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1. Satisficing behavior is most common:
a. in vigorously competitive markets.
b. when institutional shareholders are vigilant.
c. when economic profits are low.
d. in markets sheltered from competition.
status: correct
score: 1.0
correct answer: d
your answer: d
rejoinder: Correct. Nonvalue-maximizing behavior is most common when competitive pressures are weak.
2.
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Average cost will fall as output expands so long as:
a. marginal revenue is less than average revenue.
b. marginal cost equals zero.
c. marginal cost is less than average cost.
d. fixed costs equal zero.
status: correct
score: 1.0
correct answer: c
your answer: c
rejoinder: Correct. Average cost will fall with rising output so long as marginal cost is less than average cost.
3.
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If demand decreases while supply increases for a particular good:
a. its equilibrium price will increase while the quantity of the good produced and sold could increase, decrease, or remain constant.
b. its equilibrium price will decrease while the quantity of the good produced and sold could increase, decrease, or remain constant.
c. the quantity of the good produced and sold will decrease while its equilibrium price could increase, decrease, or remain constant.
d. the quantity of the good produced and sold will increase while its equilibrium price could increase, decrease or remain constant.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. The equilibrium price will always increase only when demand increases and supply decreases.
4.
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The supply curve expresses the relation between the quantity supplied and:
a. energy prices.
b. output price.
c. wage rates.
d. all of the above.
status: incorrect
score: 0.0
correct answer: b
your answer: c
rejoinder: Incorrect. The supply function expresses the relation between supply and all supply-determining factors.
5.
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The law of diminishing marginal utility:
a. states that as an individual increases consumption of a given product within a set period of time, the marginal utility gained from consumption eventually becomes negative.
b. contradicts the nonsatiation principle.
c. measures the added satisfaction derived from a oneunit increase in consumption of a particular good or service, holding consumption of other goods and services constant.
d. gives rise to a downward-sloping demand curve for all goods and services.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. The law of diminishing marginal utility states that as an individual increases consumption of a given product within a set period of time, the marginal utility gained from consumption eventually declines.
6.
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In a simple regression model, the correlation coefficient:
a. shows the effect of X on Y.
b. shows the effect of Y on X.
c. is greater than one.
d. is the square root of the coefficient of determination.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. In a simple regression model, the correlation coefficient shows the relationship between X and Y, but does not show causation.
7.
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A forecast method that gives feedback to panel members in a manner that prevents direct identification of individual positions is called:
a. personal insight.
b. panel consensus.
c. the Delphi method.
d. qualitative analysis.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. The most basic form of qualitative analysis forecasting is personal insight, in which an informed individual uses personal or company experience as a basis for developing future expectations.
8.
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If ln St = 4.568 + 0.336t, t is in years, and sales is in millions of dollars, the constant:
a. change in sales is $4.568 million per year.
b. change in sales is $0.336 million per year.
c. percentage change in sales is 33.6 percent per year.
d. percentage change in sales is 4.568 percent per year.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. In the logarithmic transformation of the continuous growth model, the intercept coefficient is an estimate of natural logarithm of base period sales.
9.
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Technical efficiency and optimal input proportions are found when:
a. MPX/PY = MPY/PX.
b. PX/PY = MPY/MPX.
c. MRPX = MRPY.
d. none of these.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. Technical efficiency and optimal input proportions are found when MPX/PX = MPY/PY.
10.
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The cost of duplicating productive capability using current technology is called:
a. current cost.
b. replacement cost.
c. historical cost.
d. opportunity cost.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. Current cost is the amount that must be paid under prevailing market conditions.
11.
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If the primal objective function is to maximize profit subject to input constraints, the dual objective function is to minimize:
a. total cost.
b. explicit costs.
c. the quantity of output.
d. the value of inputs employed.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. In LP, the fixed costs of constrained resources are irrelevant.
12.
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When an LP objective function is to minimize cost:
a. constraint conditions must be of the variety.
b. constraint conditions must be of the variety.
c. all costs must be variable.
d. the total cost function must not be linear.
status: incorrect
score: 0.0
correct answer: b
your answer: c
rejoinder: Incorrect. In LP, the presence of constraints suggests the presence of fixed costs.
13.
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For a firm in a perfectly competitive market equilibrium:
a. MR < MC.
b. AR = MC.
c. AR > AC.
d. AR > MR.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. For a firm in a perfectly competitive market equilibrium, MR = MC.
