginal product is:
26.  The absolute value of the slope of the isoquant is the:
27.  Changes in the price of an input cause:
28.  A production function
29.  The short-run is defined as the time-frame
30.  The long-run is defined as
31.  The marginal rate of technical substitution
32.  The marginal product of an input is defined as
34.  In a competitive industry with identical firms, long run equilibrium is characterized by
35.  In the long-run, monopolistically competitive firms:
36.  Which of the following market structures would you expect to yield the greatest product variety?
37.  The primary difference between Monopolistic Competition and Perfect Competition is
38.  Which of the following statements concerning monopoly is NOT true?
39.  Suppose that initially the price is $50 in a perfectly competitive market.  Firms are making zero economic profits.  Then the market demand shrinks permanently and some firms leave the industry and the industry returns back to a long run equilibrium.  What will be the new equilibrium price, assuming cost conditions in the industry remain constant?
40.  Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
41.  The source(s) of monopoly power for a monopoly may be:
43.  You are a manager for a monopolistically competitive firm.  From experience, the profit-maximizing level of output of your firm is 100 units.  However, it is expected that prices of other close substitutes will fall in the near future.  How should you adjust your level of production in response to this change?
44.  A linear demand function exhibits:
45.  Which of the following is not a basic feature of a monopolistically competitive industry?
47. Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?
  Question 14
Iron ore is an example of a:
  Question 16
If demand were inelastic, then we should immediately:
  Question 17
 Those goods having a calculated income elasticity that is negative are
called:
  Question 18
When demand elasticity is ____ in absolute value (or ____), an increase in
price will result in a(n) ____ in total revenues.
  Question 19
Songwriters and composers press music companies to lower the price
for music downloads because
  Question 21
Even though insignificant explanatory variables can raise the adjusted
R2 of a demand function, one should not interpret their effects on the
regression when
  Question 22
 The method which can give some information in estimating demand of a
product that hasn’t yet come to market is:
  Question 23
When two or more “independent” variables are highly correlated, then we
have:
  Question 24
 When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to
represent an economic relationship, estimates of the parameters (a, and
the b’s) using linear regression analysis can be obtained by first applying
a ____ transformation to convert the function to a linear relationship.
  Question 25
Demand functions in the multiplicative form are most common for all of
the following reasons except:
  Question 12
A change in the level of an economic activity is desirable and should be
undertaken as long as the marginal benefits exceed the ____.
  Question 13
Auto dealers slash prices at the end of the model year in response to
deficient demand/excess inventory but restaurants facing the same
problem slash production because
  Question 14
Iron ore is an example of a:
  Question 15
 
Suppose we estimate that the demand elasticity for fine leather jackets is
.7 at their current prices. Then we know that:
  Question 16
If demand were inelastic, then we should immediately:
  Question 17
 Those goods having a calculated income elasticity that is negative are
called:
Answer
  Question 18
When demand elasticity is ____ in absolute value (or ____), an increase in
price will result in a(n) ____ in total revenues.
  Question 19
Songwriters and composers press music companies to lower the price
for music downloads because
  Question 20
 The estimated slope coefficient (b) of the regression equation (Ln Y = a +
b Ln X) measures the ____ change in Y for a one ____ change in X.
  Question 23
When two or more “independent” variables are highly correlated, then we
have:
  Question 24
 When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to
represent an economic relationship, estimates of the parameters (a, and
the b’s) using linear regression analysis can be obtained by first applying
a ____ transformation to convert the function to a linear relationship.
  Question 25
Demand functions in the multiplicative form are most common for all of
the following reasons except: