question

Economic profit is:

a. calculated by subtracting implicit costs of using owner-supplied resources from the firm's total revenue

b. a theoretical measure of a firm's performance and has little value in real world decision making

c. generally larger than accounting profit

d. negative costs exceed revenues

a. calculated by subtracting implicit costs of using owner-supplied resources from the firm's total revenue

b. a theoretical measure of a firm's performance and has little value in real world decision making

c. generally larger than accounting profit

d. negative costs exceed revenues

answer

d. negative when costs exceed revenues

question

Economic profit is...

A)the difference between total revenue and explicit costs.

B)the difference between total revenue and the opportunity cost of all the resources used in production.

C)the difference between accounting profit and explicit costs.

D)the difference between accounting profit and the opportunity cost of the market-supplied resources used by the firm.

A)the difference between total revenue and explicit costs.

B)the difference between total revenue and the opportunity cost of all the resources used in production.

C)the difference between accounting profit and explicit costs.

D)the difference between accounting profit and the opportunity cost of the market-supplied resources used by the firm.

answer

b. the difference between total revenue and the opportunity cost of all the resources used in production

question

When economic profit is negative,

A)total economic cost exceeds total revenue.

B)the firm's owners experience the principal-agent problem.

C)the firm's owners experience a decrease in wealth.

D)both a and b

E)both a and c

A)total economic cost exceeds total revenue.

B)the firm's owners experience the principal-agent problem.

C)the firm's owners experience a decrease in wealth.

D)both a and b

E)both a and c

answer

e. both a and c

question

Consider a firm that employs some resources that are owned by the firm. When economic profit is zero, accounting profit is

A)positive and equal to the opportunity cost of all the resources used in production.

B)equal to the implicit costs of using owner-supplied resources

.C)negative.

D)also zero.

A)positive and equal to the opportunity cost of all the resources used in production.

B)equal to the implicit costs of using owner-supplied resources

.C)negative.

D)also zero.

answer

b. equal to the implicit costs of using owner-supplied resources

question

Which of the following statements is true?

A)Implicit costs are the opportunity cost of the owner's resources.

B)When economic profit is zero, the firm could have done better putting their resources in some other industry of comparable risk.

C)If accounting profit is positive, economic profit must be negative.

D)If economic profit is negative, accounting profit must also be negative.

E)None of the above statements is true

A)Implicit costs are the opportunity cost of the owner's resources.

B)When economic profit is zero, the firm could have done better putting their resources in some other industry of comparable risk.

C)If accounting profit is positive, economic profit must be negative.

D)If economic profit is negative, accounting profit must also be negative.

E)None of the above statements is true

answer

a. implicit costs are the opportunity cost of the owner's resources

question

The value of a firm is...

A)smaller the lower is the risk premium used to compute the firm's value.

B)larger the lower is the risk premium used to compute the firm's value.

C)the price for which the firm can be sold minus the present value of the expected future profits.

D)both b and c

A)smaller the lower is the risk premium used to compute the firm's value.

B)larger the lower is the risk premium used to compute the firm's value.

C)the price for which the firm can be sold minus the present value of the expected future profits.

D)both b and c

answer

b. larger the lower is the risk risk premium used to compute the firm's value

question

Suppose Dave, the owner-manager of Dave's Golf Academy, earned $200,000 in revenue last year. Dave's explicit costs of operation totaled $130,000. Dave has a Bachelor of Science degree in civil engineering and could be earning $60,000 annually as a civil engineer.

A)Dave's implicit cost of using owner-supplied resources is $130,000.B)Dave's economic profit is $7

0,000.

C)Dave's implicit cost of using owner-supplied resources is $60,000.

D)Dave's economic profit is $10,000.

E)both c and d.

A)Dave's implicit cost of using owner-supplied resources is $130,000.B)Dave's economic profit is $7

0,000.

C)Dave's implicit cost of using owner-supplied resources is $60,000.

D)Dave's economic profit is $10,000.

E)both c and d.

answer

E. both c and d

question

A risk premium is...

A)subtracted from the discount rate when calculating the present value of a future stream of risky profits.

B)a measure calculated to reflect the riskiness of future profits.

C)lower the more risky the future stream of profits.

D)an additional compensation paid to the workers of a business enterprise

A)subtracted from the discount rate when calculating the present value of a future stream of risky profits.

B)a measure calculated to reflect the riskiness of future profits.

C)lower the more risky the future stream of profits.

D)an additional compensation paid to the workers of a business enterprise

answer

b. a measure calculated to reflect the riskiness of future profits

question

Owners of a firm want the managers to make business decisions that will...

A)maximize the value of the firm.

B)maximize the market share of the firm.

C)maximize expected profit in each period of operation.

D)both a and c are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

E)both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

A)maximize the value of the firm.

B)maximize the market share of the firm.

C)maximize expected profit in each period of operation.

