Quizzes Managerial Economics

Which of the following statements is TRUE? Top of Form Multiple Choice Avoidable costs should be ignored for decision-making purposes. Variable costs and fixed costs are avoidable costs. Fixed costs are sunk costs. Sunk costs are input costs the firm can recover.

Fixed costs are sunk costs.

Which of the following statements is false? Top of Form Multiple Choice Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. When economic profit is zero, the firm's owners could not have done better putting their resources in some other industry of comparable risk. If economic profit is positive, accounting profit must also be positive. If economic profit is negative, accounting profit must also be nega

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

Which of the following statements is false? Top of Form Multiple Choice Explicit costs of using market-supplied resources entail an opportunity cost equal to the dollar cost of obtaining the resources in the market. When economic profit is zero, the firm's owners could not have done better putting their resources in some other industry of comparable risk. If economic profit is positive, accounting profit must also be positive. If economic profit is negative, accounting profit must also be negati

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

Which of the following statements is TRUE? Top of Form Multiple Choice A firm plans in the short run and operates in the long run. In the long run a firm can change all but one input. In the long run all inputs are variable. In the short run all inputs are fixed.

In the long run all inputs are variable.

During a year of operation, Knight's Electric, LLC collects $5,000,000 in revenue and spends $3,500,000 on labor expense, raw materials, rent, and utilities. Knight's owner has provided $1,000,000 of her own money to her business instead of investing the money and earning a 12 percent annual rate of return. Knight's Electric earns accounting profit of $_____ and its economic profit is $_____. Top of Form Multiple Choice $1,500,000; $1,000,000 $3,500,000; $120,000 $4,500,000; $1,000,000 $1,

$1,500,000; $1,380,000

Until recently you worked as an accountant earning $60,000 annually. Then you inherited a piece of commercial real estate bringing in $40,000 rent annually. You decided to leave your job and open a tattoo parlor in the office space you inherited. At the end of the first year, your books showed total revenues of $180,000 and total explicit costs of $90,000 for labor, ink, utilities, taxes, and miscellaneous supplies. Your total cost of doing business during the first year is _____ and you earned

$190,000; −$10,000

An annual income statement for Bonus Realty, Inc. is shown below: Revenues Revenue from sales of goods and services $ 100,000,000 Operating costs and expenses: Cost of products and services sold $ 30,000,000 Selling expenses $ 3,000,000 Administrative expense $ 4,000,000 Total operating costs and expenses $ 37,000,000 Income from operations $ 63,000,000 Interest expense (corporate bonds & loans) $ 500,000 Non-recurring expense (Legal expenses/fines in settling a federal antitrust suit) $ 1

$3,400,000.

An annual income statement for Quest Realty, Inc. is shown below: Revenues Revenue from sales of goods and services $ 80,000,000 Operating costs and expenses: Cost of products and services sold $ 30,000,000 Selling expenses $ 3,000,000 Administrative expense $ 4,000,000 Total operating costs and expenses $ 37,000,000 Income from operations $ 43,000,000 Interest expense (corporate bonds & loans) $ 300,000 Non-recurring expense (Legal expenses/fines in settling a federal antitrust suit) $ 20

$38,200,000

An annual income statement for Bonus Realty, Inc. is shown below: Revenues Revenue from sales of goods and services $ 100,000,000 Operating costs and expenses: Cost of products and services sold $ 30,000,000 Selling expenses $ 3,000,000 Administrative expense $ 4,000,000 Total operating costs and expenses $ 37,000,000 Income from operations $ 63,000,000 Interest expense (corporate bonds & loans) $ 500,000 Non-recurring expense (Legal expenses/fines in settling a federal antitrust suit) $ 1

$38,340,000.

An annual income statement for Quest Realty, Inc. is shown below: Revenues Revenue from sales of goods and services $ 80,000,000 Operating costs and expenses: Cost of products and services sold $ 30,000,000 Selling expenses $ 3,000,000 Administrative expense $ 4,000,000 Total operating costs and expenses $ 37,000,000 Income from operations $ 43,000,000 Interest expense (corporate bonds & loans) $ 300,000 Non-recurring expense (Legal expenses/fines in settling a federal antitrust suit) $ 20

$42,300,000

The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,000. Fixed cost is $120,000. When the firm uses 60 units of labor, what is average total cost at this output? Top of Form Multiple Choice $44.44 $60 $66.67 $120

$66.67

If the level of significance for testing is specified to be 5%, then the parameter estimate for b is statistically significant if its p-value is Top of Form Multiple Choice The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, the parameter estimate of a (the intercept) indicates Top of Form Multiple Choice · that when X is zero, Y is 102.54. · that when X is zero, Y is 412.18. · ΔY /Δa · ΔY / ΔX Bottom of Form

0.048.

