1. The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn
a. Saturn's cars sold at prices higher than rivals Honda or Toyota, so they could not sell many cars.
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 Saturn purchasers trade up to Buick or Cadillac.
e. all of the above
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
a. equals zero.
b. is greater than the marginal cost of the test
c. is lower than the marginal cost of an additional test
d. equals the marginal cost of the test
e. both a and b.
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
a. 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 above
4. The closest example of a risk-free security is
General Motors bondsAT&T commercial paperU.S. Government Treasury billsSan Francisco municipal bondsan I.O.U. that your cousin promises to pay you $100 in 3 months. The standard deviation is appropriate to compare the risk between two investments only if the expected returns from the investments are approximately equalthe investments have similar life spansobjective estimates of each possible outcome is availablethe coefficient of variation is equal to 1.0none of the above8. 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?
U.S. Government bondsmunicipal bondscommon stockcommercial papere. 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 demand curve.
d. stop selling it since it is inelastic.
e. raise the price10. An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except price of substitute goodslevel of competitor advertisingconsumer income levelconsumer desires for goods and servicesa and b
11. Those goods having a calculated income elasticity that is negative are called
a. producers' goods
b. durable goods
c. inferior goods
d. nondurable goods
e. none of the above
12. Which of the following would tend to make demand INELASTIC
a. the amount of time analyzed is quite long
b. there are lots of substitutes available
c. the product is highly durable
d. the proportion of the budget spent on the item is very small
e. no one really wants the product at all
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
a. semilogarithmic
b. double-logarithmic
c. reciprocal
d. polynomial
e. cubic
14. In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0
a. the identification problem
b. autocorrelation
c. multicollinearity
d. heteroscedasticity
e. agency problems
15. All of the following are reasons why an association relationship may not imply a causal relationship except
a. the association may be due to pure chance
b. the association may be the result of the influence of a third common factor
c. both variables may be the cause and the effect at the same time
d. the association may be hypothetical
e. both c and d
16. Demand functions in the multiplicative form are most common for all of the following reasons except
a. elasticities are constant over a range of data
b. ease of estimation of elasticities
c. exponents of parameters are the elasticities of those variables
d. marginal impact of a unit change in an individual variable is constant
e. c and d
18. The use of quarterly data to develop the forecasting model Yt = a +bYt-1 is an example of which forecasting technique?
a. Barometric forecasting
b. Time-series forecasting
c. Survey and opinion
d. Econometric methods based on an understanding of the underlying economic variables involved
e. Input-output analysis
19. An example of a time series data set is one for which the
a. 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 series
20. 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
secular trendcyclical variationseasonal effectunpredictable random factornone of the above21. Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
sacrifice market share abroad but build market share at homeincrease production volume to realize learning curve advantagessell foreign plants and equipment to lower their debtreduce the costs of transportationall of the above24. In a recession, the trade balance often improves because
service exports exceed manufactured good exportsbanks sell depressed assetsfewer households can afford luxury importsdirect investment abroad declines25. The isoquants for inputs that are perfect substitutes for one another consist of a series of
right anglesparallel linesconcentric circlesright trianglesnone of the above26. 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
a. stage II
b. stages I and II
c. when Ep = 1
d. stage III
e. none of the above
27. The marginal product is defined as
a. The ratio of total output to the amount of the variable input used in producing the output
b. The incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. The percentage change in output resulting from a given percentage change in the amount
d. The amount of fixed cost involved.
e. None of the above
28. The marginal rate of technical substitution may be defined as all of the following except:
a. the rate at which one input may be substituted for another input in the production process, while total output remains constant
b. equal to the negative slope of the isoquant at any point on the isoquant
c. the rate at which all combinations of inputs have equal total costs
d. equal to the ratio of the marginal products of X and Y
e.b and c
29. For a short-run cost function which of the following statements is (are) not true?
The average fixed cost function is monotonically decreasing.The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum.The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum.The marginal cost function intersects the average total cost function where the average total cost function is a minimum.b and c30. If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 is
a. 10.2
b. 102
c. 37.1
d. 371
e. 3213
1. ____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem
Opportunity costsMarginal costsRelevant costsSunk costsNone of the above32. What method of inventory valuation should be used for economic decision-making problems? book valueoriginal costcurrent replacement costcost or market, whichever is lowerhistorical cost