D)both a and c are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

E)both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

answer

d. both a and c are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods

question

The principal-agent problem arises when...

A)the principal and the agent have different objectives

B)the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold.

C)the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent.

D)both a and c

E)none of the above

A)the principal and the agent have different objectives

B)the principal cannot decide whether the firm should seek to maximize the expected future profits of the firm or maximize the price for which the firm can be sold.

C)the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent.

D)both a and c

E)none of the above

answer

d. both a and c

question

Moral hazard...

A)occurs when managers pursue profit maximization without regard to the interests of society in general.

B)is the cause of principal-agent problems.

C)occurs only rarely in modern corporations.

D)exists when either party to a contract has an incentive to cancel the contract.

E)both a and b

A)occurs when managers pursue profit maximization without regard to the interests of society in general.

B)is the cause of principal-agent problems.

C)occurs only rarely in modern corporations.

D)exists when either party to a contract has an incentive to cancel the contract.

E)both a and b

answer

b. is the cause of principal-agent problems

question

A price-taking firm can exert no control over price because...

A)of a lack of substitutes for the product.

B)the firm's individual production is insignificant relative to production in the industry.

C)many other firms produce a product that is nearly identical to its product.

D)both b and c

E)both a and b

A)of a lack of substitutes for the product.

B)the firm's individual production is insignificant relative to production in the industry.

C)many other firms produce a product that is nearly identical to its product.

D)both b and c

E)both a and b

answer

d. both b and c

question

Which of the following statements is true?A)Shareholders have little or no ability to force managers to pursue maximization of the firm's value.

B)The effectiveness of a board of directors in monitoring managers will be enhanced by appointing members from the firm who are well-informed about the management problems facing the firm.

C)Equity ownership by managers is thought to be one of the most effective corporate control mechanisms.

D)Reducing the amount of debt financing can reduce the divergence between the shareholders' interests and the owner's interests.

E)none of the above are true

B)The effectiveness of a board of directors in monitoring managers will be enhanced by appointing members from the firm who are well-informed about the management problems facing the firm.

C)Equity ownership by managers is thought to be one of the most effective corporate control mechanisms.

D)Reducing the amount of debt financing can reduce the divergence between the shareholders' interests and the owner's interests.

E)none of the above are true

answer

c. equity ownership by managers is thought to be one of the most effective corporate control mechanisms

question

When a firm is a price-taking firm,

A)the price of the product it sells is determined by the intersection of the industry demand and supply curves for the product.

B)raising the price of the product above the market-determined price will cause the firm to lose all of its sales

.C)many other firms produce a product that is identical to the output produced by the rest of the firms in the industry.

D)all of the above

A)the price of the product it sells is determined by the intersection of the industry demand and supply curves for the product.

B)raising the price of the product above the market-determined price will cause the firm to lose all of its sales

.C)many other firms produce a product that is identical to the output produced by the rest of the firms in the industry.

D)all of the above

answer

d. all of the above

question

A price-setting firm...

A)can lower the price of its product and sell more units.

B)cannot raise the price of its product without losing nearly all of its sales.

C)does not possess market power.

D)sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers.

E)both a and d

A)can lower the price of its product and sell more units.

B)cannot raise the price of its product without losing nearly all of its sales.

C)does not possess market power.

D)sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers.

E)both a and d

answer

e. both a and d

question

A market...

A)lowers the transaction costs of doing business.

B)is any arrangement that brings buyers and sellers together to exchange goods or services.

C)is an institution used exclusively by capitalist nations.

D)both b and c

E)both a and b

A)lowers the transaction costs of doing business.

B)is any arrangement that brings buyers and sellers together to exchange goods or services.

C)is an institution used exclusively by capitalist nations.

D)both b and c

E)both a and b

answer

e. both a and b

question

Which of the following is NOT a feature characterizing market structures?

A)the number and size of firms

B)the level of capital investment in research and development

C)likelihood of new firm's entering a market.

D)the degree of product differentiation.

E)all of the above characterize market structures.

A)the number and size of firms

B)the level of capital investment in research and development

C)likelihood of new firm's entering a market.

D)the degree of product differentiation.

E)all of the above characterize market structures.

answer

b. the level of capital investment in research and development

question

Which of the following is a characteristic of a perfectly-competitive market?

A)The firms are price-setters.

B)All firms produce and sell a standardized or undifferentiated product.

C)It is difficult for new firms to enter the market due to barriers to entry.

D)The output sold by a particular firm may be quite different from the output sold by the other firms in the market.

A)The firms are price-setters.

B)All firms produce and sell a standardized or undifferentiated product.

C)It is difficult for new firms to enter the market due to barriers to entry.

D)The output sold by a particular firm may be quite different from the output sold by the other firms in the market.

answer

b. all firms produce and sell a standardized or undifferentiated product

question

Which of the following is a characteristic of a monopoly market structure?

A)Close substitutes for the product are available.

B)There are barriers to entry.

