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MIDTERM QUIZ 1
This midterm exam consist of 32 multiple choice questions and covers the material
in Chapters 1 through 8. There are four questions from each chapter.
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?
Correct Answer:
Which of the following will increase (V0), the shareholder wealth maximization
model of the firm:
The primary difference(s) between the standard deviation and the coefficient of
variation as measures of risk are:
10
11
12
Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at
their current prices. Then we know that:
13
The method which can give some information in estimating demand of a product
that hasnt yet come to market is:
14
15
All of the following are reasons why an association relationship may not imply a
causal relationship except:
16
Demand functions in the multiplicative form are most common for all of the
following reasons except:
17
18
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:
19
The type of economic indicator that can best be used for business forecasting is the:
20
21
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:
22
23
24
Using demand and supply curves for the Japanese yen based on the $/ price for
yen, an increase in US INFLATION RATES would
25
26
27
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?
28
29
30
____ are defined as costs which are incurred regardless of the alternative action
chosen in a decision-making problem.
31
32
According to the theory of cost, specialization in the use of variable resources in the
short-run results initially in:
MIDTERM QUIZ 2
The different methods by which the sellers inform their potential buyers about the
product is called:
knowledge transfer.
advertising.
product offering.
information dissemination.
Question 2
fairness.
altruism.
selfishness.
self-interest.
Question 3
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:
bounded rationality.
selfishness.
altruism.
Question 4
In the example of Ireland described in the text, the countrys production set shifted
outward over time because:
it gained new resources over time which enabled it to specialize and gain
comparative advantage in software trade with the U.S. and Europe.
of new resources which allowed it to gain absolute advantage over many of its
trading partners.
Question 5
Suppose Zia spends her time picking berries and apples. Her production set is
described by the equation SHAPE \* MERGEFORMAT , where SHAPE \*
MERGEFORMAT is the number of berries and y
the number of apples. Which of the following statements will be true?
Question 6
the marginal cost of producing the good measured on the Y-axis has fallen.
the marginal cost of producing the good measured on the Y-axis has increased.
the marginal cost of producing the good measured on the X-axis has fallen.
Question 7
it allowed them to borrow at a low rate of interest and lend out at a high rate of
interest.
Question 8
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
Question 10
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?
$30
$3
$60
$6
Question 11
Its slope is given by the ratio of the marginal products, for example, (marginal
product of capital) (marginal product of labor), where capital and labor are
measured on the Y and X-axes respectively.
Question 12
Refer to Figure 4-1. If the firm produces 2,000 dolls per month when the market
price is $4:
Question 13
Refer to Figure 5-1. Which of the following points represents the long-run
equilibrium price-output combination?
E0
E3
E1
E2
Question 14
Which of the following conditions define the short-run for any industry?
Question 15
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 16
$320
$160
$380
$240
Question 17
Refer to Figure 6-4. Calculate the profit earned by the monopolist when the marginal
cost of production is $15 per unit.
$20
$35
$25
$45
Question 18
Which of the following is a possible explanation for the fall in prices after an industry
is monopolized by combining a group of competitors?
A monopolist may reduce prices to make it difficult for other firms to compete.
A monopolist can increase profits by reducing price when its cost of production
declines due to increased size of the new firm. The fall in price is less than the
decline in cost.
Question 19
Question 20
High barriers to entry protect the market power of existing firms and discourage the
formation of firms which:
Question 21
the players honor the agreement if the game is played five times.
the players dishonor the agreement if the game is not played more than twice.
the players dishonor the agreement if the game is repeated a number of times, as
determined prior to the start of play.
Question 22
Refer to Figure 7-1. What will be the dominant firms profit maximizing output?
Question 23
In a mixed strategy situation, like the heads or tails game, the players can
maximize their income by randomly choosing head or tail each with a probability of:
0.25
0.5
0.75
1.0
Question 24
Refer to Table 7-3. What will be the Nash equilibrium if there is no interaction
between the two students?
Question 25
A price-fixing game
A Prisoners dilemma