14.
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Tradable emission permits:
a. are often worthless.
b. are granted by the government and allow an increase in pollution.
c. can harm environmentally sensitive firms and consumers, at least on a relative basis.
d. force polluters to spend millions of dollars on new equipment to meet pollution abatement regulations.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. Tradable emissions permits are a valuable commodity that can be worth millions of dollars.
15.
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A market dominated by few buyers is called:
a. monopoly.
b. oligopsony.
c. monopsony.
d. perfectly competitive.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. A monopoly market is dominated by a single seller.
16.
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The dilemma of natural monopoly occurs when:
a. average costs rise as output expands.
b. a group of smaller producers has the potential to produce total industry output more efficiently than a single large firm.
c. demand equals supply at a point where the industry long-run average cost curve is still declining.
d. the profit-maximizing output level occurs at a point where the industry long-run average cost curve is still declining.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. The dilemma of natural monopoly occurs when average costs decline as output expands.
17.
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When prices in oligopoly markets exceed those in a perfectly competitive equilibrium, this difference is the cost of:
a. information.
b. inefficiency.
c. market power.
d. product differentiation.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. When prices in oligopoly markets exceed those in a perfectly competitive equilibrium, this difference is often measured in excess profits, not by the costs of information search.
18.
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A system of behavior that remains the same until another player takes some course of action that precipitates a different response is:
a. a finitely repeated game with known duration.
b. a finitely repeated game of unknown duration.
c. an infinitely repeated game.
d. a trigger strategy.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. A finitely repeated game is one that occurs only a limited number of times, or has limited duration in time. If there is uncertainty about when a game will end, the conduct of a finitely repeated game mirrors an infinitely repeated game.
19.
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When P = -4, the optimal markup on cost is:
a. 25%.
b. 33%.
c. 75%.
d. 400%.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. When P = -4, the optimal markup on price = -1/P = -1/-4 = 0.25 or 25%.
20.
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If all customers are charged the same price and the demand curve is downward sloping, consumers' surplus is always less than:
a. total revenue minus total cost.
b. the excess of revenues over the minimum amount necessary to produce output.
c. total revenues.
d. the value of output to consumers above and beyond the amount paid to producers.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. Total revenue minus total cost is profit, and this amount may be less than consumers' surplus due to fixed costs.
21.
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For two projects of differing sizes, the project that is relatively more risky has the:
a. highest standard deviation.
b. highest expected profit.
c. highest coefficient of variation.
d. lowest coefficient of variation.
status: incorrect
score: 0.0
correct answer: c
your answer: a
rejoinder: Incorrect. Absolute risk is measured by standard deviation, but relative risk is measured by the coefficient of variation (risk/reward ratio).
22.
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The value of the firm will rise following adoption of capital budgeting projects when:
a. IRR > k.
b. IRR = k.
c. IRR < k.
d. none of these.
status: incorrect
score: 0.0
correct answer: a
your answer: b
rejoinder: Incorrect. When IRR = k, the rate of return on an investment project equals the cost of capital and NPV = 0.
23.
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Small high-tech firms tend to display:
a. high inside ownership with low institutional ownership.
b. high inside ownership with high institutional ownership.
c. low inside ownership.
d. none of these.
status: correct
score: 1.0
correct answer: a
your answer: a
rejoinder: Correct. Small high-tech firms tend to display high quality-control potential and high inside ownership with low institutional ownership.
24.
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The Coase Theorem does not suggest that:
a. firms exist because they are an effective means for minimizing transaction costs.
b. are well-equipped to deal with negative externalities, such as pollution.
c. it would be prohibitively expensive for each of us to organize production of all goods and services that we desire.
d. resource allocation remains inefficient so long as property rights can be freely assigned and exchanged.
status: incorrect
score: 0.0
correct answer: d
your answer: a
rejoinder: Incorrect. The Coase Theorem does suggest that firms exist as an economic force because they are an effective means for minimizing transaction costs.
25.
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Market failure is a growing problem in the:
a. wholesale generation of electric power.
b. transmission and local distribution of electricity.
c. market for telecommunications services.
d. period following passage of the Clean Air Act.
status: incorrect
score: 0.0
correct answer: b
your answer: a
rejoinder: Incorrect. Competition has emerged in the wholesale generation of electric power, and regulators now face the question of how to foster and encourage such competition.