Eco 550 midterm
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Eco 550 midterm



ECO 550 Midterm

ECO 550 Midterm



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    Eco 550 midterm Eco 550 midterm Document Transcript

    • Click here: 550 MIDTERM1. Income tax payments are an example ofa. implicit costsb. explicit costsc. normal return on investmentd. shareholder wealthe. none of the above2. The Saturn Corporation (once a division of GM) was permanently closed in 2009. Whatwent wrong with Saturna. Saturn’s cars sold at prices higher than rivals Honda or Toyota, so they could not sell manycars.b. Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return.c. Saturn found that young buyers of Saturn automobiles were very loyal to Saturn and GM.d. Saturn implemented a change management view that helped make first time Saturnpurchasers trade up to Buick or Cadillac.e. all of the above3. Recently, the American Medical Association changed its recommendations on thefrequency of pap-smear exams for women. The new frequency recommendation wasdesigned to address the family histories of the patients. The optimal frequency should bewhere the marginal benefit of an additional pap-testa. equals zero.b. is greater than the marginal cost of the testc. is lower than the marginal cost of an additional testd. equals the marginal cost of the teste. both a and b.4.Which of the following will increase (V0), the shareholder wealth maximization model of thefirm:V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t+ Real Option Valuea. Decrease the required rate of return (ke).b. Decrease the stream of profits (pt).c. Decrease the number of periods from ¥ to 10 periods.d. Decrease the real option value.e. All of the above5. The closest example of a risk-free security is1. General Motors bonds2. AT&T commercial paper
    • 3. U.S. Government Treasury bills4. San Francisco municipal bondsan I.O.U. that your cousin promises to pay you $100 in 3 months6. The standard deviation is appropriate to compare the risk between two investmentsonly if1. the expected returns from the investments are approximately equal2. the investments have similar life spans3. objective estimates of each possible outcome is available4. the coefficient of variation is equal to 1.05. none of the above7. The ____ is the ratio of ____ to the1. standard deviation; covariance; expected value2. coefficient of variation; expected value; standard deviation3. correlation coefficient; standard deviation; expected value4. coefficient of variation; standard deviation; expected value5. e. none of the above8. Based on risk-return tradeoffs observable in the financial marketplace, which of thefollowing securities would you expect to offer higher expected returns than corporatebonds?1. U.S. Government bonds2. municipal bonds3. common stock4. commercial paper5. e. none of the above9.If demand were inelastic, then we should immediately:a. cut the price.b. keep the price where it is.c. go to the Nobel Prize Committee to show we were the first to find an upward sloping demandcurve.d. stop selling it since it is inelastic.e. raise the price10. An increase in each of the following factors would normally provide a subsequentincrease in quantity demanded, except1. price of substitute goods2. level of competitor advertising3. consumer income level4. consumer desires for goods and services5. a and b11. Those goods having a calculated income elasticity that is negative are calleda. producers goodsb. durable goods
    • c. inferior goodsd. nondurable goodse. none of the above12. Which of the following would tend to make demand INELASTICa. the amount of time analyzed is quite longb. there are lots of substitutes availablec. the product is highly durabled. the proportion of the budget spent on the item is very smalle. no one really wants the product at all13. When using a multiplicative power function (Y = a X1b1 X2b2 X3b3) to represent aneconomic relationship, estimates of the parameters (a, and the bs) using linearregression analysis can be obtained by first applying a ____ transformation to convertthe function to a linear relationshipa. semilogarithmicb. double-logarithmicc. reciprocald. polynomiale. cubic14. In which of the following econometric problems do we find Durbin-Watson statisticbeing far away from 2.0a. the identification problemb. autocorrelationc. multicollinearityd. heteroscedasticitye. agency problems15. All of the following are reasons why an association relationship may not imply acausal relationship excepta. the association may be due to pure chanceb. the association may be the result of the influence of a third common factorc. both variables may be the cause and the effect at the same timed. the association may be hypotheticale. both c and d16. Demand functions in the multiplicative form are most common for all of the followingreasons excepta. elasticities are constant over a range of datab. ease of estimation of elasticitiesc. exponents of parameters are the elasticities of those variablesd. marginal impact of a unit change in an individual