C)The entire market output is produced by only a few firms.

D)The greater the ability of consumers to find imperfect substitutes for the firm's product, the lower will be the firm's market power.

A)Close substitutes for the product are available.

B)There are barriers to entry.

C)The entire market output is produced by only a few firms.

D)The greater the ability of consumers to find imperfect substitutes for the firm's product, the lower will be the firm's market power.

answer

b. there are barriers to entry

question

Economic profit is the best measure of a firm's performance because...

A)economic profit fully accounts for all sources of revenue.

B)implicit costs are generally too difficult to measure accurately.

C)the opportunity cost of using ALL resources is subtracted from total revenue.

D)only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.

A)economic profit fully accounts for all sources of revenue.

B)implicit costs are generally too difficult to measure accurately.

C)the opportunity cost of using ALL resources is subtracted from total revenue.

D)only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.

answer

c. the opportunity cost of using all resources is subtracted from total revenue

question

Explicit costs are

answer

operating costs & expenses, legal expenses to start a business, income taxes, interest expense

question

implicit costs are

answer

forgone salary, and % of return of all owner supplied resources

question

Economic theory is a valuable tool for business decision making because it

a. acts like a road map to abstract away from nonessential matters to allow managers to concentrate on the relevant items for making a decision

b. creates a realistic, complex model of the business decision

c. allows managers to apply the economic way of thinking to make valid explanations and predictions about real world business problems

d. a and c

e. all of the above

a. acts like a road map to abstract away from nonessential matters to allow managers to concentrate on the relevant items for making a decision

b. creates a realistic, complex model of the business decision

c. allows managers to apply the economic way of thinking to make valid explanations and predictions about real world business problems

d. a and c

e. all of the above

answer

d. a and c

question

Microeconomics

a. is generally too complex and abstract to be much use in making real-world business decisions

b. studies the behavior of individual economic units or segments of the economy

c. contributes to the understanding of ordinary business practices or tactics

d. all of the choices are correct

e. both b and c

a. is generally too complex and abstract to be much use in making real-world business decisions

b. studies the behavior of individual economic units or segments of the economy

c. contributes to the understanding of ordinary business practices or tactics

d. all of the choices are correct

e. both b and c

answer

e. both b and c

question

which of the following is an example of an implicit cost for a firm?

a. the value of time worked by the owner

b. any wages and salaries paid to employed

c. forgone rent on property owned by the firm

d. both a and c

e. all are correct

a. the value of time worked by the owner

b. any wages and salaries paid to employed

c. forgone rent on property owned by the firm

d. both a and c

e. all are correct

answer

d. both a and c

question

the economic cost to the owners of a firm for using productive resources

a. is measured dully by the explicit or out-of-pocket expenses incurred when the firm uses resources it purchases in the market

b. does not include implicit costs associated with resources the firm already owns

c. is the total opportunity cost of all resources used by the firm

d. is measured by the sum of the explicit costs of market supplied resources plus the implicit costs of owner-supplied resources

e. both c and d

a. is measured dully by the explicit or out-of-pocket expenses incurred when the firm uses resources it purchases in the market

b. does not include implicit costs associated with resources the firm already owns

c. is the total opportunity cost of all resources used by the firm

d. is measured by the sum of the explicit costs of market supplied resources plus the implicit costs of owner-supplied resources

e. both c and d

answer

e. both c and d

question

In a linear regression equation of the form Y = a + bX, the slope parameter b shows...

A)ΔY / Δb.

B)ΔX / Δb.

C)ΔY / ΔX.

D)ΔX / ΔY.

E)none of the abov

A)ΔY / Δb.

B)ΔX / Δb.

C)ΔY / ΔX.

D)ΔX / ΔY.

E)none of the abov

answer

C)ΔY / ΔX.

question

In a linear regression equation of the form Y = a + bX, the intercept parameter a shows...

A)the amount that Y changes when X changes by one unit.

B)the amount that X changes when Y changes by one unit.

C)the value of Y when X is zero.

D)the value of X when Y is zero.

A)the amount that Y changes when X changes by one unit.

B)the amount that X changes when Y changes by one unit.

C)the value of Y when X is zero.

D)the value of X when Y is zero.

answer

c. the value of Y when X is zero

question

The sample regression line...

A)is the same as the population regression line.

B)is used to estimate the population regression line.

C)connects the sample data points.

D)shows the true relation between the dependent and independent variables.

E)none of the above

A)is the same as the population regression line.

B)is used to estimate the population regression line.

C)connects the sample data points.

D)shows the true relation between the dependent and independent variables.

E)none of the above

answer

b. is used to estimate the population regression line

question

In a linear regression equation Y = a + bX, the fitted or predicted value of Y is...

A)the value of X associated with a particular value of Y.

B)the value of X predicted by the regression equation.

C)the values of the parameters predicted by the estimators.

D)the value of Y obtained by substituting specific values of X into the estimated sample regression equation.