A forecaster used the regression equation Qt = a + bt + c1D1 + c2D2 + c3D3 and quarterly sales data for 1998I-2016IV (t = 1, ...,72) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2, and D3 are dummy variables for quarters I, II, and III. The estimated QUARTERLY increase in sales is ______ units. Top of Form Multiple Choice 2.5 12

2.5

A forecaster used the regression equation Qt = a + bt + c1D1 + c2D2 + c3D3 and quarterly sales data for 1998I-2016IV (t = 1, ...,72) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2, and D3 are dummy variables for quarters I, II, and III. Using the estimation results given above, the predicted level of sales in 2018I is _______ units. * Top of Form Multiple Choice 240.5 230.5 218.5 194.5

240.5

A forecaster used the regression equation Qt = a + bt + c1D1 + c2D2 + c3D3 and quarterly sales data for 1998I-2016IV (t = 1, ...,72) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2, and D3 are dummy variables for quarters I, II, and III. Using the estimation results given above, the predicted level of sales in 2019III is _______ units. Top of Form Multiple Choice 201 231.5 252.5 288.5

288.5

The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, if X equals 35, what is the predicted value of Y? Top of Form Multiple Choice 593.24 634.71 389.93 434.43 Bottom of Form

434.43

The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, the value of the R2 statistic indicates that Top of Form Multiple Choice 60.10% of the total variation in X is explained by the regression equation. 60.10% of the total variation in Y is explained by the regression equation. 0.6010% of the total variation in Y is explained by the regression equation. 0.6010% of the total variation in X is explained by the regression

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

The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,000. Fixed cost is $120,000. At what output does the firm reach minimum average variable cost? Top of Form Multiple Choice 80 100 600 6,000 8,000

8,000

When a firm is a price-taking firm, Top of Form Multiple Choice the price of the product it sells is determined by the intersection of the market demand and supply curves for the product. raising the price of the product above the market-determined price will cause sales to fall nearly to zero. many other firms produce a product that is identical to the output produced by the rest of the firms in the industry. All of the choices are correct. Bottom of Form

All of the choices are correct.

Which of the following is a common mistake that managers make?Top of Form Multiple Choice using marginal analysis to make output decisions maximizing the value of the firm instead of maximizing the firm's profits treating implicit opportunity costs as part of the total costs of using resources increasing the rate of production in order to reduce unit costs of production All of the choices are correct.

All of the choices are correct.

The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, which of the following statements is correct at the 5% level of significance? Top of Form Multiple Choice Both parameter estimates are statistically significant. Neither parameter estimate is statistically significant. The parameter estimate for the intercept is statistically significant, but the parameter estimate for X is not. The parameter estimate for X is statis

Both parameter estimates are statistically significant.

To test whether the overall regression equation is statistically significant, one uses the Top of Form Multiple Choice t-statistic. R2-statistic. F-statistic. standard error statistic.

F-statistic.

Suppose Marv, the owner-manager of Marv's Hot Dogs, earned $82,000 in revenue last year. Marv's explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer. Top of Form Multiple Choice Marv's implicit cost of using owner-supplied resources is $36,000. Marv's economic profit is $36,000. Marv's implicit cost of using owner-supplied resources is $30,000. Marv's economic profit is $6,000

Marv's economic profit is $6,000.

Which of the following statements is TRUE about quasi-fixed inputs? Top of Form Multiple Choice None is purchased when output is zero. Quasi-fixed inputs must be paid for even if output is zero. Quasi-fixed inputs are sunk costs. Quasi-fixed inputs may be varied to increase or decrease the level of output.

None is purchased when output is zero.

A forecaster used the regression equation Qt = a + bt + c1D1 + c2D2 + c3D3 and quarterly sales data for 1998I-2016IV (t = 1, ...,72) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2, and D3 are dummy variables for quarters I, II, and III. In any given year, quarterly sales tend to vary as follows: Top of Form Multiple Choice QIV > QIII > QII > QI QIII > QII > QI > QIV QII > QIII > QIV > QI QI > QII > QIV > QIII QI > QII > QIII > QIV Bottom of For

QIII > QII > QI > QIV

The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, the parameter estimate of b (on the variable X) indicates that Top of Form Multiple Choice · X increases by 0.1765 units when Y increases by one unit. · X increases by 0.6358 units when Y increases by one unit. · Y increases by 0.1765 units when X increases by one unit. · Y increases by 0.6358 units when X increases by one unit. · Y increases by 3.60 units when

