1.

Mr. Smart still has money in

pocket to spend. If only two products are available to him, apple (A) and beef

(B); the current marginal utility (MU) and unit price (P) are as the following:

MUA=3, MUB=10, PA=$1, PB=$4. In

order to maximize his total utility, Mr. Smart should

purchase more beef because its marginal utility is greater than appleâs.

purchase

more apples because the marginal utility per dollar is greater than beefâs.

purchase more beef because he likes it.

purchase

more apples because the price is very low.

2. âI like ice cream, but after eating

homemade ice cream last night, I want to have something else for desert today.â

This statement most clearly reflects

the law of demand.

the law of diminishing returns.

the law of diminishing marginal

utility.

the law of increasing costs.

3.

Consider

the following linear demand function where QD = quantity demanded; P

= selling price; M= disposable income; PR= price of related good:

QD = 60 â 4P

Assume that the current market price is P=10. In order to increase the total

revenue, the sales manager should _______ the price.

raise

maintain

cut

freeze

4.

A

market demand curve

is the horizontal summation of the

demand curves of all consumers in the market.

is the sum of the prices consumers

are willing to pay at each quantity.

is more unpredictable compared

with a consumerâs individual demand.

Both a and c

Economic profit is defined as the

difference between total revenue and ________________.

explicit cost

total economic cost

implicit cost

shareholder wealth

Which of the following is the

correct procedure order to obtain a better linear regression function for

estimation after Excel operation?

Check r2

(Good fit or not) ? F test? t test

F test? t test? Check

r2 (Good fit or not)

Check r2

(Good fit or not) ? t test? F test

t test? F test? Check

r2 (Good fit or not)

Consider the following linear

demand function where QD = quantity demanded; P = selling price.

QD = 60 â 4P

The price elasticity of demand associated with P=10

?4.00

?2.00

â1.33

â0.67

If the current price elasticity of

demand for product X is ?1.2, a 10% price cut will result in

12%

decrease of quantity demanded.

0.8%

increase of total revenue.

12%

increase of total revenue.

0.8%

increase of quantity demanded.

Assume a countryâs personal annual

income is estimated by the following regression equation: Y= 33,000 +

1,200X ? 4,000DG, where X = Working Experience (Years); DG=1,

if male; DG=0, if female. Which of the following statement is

incorrect?

DGis a dummy variable

for gender.

A female with 10 years working

experience is supposed to earn $45,000 per year.

A male with 10 years working

experience is supposed to earn $41,000 per year.

The regression equation indicates

that male dominates in personal annual income.

Which of the following are likely

to increase the value of the firm, based on the shareholders

wealth-maximization model?

The

interest rate increases substantially.

A

previously nonunion workforce votes to unionize.

The government

implements strict pollution control requirements.

A

technological breakthrough allows the firm to reduce its cost of

production.

Assume that a product has the

market demand function QD = 10 ? P and the market supply function

QS = 2 + P. If a price ceiling (i.e. maximum price) is set at $5,

then you will predict which of the following would as a result?

Nothing will happen.

There will be a surplus.

There will be a shortage.

Quantity demanded will be zero.

Which of the following is NOT the

factor affecting how elastic a demand is?

Time

of adjustment

Availability

of close substitutes

Share

in budget

Price

of the good

A price elasticity (ED)

of â0.50 indicates that for a ____________ increase in price, quantity

demanded will ____________ by ______________.

one

percent; increase; 0.50 units

one

unit; increase; 0.50 units

one

percent; decrease; 0.50 percent

one

unit; decrease; 0.50 percent

Which of the following would

increase the supply of corn?

An increase in the price of

pesticides.

A decrease in the demand for corn.

A fall in the price of corn.

A decrease in the price of wheat.

Which of the following is an example

of an implicit cost for a firm?

The value of time worked by the

owner.

Any wages and salaries paid to

employed.

Rent on property not owned by

firm.

Both b and c.

In general, which of the following

methods is the most costly and risky in estimating market demand?