A)the value of X associated with a particular value of Y.

B)the value of X predicted by the regression equation.

C)the values of the parameters predicted by the estimators.

D)the value of Y obtained by substituting specific values of X into the estimated sample regression equation.

answer

d. the value of Y obtained by subtracting specific values of X into the estimated sample regression equation

question

A parameter is said to be statistically significant if there is sufficient evidence that the

A)sample regression line is equal to the population regression.

B)parameter estimated from the sample equals the true value of the parameter.

C)true value of the parameter does not equal zero.

D)value of the t-ratio equals the critical value

.E)both b and c

A)sample regression line is equal to the population regression.

B)parameter estimated from the sample equals the true value of the parameter.

C)true value of the parameter does not equal zero.

D)value of the t-ratio equals the critical value

.E)both b and c

answer

c. true value of the parameter does not equal zero

question

An estimator is unbiased if it produces...

A)a parameter from the sample that equals the true parameter.

B)estimates of a parameter that are close to the true parameter.

C)estimates of a parameter that are, on average, equal to the true parameter.

D)estimates of a parameter that are statistically significant.

E)both b and d

A)a parameter from the sample that equals the true parameter.

B)estimates of a parameter that are close to the true parameter.

C)estimates of a parameter that are, on average, equal to the true parameter.

D)estimates of a parameter that are statistically significant.

E)both b and d

answer

c. estimates of a parameter that are, on average, equal to the true parameter

question

If the t-statistic exceeds the critical value of t , then one can...A)not reject the hypothesis that the true value of the parameter equals zero.

B)reject the hypothesis that the true value of the parameter equals zero.

C)accept the hypothesis that the estimated value of the parameter equals the true value.

D)reject the hypothesis that the estimated value of the parameter exceeds the true value.

E)reject the hypothesis that the estimated value of the parameter equals the true value.

B)reject the hypothesis that the true value of the parameter equals zero.

C)accept the hypothesis that the estimated value of the parameter equals the true value.

D)reject the hypothesis that the estimated value of the parameter exceeds the true value.

E)reject the hypothesis that the estimated value of the parameter equals the true value.

answer

b. reject the hypothesis that the true value of the parameter equals zero

question

To test whether the overall regression equation is statistically significant, one uses the...

A)t-statistic.

B)R2-statistic.

C)F-statistic.

D)standard error statistic.

E)all of the above

A)t-statistic.

B)R2-statistic.

C)F-statistic.

D)standard error statistic.

E)all of the above

answer

C)F-statistic.

question

To test the hypothesis that a particular parameter equals zero, one uses the...

A)t-statistic.

B)R2-statistic.

C)F-statistic.

D)standard error statistic.

E)none of the above

A)t-statistic.

B)R2-statistic.

C)F-statistic.

D)standard error statistic.

E)none of the above

answer

a. t-statistic

question

In the nonlinear function Y = aXbZc, the parameter c measures

A)ΔY / ΔZ.

B)the percent change in Y for a 1 percent change in Z.

C)the elasticity of Y with respect to Z.

D)both b and c

E)all of the above

A)ΔY / ΔZ.

B)the percent change in Y for a 1 percent change in Z.

C)the elasticity of Y with respect to Z.

D)both b and c

E)all of the above

answer

c. the elasticity of Y with respect to Z

question

If the p-value is 0.01 for the parameter estimate for b, the

A)probability of finding statistical significance when the true value of b is zero is exactly 1%.

B)probability of finding significance for the estimate of b when none exists is exactly 0.01%.

C)level of confidence is 99.99%.

D)probability that the parameter estimate equals the true value of b is 1%.

E)probability that the parameter estimate equals the true value of b is 0.01%.

A)probability of finding statistical significance when the true value of b is zero is exactly 1%.

B)probability of finding significance for the estimate of b when none exists is exactly 0.01%.

C)level of confidence is 99.99%.

D)probability that the parameter estimate equals the true value of b is 1%.

E)probability that the parameter estimate equals the true value of b is 0.01%.

answer

A. probability of finding statistical significance when the true value of b is zero is exactly 1%

question

If the level significance for testing is specified to be 5%, then the parameter estimate for b is statistically significant if its p-value is...

A)0.048.

B)0.48.

C)greater than 0.05.

D)equal to the true value of b.

A)0.048.

B)0.48.

C)greater than 0.05.

D)equal to the true value of b.

answer

a. 0.048

question

In a multiple regression model, the coefficients on the independent variables measure the...

A)percent of the variation in the dependent variable explained by a change in that independent variable, all other influences held constant.

B)change in the independent variable from a 1-unit change in the dependent variable, all other influences held constant.

C)change in the dependent variable from a 1-unit change in that independent variable, all other influences held constant.

D)none of the above

A)percent of the variation in the dependent variable explained by a change in that independent variable, all other influences held constant.