Y increases by 0.6358 units when X increases by one unit

A forecaster used the regression equation Qt = a + bt + c1D1 + c2D2 + c3D3 and quarterly sales data for 1998I-2016IV (t = 1, ...,72) for an appliance manufacturer to obtain the results shown below. Q is quarterly sales, and D1, D2, and D3 are dummy variables for quarters I, II, and III. At the 5 percent level of significance, is there a statistically significant trend in sales? Top of Form Multiple Choice No, because 2.5 < 2.91. No, because 0.0049 < 0.05. Yes, because 0.0049 < 0.05. Yes, becau

Yes, because 0.0049 < 0.05.

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 Top of Form Multiple Choice an inferior good because the coefficient on PR is negative. a normal good because the coefficient on P is negative. a normal good because the coefficient on M is positive. an inferior good because the coefficient on M is less than one (1).

a normal good because the coefficient on M is positive.

In markets characterized by monopolistic competition, Top of Form Multiple Choice a small number of relatively small firms sell a differentiated product. a small number of relatively large firms sell a standardized product. entry into the market is relatively easy so that profit in the long run is zero. entry into the market is restricted so that profit may be positive in the long run.

a small number of relatively small firms sell a differentiated product.

Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by the state department of transportation using a demand function in the nonlinear form: Q = a Pb Mc P dR where Q = yards of cement demanded monthly, P = the price of Stonebuilt's cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Stonebuilt transforms the nonlinear relation into a linea

all are statistically significant

In a perfectly competitive market, Top of Form Multiple Choice · all firms produce and sell a standardized or undifferentiated product. · the output sold by a particular firm may be quite different from the output sold by the other firms in the market. · firms are price-setters. · it is difficult for new firms to enter the market due to barriers to entry.

all firms produce and sell a standardized or undifferentiated product

Which of the following economic forces promotes profitability in the long run? Top of Form Multiple Choice existence of strong barriers to entry a large number of complementary products a large number of close substitute products both "Existence of strong barriers to entry" and "A large number of complementary products" All of the choices are correct.

both "Existence of strong barriers to entry" and "A large number of complementary products"

Owners of a firm want the managers to make business decisions which will Top of Form Multiple Choice maximize the value of the firm. maximize expected profit in each period of operation. maximize the market share of the firm. both "maximize the value of the firm" and "maximize expected profit in each period of operation" are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

both "maximize the value of the firm" and "maximize expected profit in each period of operation" are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.

The principal-agent problem arises when Top of Form Multiple Choice the principal and the agent have different objectives. the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent. 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. both "the principal and the agent have different objectives" and "the principal cannot enforce the contract with

both "the principal and the agent have different objectives" and "the principal cannot enforce the contract with the agent or finds it too costly to monitor the agent". Bottom of Form Bottom of Form

Which of the following is an example of an implicit cost for a firm? Top of Form Multiple Choice the value of time worked by the owner any wages and salaries paid to employed forgone rent on property owned by firm both "the value of time worked by the owner" and "forgone rent on property owned by firm"

both "the value of time worked by the owner" and "forgone rent on property owned by firm"

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 Top of Form Multiple Choice complements because the coefficient on M is positive. substitutes because the coefficient on M is positive. substitutes because the coefficient on PR is negative. complements because the coefficient on PR is negative.

complements because the coefficient on PR is negative.

For a linear demand function, Q = a + bP + cM + dPR, the cross-price elasticity is... Top of Form Multiple Choice d d(Q/PR) d(PR /Q) -d

d(PR /Q)

What is the most important characteristic of oligopoly?Top of Form Multiple Choice firms have market power product differentiation barriers to entry interdependence of profits Bottom of Form

interdependence of profits

Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by the state department of transportation using a demand function in the nonlinear form: Q = a Pb Mc P dR where Q = yards of cement demanded monthly, P = the price of Stonebuilt's cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Stonebuilt transforms the nonlinear relation into a linea

decrease 11.8%.

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. Top of Form Multiple Choice increase; 12 units increase; 120 units increase; 250 units decrease; 1.2 units

decrease; 1.2 units

Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by the state department of transportation using a demand function in the nonlinear form: Q = a Pb Mc P dR where Q = yards of cement demanded monthly, P = the price of Stonebuilt's cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Stonebuilt transforms the nonlinear relation into a linea

elastic because Ê = -3.54.