variable is constante. c and d17. Consumer expenditure plans is an example of a forecasting method. Which of thegeneral categories best described this examplea. time-series forecasting techniquesb. barometric techniquesc. survey techniques and opinion pollingd. econometric techniquese. input-output analysis18. The use of quarterly data to develop the forecasting model Yt = a +bYt−1 is anexample of which forecasting technique?a. Barometric forecastingb. Time-series forecastingc. Survey and opiniond. Econometric methods based on an understanding of the underlying economic variablesinvolvede. Input-output analysis19. An example of a time series data set is one for which thea. data would be collected for a given firm for several consecutive periods (e.g., months).b. data would be collected for several different firms at a single point in time.
    • c. regression analysis comes from data randomly taken from different points in time.d. data is created from a random number generation program.d. use of regression analysis would impossible in time series20. The variation in an economic time-series which is caused by major expansions orcontractions usually of greater than a year in duration is known as1. secular trend2. cyclical variation3. seasonal effect4. unpredictable random factor5. none of the above21. Companies that reduce their margins on export products in the face of appreciationof their home currency may be motivated by a desire to1. sacrifice market share abroad but build market share at home2. increase production volume to realize learning curve advantages3. sell foreign plants and equipment to lower their debt4. reduce the costs of transportation5. all of the above22. European Union labor costs exceed U.S. and British labor costs primarily because1. worker productivity is lower in the EU2. union wages are higher in the EU3. layoffs and plant closings are more restrictive in the U.S. and Britain4. the amount of paid time off is higher in the EU5. labor-management relations are better in the EU23. If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetarypolicy by raising US interest rates next year, what is the likely impact on the value of thedollara. The value of the dollar falls when US interest rates rise.b. The value of the dollar rises when US interest rates rise.c. The value of the dollar is not related to US interest rates.d. This is known as Purchasing Power Parity or PPP.e. The Federal Reserve has no impact at all on interest rates.24. In a recession, the trade balance often improves because1. service exports exceed manufactured good exports2. banks sell depressed assets3. fewer households can afford luxury imports4. direct investment abroad declinesthe capital account exceeds the current account25. The isoquants for inputs that are perfect substitutes for one another consist of aseries of1. right angles2. parallel lines3. concentric circles4. right triangles5. none of the above26. In a production process, an excessive amount of the variable input relative to thefixed input is being used to produce the desired output. This statement is true for
    • a. stage IIb. stages I and IIc. when Ep = 1d. stage IIIe. none of the above27. The marginal product is defined asa. The ratio of total output to the amount of the variable input used in producing the outputb. The incremental change in total output that can be produced by the use of one more unit ofthe variable input in the production processc. The percentage change in output resulting from a given percentage change in the amountd. The amount of fixed cost involved.e. None of the above28. The marginal rate of technical substitution may be defined as all of the followingexcept:a. the rate at which one input may be substituted for another input in the production process,while total output remains constantb. equal to the negative slope of the isoquant at any point on the isoquantc. the rate at which all combinations of inputs have equal total costsd. equal to the ratio of the marginal products of X and Ye.b and c29. For a short-run cost function which of the following statements is (are) not true?1. The average fixed cost function is monotonically decreasing.2. The marginal cost function intersects the average fixed cost function where the averagevariable cost function is a minimum.3. The marginal cost function intersects the average variable cost function where theaverage variable cost function is a minimum.4. The marginal cost function intersects the average total cost function where the averagetotal cost function is a minimum.5. b and c30. If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 isa. 10.2b. 102c. 37.1d. 371e. 32131. ____ are defined as costs which are incurred regardless of the alternative actionchosen in a decision-making problem1. Opportunity costs2. Marginal costs3. Relevant costs4. Sunk costs5. None of the above32. What method of inventory valuation should be used for economic decision-makingproblems?1. book value2. original cost3. current replacement cost4. cost or market, whichever is lower5. historical cost