B)change in the independent variable from a 1-unit change in the dependent variable, all other influences held constant.

C)change in the dependent variable from a 1-unit change in that independent variable, all other influences held constant.

D)none of the above

answer

c. change in the dependent variable from a 1-unit change in the independent variable, all other influences held constant

question

The quadratic equation, Y = a + bX + cX2, can be estimated using linear regression by estimating...A)Y = a + ZX where Z = (b + c)2

B)Y = a + bZ where Z = X2

C)Y = a + ZX where Z = (b + c)

D)Y = a + bX + ZX where Z = c2

E)none of the above will work

B)Y = a + bZ where Z = X2

C)Y = a + ZX where Z = (b + c)

D)Y = a + bX + ZX where Z = c2

E)none of the above will work

answer

e. none of the above will work

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

the regression above, the parameter estimate of a indicates...

A)that when X is zero, Y is 102.54.

B)that when X is zero, Y is 412.18.

C)ΔY /Δa

D)ΔY / ΔX

E)both a and c

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

the regression above, the parameter estimate of a indicates...

A)that when X is zero, Y is 102.54.

B)that when X is zero, Y is 412.18.

C)ΔY /Δa

D)ΔY / ΔX

E)both a and c

answer

b. that when X is zero Y is 412.18

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, the parameter estimate of b indicates that...

A)X increases by 0.1765 units when Y increases by one unit.

B)X increases by 0.6358 units when Y increases by one unit.

C)Y increases by 0.1765 units when X decreases by one unit.

D)Y increases by 0.6358 units when X increases by one unit.

E)Y increases by 3.60 units when X increases by one unit.

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, the parameter estimate of b indicates that...

A)X increases by 0.1765 units when Y increases by one unit.

B)X increases by 0.6358 units when Y increases by one unit.

C)Y increases by 0.1765 units when X decreases by one unit.

D)Y increases by 0.6358 units when X increases by one unit.

E)Y increases by 3.60 units when X increases by one unit.

answer

d. Y increases by 0.6358 units when X increases by one unit

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, what is the critical value of t at the 5% level of significance?

A)2.131

B)1.771

C)2.160

D)2.145

E)none of the above

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, what is the critical value of t at the 5% level of significance?

A)2.131

B)1.771

C)2.160

D)2.145

E)none of the above

answer

c. 2.160

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, which of the following statements is correct at the 5% level of significance?

A)Both â and b are statistically significant.

B)Neither â nor b is statistically significant.

C)â is statistically significant, but b is not.

D)b is statistically significant, but â is not.

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, which of the following statements is correct at the 5% level of significance?

A)Both â and b are statistically significant.

B)Neither â nor b is statistically significant.

C)â is statistically significant, but b is not.

D)b is statistically significant, but â is not.

answer

a. both ahat and b are statistically significant

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, the value of the R2 statistic indicates that

A)60.10% of the total variation in X is explained by the regression equation.

B)60.10% of the total variation in Y is explained by the regression equation.

C)0.6010% of the total variation in Y is explained by the regression equation.

D)0.6010% of the total variation in X is explained by the regression equation.

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, the value of the R2 statistic indicates that

A)60.10% of the total variation in X is explained by the regression equation.

B)60.10% of the total variation in Y is explained by the regression equation.

C)0.6010% of the total variation in Y is explained by the regression equation.

D)0.6010% of the total variation in X is explained by the regression equation.

answer

b. 60.10% of the total variation in Y is explained by the regression equation

question

The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, if X equals 35, what is the predicted value of Y?A)593.24

B)634.71

C)389.93

D)434.43

DEPENDENT VARIABLE:

Y 15

R-SQUARE

0.6010

F-RATIO

19.58

P-VALUE ON F

0.0001

PARAMETER ESTIMATE INTERCEPT 412.18

X 0.6358

STANDARD ERROR

102.54

0.1765

T-RATIO

4.02

3.60

P-VALUE

0.0015

0.0032

In the regression above, if X equals 35, what is the predicted value of Y?A)593.24

B)634.71

C)389.93

D)434.43

answer

d. 434.43

question

One problem with consumer interviews is that...

A)the sample might not be a representative sample.

B)interview techniques are not scientific.

C)response bias can occur.

D)both a and c

E)none of the above

A)the sample might not be a representative sample.

B)interview techniques are not scientific.

C)response bias can occur.

D)both a and c

E)none of the above

answer

d. both a and c

question

The estimated demand for a good is

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

The coefficient on P

A)violates the law of demand.

B)is negative as dictated by the law of demand.

C)should not have the same sign as the coefficient on PR.

D)should not be greater than one (in absolute value).

E)both c and d

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

The coefficient on P

A)violates the law of demand.

B)is negative as dictated by the law of demand.

C)should not have the same sign as the coefficient on PR.

D)should not be greater than one (in absolute value).

E)both c and d

answer

b. is negative as dictated by the law of demand

question

The estimated demand for a good is

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

The good is...