In markets characterized by oligopoly, Top of Form Multiple Choice a large number of relatively large firms sell a differentiated product. a small number of relatively small firms sell a standardized product. mutual interdependence of firms means that actions of any one firm in the market will have no effect on the sales of all other firms in the market. entry into the market is restricted so that profit may be positive in the long run.

entry into the market is restricted so that profit may be positive in the long run. Bottom of Form

An estimator is unbiased if it produces Top of Form Multiple Choice a parameter from the sample that equals the true parameter. estimates of a parameter that are close to the true parameter. estimates of a parameter that are, on average, equal to the true parameter. estimates of a parameter that are statistically significant. Bottom of Form

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

Economic theory is a valuable tool for business decision making because it Top of Form Multiple Choice identifies for managers the essential information for making a decision. assumes away the problem. creates a realistic, complex model of the business firm. provides an easy solution to complex business problems

identifies for managers the essential information for making a decision

Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by the state department of transportation using a demand function in the nonlinear form: Q = a Pb Mc P dR where Q = yards of cement demanded monthly, P = the price of Stonebuilt's cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Stonebuilt transforms the nonlinear relation into a linea

increase more than 5% but less than 10%.

Which of the following is a common mistake that managers make? Top of Form Multiple Choice using marginal analysis to make output decisions maximizing the value of the firm instead of maximizing the firm's profits treating implicit opportunity costs as part of the total costs of using resources increasing the rate of production in order to reduce unit costs of production All of the choices are correct.

increasing the rate of production in order to reduce unit costs of production

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 Top of Form Multiple Choice 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. is a business practice or tactic because pricing decisions are routine decisions made by managers everyday. should always be implem

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 market Top of Form Multiple Choice raises the transaction costs of doing business. is any arrangement that brings buyers and sellers together to exchange goods or services. is an institution used rarely by capitalist nations. is characterized by rigid prices

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

Marginal cost... Top of Form Multiple Choice is less than average cost when average cost is decreasing. measures how average cost changes when one more unit of output is produced. measures how total cost changes when input prices change. None of these options are correct.

is less than average cost when average cost is decreasing.

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 Top of Form Multiple Choice violates the law of demand. is negative as dictated by the law of demand. should not have the same sign as the coefficient on PR . should not be greater than one (in absolute value).

is negative as dictated by the law of demand.

Moral hazard Top of Form Multiple Choice occurs when managers pursue profit maximization without regard to the interests of society in general. exists when either party to a contract has an incentive to cancel the contract. occurs only rarely in modern corporations. is the cause of principal-agent problems.

is the cause of principal-agent problems.

If average product is decreasing, then marginal product... Top of Form Multiple Choice must be greater than average product. must be less than average product. must be increasing. cannot be decreasing.

must be less than average product.

If the p-value is 0.01 for the parameter estimate for b, the Top of Form Multiple Choice probability of finding statistical significance when the true value of b is zero is exactly 1%. probability of finding significance for the estimate of b when none exists is exactly 0.01%. level of confidence is 99.99%. probability that the parameter estimate equals the true value of b is 1%.

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

Which of the following is a common mistake that managers make? Top of Form Multiple Choice using marginal analysis to make output decisions maximizing the value of the firm instead of maximizing the firm's profits reducing price to increase the firm's share of total market sales treating implicit opportunity costs as part of the total costs of using resources All of the choices are correct.

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

If the t-statistic exceeds the critical value of t , then one can Top of Form Multiple Choice not reject the hypothesis that the true value of the parameter equals zero. reject the hypothesis that the true value of the parameter equals zero. accept the hypothesis that the estimated value of the parameter equals the true value. reject the hypothesis that the estimated value of the parameter exceeds the true value. reject the hypothesis that the estimated value of the parameter equals the true val

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

The value of a firm is Top of Form Multiple Choice smaller the higher is the risk premium used to compute the firm's value. larger the higher is the risk premium used to compute the firm's value. the price for which the firm can be sold minus the present value of the expected future profits. both "larger the higher is the risk premium used to compute the firm's value" and "the price for which the firm can be sold minus the present value of the expected future profits".

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

In the nonlinear function Y = aXbZc, the parameter c measures Top of Form Multiple Choice ΔY / ΔZ. the percent change in X for a 1 percent change in Z. the elasticity of Y with respect to Z. None of these options are correct. Bottom of Form Bottom of Form

the elasticity of Y with respect to Z.