A)an inferior good since the coefficient on PR is negative.

B)a normal good since the coefficient on PR is negative.

C)a normal good since the coefficient on M is positive.

D)an inferior good since the coefficient on M is less than one (1).

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

The good is...

A)an inferior good since the coefficient on PR is negative.

B)a normal good since the coefficient on PR is negative.

C)a normal good since the coefficient on M is positive.

D)an inferior good since the coefficient on M is less than one (1).

answer

c. a normal good since the coefficient on M is positive

question

The estimated demand for a good is

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

This good and good R are...A)complements since the coefficient on M is positive.

B)substitutes since the coefficient on M is positive.

C)substitutes since the coefficient on PR is negative.

D)complements since the coefficient on PR is negative.

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

This good and good R are...A)complements since the coefficient on M is positive.

B)substitutes since the coefficient on M is positive.

C)substitutes since the coefficient on PR is negative.

D)complements since the coefficient on PR is negative.

answer

d. complements since the coefficient on Pr is negative

question

The estimated demand for a good is

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

If income decreases by $1,000, all else constant, quantity demanded will ________ by _________ units.

A)increase; 60 units

B)decrease; 60 units

C)decrease; 1600 units

D)decrease; 600 units

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

If income decreases by $1,000, all else constant, quantity demanded will ________ by _________ units.

A)increase; 60 units

B)decrease; 60 units

C)decrease; 1600 units

D)decrease; 600 units

answer

d. decrease; 600 units

question

The estimated demand for a good is

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

If the price of the good decreases by $10, all else constant, the quantity demanded will ________ by ________ units.

A)increase; 12 units

B)increase; 120 units

C)increase; 250 units

D)decrease; 1.2 units

Q = 3,600 - 12P + 0.6M - 2.5PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R.

If the price of the good decreases by $10, all else constant, the quantity demanded will ________ by ________ units.

A)increase; 12 units

B)increase; 120 units

C)increase; 250 units

D)decrease; 1.2 units

answer

b. increase; 120 units

question

For a linear demand function, Q = a + bP + cM + dPR, the cross-price elasticity is...

A)d

B)d(Q/PR)

C)d(PR/Q)

D)-d

E)-d(Q/P)

A)d

B)d(Q/PR)

C)d(PR/Q)

D)-d

E)-d(Q/P)

answer

c. d(Pr/Q)

question

For a nonlinear demand function of the form Q = aPb Mc PRd, the estimated income elasticity is...A)c

B)-c

C)c(M/P)

D)c(M/Q.)

E)c(Q/M)

B)-c

C)c(M/P)

D)c(M/Q.)

E)c(Q/M)

answer

a. c

question

A production function measures the relation between...

A)input prices and output prices.

B)input prices and the quantity of output.

C)the quantity of inputs and the quantity of output.

D)the quantity of inputs and input prices.

A)input prices and output prices.

B)input prices and the quantity of output.

C)the quantity of inputs and the quantity of output.

D)the quantity of inputs and input prices.

answer

c. the quantity of inputs and the quantity of output

question

A short-run production function assumes that...

A)the usage of at least one input is fixed.

B)the level of output is fixed.

C)all inputs are fixed inputs.

D)both a and bE

)both b and c

A)the usage of at least one input is fixed.

B)the level of output is fixed.

C)all inputs are fixed inputs.

D)both a and bE

)both b and c

answer

a. the usage of at least one input is fixed

question

If average product is decreasing, then marginal product...

A)must be greater than average product.

B)must be less than average product.

C)must be increasing.

D)cannot be decreasing.

E)both a and c

A)must be greater than average product.

B)must be less than average product.

C)must be increasing.

D)cannot be decreasing.

E)both a and c

answer

b. must be less than average product

question

Which of the following statements is TRUE?

A)A firm plans in the short run and operates in the long run.

B)In the long run a firm can change all but one input.

C)In the long run all inputs are variable.

D)In the short run all inputs are fixed.

A)A firm plans in the short run and operates in the long run.

B)In the long run a firm can change all but one input.

C)In the long run all inputs are variable.

D)In the short run all inputs are fixed.

answer

c. in the long run all inputs are variable

question

Suppose you operate a sandwich shop and currently have two employees. If you hire a third employee, your output of sandwiches per day rises from 75 to 90. If you hire a fourth employee, output rises to 110 per day. A fifth and sixth employee would cause output to rise to 120 and 125 per day, respectively. Choose the correct statement:

A)Diminishing returns set have not yet set in because output is still increases.

B)Diminishing returns set in with the hiring of the fourth worker.

C)Diminishing returns set in with the hiring of the fifth worker.

D)Diminishing returns set in with the hiring of the sixth worker.

A)Diminishing returns set have not yet set in because output is still increases.

B)Diminishing returns set in with the hiring of the fourth worker.

C)Diminishing returns set in with the hiring of the fifth worker.

D)Diminishing returns set in with the hiring of the sixth worker.

answer

c. diminishing returns set in with the hiring of the fifth worker

question

The marginal product of labor...A)is less than the average product of labor when the average product of labor is decreasing.

B)measures how output changes as the wage rate changes.

C)is negative when adding another unit of labor decreases output.

D)both a and c

E)both b and c

B)measures how output changes as the wage rate changes.

C)is negative when adding another unit of labor decreases output.

D)both a and c

E)both b and c

answer

d. both a and c

question

Diminishing marginal productivity...

A)occurs when the marginal product curve begins to slope downward.

B)occurs eventually because each additional unit of the variable input has, on average, fewer units of the fixed input with which to work.

C)occurs when adding one more unit of the variable input reduces total product.

D)both a and b

E)both a and c

A)occurs when the marginal product curve begins to slope downward.

B)occurs eventually because each additional unit of the variable input has, on average, fewer units of the fixed input with which to work.

C)occurs when adding one more unit of the variable input reduces total product.

D)both a and b

E)both a and c

answer

d. both a and b

question

Diminishing returns refers to the decrease in...

A)long-run average cost that results from increases in output.

B)average total cost that results from decreases in input prices.

C)profit that results from increases in output.

D)average product that results from increases in the variable input.

E)marginal product that results from increases in the variable input

A)long-run average cost that results from increases in output.

B)average total cost that results from decreases in input prices.

C)profit that results from increases in output.

D)average product that results from increases in the variable input.

E)marginal product that results from increases in the variable input

answer

e. marginal product that results from increases in the variable input

question

If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that...

A)it is choosing the lowest-cost method of producing that output.

B)this output level is the most that can be produced with the given levels of inputs.

C)each input is producing its maximum marginal product.

D)both a and b

E)both a and c

A)it is choosing the lowest-cost method of producing that output.

B)this output level is the most that can be produced with the given levels of inputs.

C)each input is producing its maximum marginal product.

D)both a and b

E)both a and c

answer

b. this output level is the most that can be produced with the given levels of inputs

question

If a firm is producing a given level of output in an economically-efficient manner, then it must be the case that...

A)it is choosing the lowest-cost method of producing that output.

B)this output level is the most that can be produced with the given level of inputs.

C)each input is producing its maximum marginal product.

D)both a and b

E)both a and c

A)it is choosing the lowest-cost method of producing that output.

B)this output level is the most that can be produced with the given level of inputs.

C)each input is producing its maximum marginal product.

D)both a and b

E)both a and c

answer

d. both a and b

question

A short-run cost function assumes that...A

)the level of output is fixed.

B)all inputs are fixed.

C)at least one input is fixed.

D)both a and c

E)none of the above

)the level of output is fixed.

B)all inputs are fixed.

C)at least one input is fixed.

D)both a and c

E)none of the above

answer

c. at least one input is fixed

question

Average total cost...

A)Decreases as output increases.

B)Increases as output increases.

C)Increases if marginal cost is increasing.

D)Increases if marginal cost is greater than average total cost

E)both b and d

A)Decreases as output increases.

B)Increases as output increases.

C)Increases if marginal cost is increasing.

D)Increases if marginal cost is greater than average total cost

E)both b and d

answer

d. increases if marginal cost is greater than average total cost

question

Average fixed cost...

A)increases if marginal cost is increasing.

B)increases as output increases.

C)decreases as output increases.

D)increases if marginal cost is greater than average fixed cost.

A)increases if marginal cost is increasing.

B)increases as output increases.

C)decreases as output increases.

D)increases if marginal cost is greater than average fixed cost.

answer

c. decreases as output increases

question

Marginal cost...

A)is less than average cost when average cost is decreasing.

B)measures how total cost changes when one more unit of output is produce

C)measures how total cost changes when input prices change.

D)both a and b

E)both b and c

A)is less than average cost when average cost is decreasing.

B)measures how total cost changes when one more unit of output is produce

C)measures how total cost changes when input prices change.

D)both a and b

E)both b and c

answer

d. both a and b

question

when average product is rising

answer

marginal product is greater than ap

question

when average product is falling

answer

marginal product is less than ap

question

average fixed costs =

answer

total fixed costs / quantity

question

average variable costs =

answer

total variable costs/quantity

question

average total costs =

answer

total cost/quantity

question

marginal cost =

answer

change in total cost / change in quantity

question

when wages are involved, average variable costs =

answer

wages / average product

question

when wages are involved, marginal costs =

answer

wages / marginal product

question

when marginal product is increasing,

answer

marginal cost is decreasing

question

when marginal product is decreasing,

answer

marginal cost is increasing

question

when average product is increasing,

answer

average cost is decreasing

question

when average product is decreasing,

answer

average variable cost is increasing

question

Time-series models...

A)cannot be replicated by another researcher.

B)often use dummy variables to control for the time trend.

C)often use dummy variables to control for cyclical variation.