Which of the following is NOT one of features characterizing market structures? Top of Form Multiple Choice the number and size of firms the likelihood of new firm's entering a market the level of capital investment in research and development the degree of product differentiation Bottom of Form

the level of capital investment in research and development

Economic profit is a better measure of a firm's performance than accounting profit because Top of Form Multiple Choice accounting profit is unreliable because generally accepted accounting practices (GAAP) overstates the firm's true costs of using resources. economic profit fully accounts for all sources of revenue. as a general rule, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit. the opportunity cost of using ALL resources is subtracted from

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

If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that... Top of Form Multiple Choice it is choosing the lowest-cost method of producing that output. this output level is the most that can be produced with the given levels of inputs. each input is producing its maximum marginal product. None of these options are correct

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

Economic profit is the difference between Top of Form Multiple Choice total revenue and the opportunity cost of all of the resources used in production. total revenue and the implicit costs of using owner-supplied resources. accounting profit and the opportunity cost of the market-supplied resources used by the firm. accounting profit and explicit costs.

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

A parameter is said to be statistically significant if there is sufficient evidence that the Top of Form Multiple Choice sample regression line is equal to the population regression. parameter estimated from the sample equals the true value of the parameter. true value of the parameter does not equal zero. value of the t-ratio equals the critical value.

true value of the parameter does not equal zero.

Bottom of Form The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,000. Fixed cost is $120,000. What is AVC at its minimum? Top of Form Multiple Choice · $15 · $25 · $40 · $80 · $100 Bottom of Form

· $25

The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,000. Fixed cost is $120,000. When the firm uses 100 units of labor, what is marginal cost at this level of output? Top of Form Multiple Choice · $25 · $33.33 · $90 · $180 · $2000 Bottom of Form

· $25

An annual income statement for Quest Realty, Inc. is shown below: Revenues Revenue from sales of goods and services $ 80,000,000 Operating costs and expenses: Cost of products and services sold $ 30,000,000 Selling expenses $ 3,000,000 Administrative expense $ 4,000,000 Total operating costs and expenses $ 37,000,000 Income from operations $ 43,000,000 Interest expense (corporate bonds & loans) $ 300,000 Non-recurring expense (Legal expenses/fines in settling a federal antitrust suit) $ 20

· $4,100,000

Over the past 25 years, which of the following developments encouraged globalization of markets? Top of Form Multiple Choice · Eleven European countries began using the "euro" as a common currency. · The ability to buy and sell goods on the Internet was increased. · Numerous bilateral and multilateral trade agreements were reached. · Both "Eleven European countries began using the "euro" as a common currency" and "numerous bilateral and multilateral trade agreements were reached". · All

· All of the choices are correct.

In markets characterized by monopolistic competition, Top of Form Multiple Choice · a small number of relatively small firms sell a differentiated product. · a small number of relatively large firms sell a standardized product. · entry into the market is relatively easy so that profit in the long run is zero. · entry into the market is restricted so that profit may be positive in the long run. Bottom of Form

· entry into the market is relatively easy so that profit in the long run is zero.

Which of the following is NOT one of the economic forces that promotes long-run profitability of business firms? Top of Form Multiple Choice · low market power of input suppliers · low market power of consumers · strong barriers to entry of rival firms · fierce rivalry among the firms competing in the industry · abundance of complementary products Bottom of Form

· fierce rivalry among the firms competing in the industry

Economic theory is a valuable tool for business decision making because it Top of Form Multiple Choice · identifies for managers the essential information for making a decision. · assumes away the problem. · creates a realistic, complex model of the business firm. · provides an easy solution to complex business problems.

· identifies for managers the essential information for making a decision.

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 Top of Form Multiple Choice · 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. · is a business practice or tactic because pricing decisions are routine decisions made by managers everyday. · should always

· 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.

Seasonal or cyclical variation in a time-series model... Top of Form Multiple Choice · exhibits irregular variation that can be accounted for by dummy variables. · is regular in nature but can be accounted for by dummy variables. · is irregular in nature and need not be accounted for by dummy variables. · None of these options are correct. Bottom of Form

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

The linear regression equation, Y = a + bX, was estimated. The following computer output was obtained: In the regression above, the parameter estimate of a (the intercept) indicates Top of Form Multiple Choice · that when X is zero, Y is 102.54. · that when X is zero, Y is 412.18. · ΔY /Δa · ΔY / ΔX

· that when X is zero, Y is 412.18.

Which of the following is NOT one of features characterizing market structures? Top of Form Multiple Choice · the number and size of firms · the likelihood of new firm's entering a market · the level of capital investment in research and development the degree of product differentiation

· the level of capital investment in research and development

When economic profit is positive, Top of Form Multiple Choice · total revenue exceeds total economic cost. · the firm's owners have successfully solved the principle-agent problem. · the firm's owners experience a decrease in their wealth. · foreign companies experience loss of market share

· total revenue exceeds total economic cost.