D)both a and b

E)both b and c

A)cannot be replicated by another researcher.

B)often use dummy variables to control for the time trend.

C)often use dummy variables to control for cyclical variation.

D)both a and b

E)both b and c

answer

d. both a and b

question

seasonal or cyclical variation in a time series model

a. exhibits irregular variation that can be accounted for by dummy variables

b. is regular in nature but can be accounted for by dummy variables

c. is irregular in nature and need not be accounted for by dummy variables

d. none of these options are correct

a. exhibits irregular variation that can be accounted for by dummy variables

b. is regular in nature but can be accounted for by dummy variables

c. is irregular in nature and need not be accounted for by dummy variables

d. none of these options are correct

answer

b. is regular in nature but can be accounted for by dummy variables

question

which of the following is not one of the economic forces that promotes long-run profitability of business firms?

a. low market power of input suppliers

b. low market power of consumer

c. strong barriers to entry of rival firms

d. fierce rivalry among the firms competing in the industry

e. abundance of complementary products

a. low market power of input suppliers

b. low market power of consumer

c. strong barriers to entry of rival firms

d. fierce rivalry among the firms competing in the industry

e. abundance of complementary products

answer

d. fierce rivalry among the firms competing in the industry

question

economic theory is a valuable tool for business decision making because it

a. identities for managers the essential information for making a decision

b. assumes away the problem

c. creates a realistic, complex model of the business firm

d. provides an easy solution to complex business problems

a. identities for managers the essential information for making a decision

b. assumes away the problem

c. creates a realistic, complex model of the business firm

d. provides an easy solution to complex business problems

answer

a. identities for managers the essential information for making a decision

question

which of the following is a common mistake that managers make?

a. using marginal analysis to make output decisions

b. maximizing the value of the firm instead of maximizing the firm's profits

c. reducing price to increase the firm's share of total market sales

d. treating implicit opportunity costs as part of the total costs of using resources

e. all of the choices are correct

a. using marginal analysis to make output decisions

b. maximizing the value of the firm instead of maximizing the firm's profits

c. reducing price to increase the firm's share of total market sales

d. treating implicit opportunity costs as part of the total costs of using resources

e. all of the choices are correct

answer

c. reducing price to increase the firm's share of total market sales

question

the value of a firm is

a. smaller the higher is the risk premium used to compute the firm's value

b. larger the higher is the risk premium used to compute the firm's value

c. the price for which the firm can be sold minus the present value of the expected future profits

d. both b and c

a. smaller the higher is the risk premium used to compute the firm's value

b. larger the higher is the risk premium used to compute the firm's value

c. the price for which the firm can be sold minus the present value of the expected future profits

d. both b and c

answer

a. smaller the higher is the risk premium used to compute the firm's value

question

corporate control mechanisms..

a. can make it easier to detect hidden actions by managers

b. will exacerbate moral hazard problems when complete contracts are effectively solving the principal-agent problem

c. may not be important when corporate takeovers effectively impose external forces to ensure managerial decisions are value-maximizing

d. make it impossible for managers to take hidden actions that are harmful to the interests of the firm's owners

e. both a and b

a. can make it easier to detect hidden actions by managers

b. will exacerbate moral hazard problems when complete contracts are effectively solving the principal-agent problem

c. may not be important when corporate takeovers effectively impose external forces to ensure managerial decisions are value-maximizing

d. make it impossible for managers to take hidden actions that are harmful to the interests of the firm's owners

e. both a and b

answer

c. may not be important when corporate takeovers effectively impose external forces to ensure managerial decisions are value-maximizing

question

firms with market power may try to limit entry of rival firms in the long run by setting the price of their product below the level that maximizes profit. this kind of pricing behavior...

a. is ok in theory but would not be commonly practiced in the real world because no manager will ever price either above or below the profit-maximizing level

b. is a business practice or tactic because pricing decisions are routine decisions made by managers everyday

c. should always be implemented in order maximize the firm's market share in both the short run and long run periods

d. is a strategic pricing decision because the manager is making the pricing decision with the goal of altering the behavior of rival firms to protect its profit in the long run

a. is ok in theory but would not be commonly practiced in the real world because no manager will ever price either above or below the profit-maximizing level

b. is a business practice or tactic because pricing decisions are routine decisions made by managers everyday

c. should always be implemented in order maximize the firm's market share in both the short run and long run periods

d. is a strategic pricing decision because the manager is making the pricing decision with the goal of altering the behavior of rival firms to protect its profit in the long run

answer

d. is a strategic pricing decision because the manager is making the pricing decision with the goal of altering the behavior of rival firms to protect its profit in the long run

question

what is the most important characteristic of oligopoly?

a. firms have market power

b. product differentiation

c. barriers to entry

d. interdependence of profits

a. firms have market power

b. product differentiation

c. barriers to entry

d. interdependence of profits

answer

d. interdependence of profits