Consumer surveys

Market experiments

Statistical demand analysis

Consumer focus group

Your demand on the 10th

edition textbook in this course is quite price-inelastic because

it has no close substitute.

it is expensive.

it is not important.

it takes a whole semester to

consume.

A simple linear regression function,

Y = 20 ? 0.05X, where Y denotes the sales of gas (x 1,000

gallons) and X denotes the gas price ($ per gallon). We can estimate

that one-dollar increases in gas price will decrease the sales by

5,000 gallons

50 gallons

0.05 gallons

15,000 gallons

The next 2 questions (19~20) refer

to the following:

Assume that an individual consumes two goods X and Y. The

total utility (assumed measurable) of each good is independent of the rate of

consumption of other goods. The prices of X and Y are,

respectively, $2 and $4.

Units of the Good

Total Utility of X

Total Utility of Y

1

2

3

4

5

6

7

8

20

38

54

68

80

90

98

104

32

60

84

104

120

132

140

144

If the consumer buys the fourth unit

of X,

the marginal utility of the fourth

unit is 68 units of satisfaction.

the marginal utility per dollar

spent on X is 39.

the marginal utility per dollar

spent on X is 7.

the total utility from X is

180.

Assume that an individual consumes

two goods X and Y. The total utility (assumed measurable)

of each good is independent of the rate of consumption of other goods.

The prices of X and Y are, respectively, $2 and $4.

Units of the Good

Total Utility of X

Total Utility of Y

1

2

3

4

5

6

7

8

20

38

54

68

80

90

98

104

32

60

84

104

120

132

140

144

If the consumer has $22 to spend on X

and Y, the utility-maximizing bundle is

3X and 4Y.

5X and 3Y.

7X and 2Y.

1X and 5Y.

When we construct a regression

function of demand on a product, which of the following should not be

considered as an appropriate independent variable?

Unit production cost

Consumersâ income

Price of substitutes

Price of the product

Honda Accord and Toyota Camry

are substitutes. If Toyota Camryâs price rises, then Honda Accordâs

market equilibrium price will be likely to ____ and market equilibrium

quantity will be likely to ____.

increase;

increase

increase;

decrease

decrease;

decrease

decrease;

increase

Suppose a company incurs the

following costs:

Labor

$9,000

Equipment

(Capital) $6,000

Materials

$7,000

The company owns the building,

so it doesnât have to pay the usual $2,000 in rent. The total economic cost is

______; the total accounting cost is _______.

$17,000; $15,000

$24,000; $17,000

$24,000; $22,000

$17,000; $22,000

When the accounting profit equals

the implicit costs, the firm earns

a

normal profit.

a

positive economic profit.

a zero

accounting profit.

a

negative accounting profit.

The next 4 questions (25~28) refer

to the following:

The estimated regression function of demand for a good is

Q = 20 ? 0.5P + 0.02M? 0.1PR

where Q is the quantity demanded of the good; P is the price of

the good; M is income; PR is the price of related

good.

The coefficient of P implies that

the function violates the law of

demand.

the price elasticity of demand is

? 0.5.

if the goodâs price increases by 1

then quantity demanded will decrease by 0.5.

the good is an inferior good.

The estimated regression function of

demand for a good is

Q = 20 ? 0.5P + 0.02M? 0.1PR

where Q is the quantity demanded of the good; P is the price of

the good; M is income; PR is the price of related

good.

The coefficient of M implies that

the income elasticity is 0.02.

the good is a normal good.

income is not an important

determinant for demand.

if income declines by 1 then

quantity demanded will increase by 0.02.

The estimated regression function of

demand for a good is

Q = 20 ? 0.5P + 0.02M? 0.1PR

where Q is the quantity demanded of the good; P is the price of

the good; M is income; PR is the price of related

good.

The coefficient of PR

implies that

the good is an inferior good.

the good and the related good are

substitutes.

the good and the related good are

complements.

the demand on the related good is

inelastic.

The estimated regression function of

demand for a good is

Q = 20 ? 0.5P + 0.02M? 0.1PR

where Q is the quantity demanded of the good; P is the price of

the good; M is income; PR is the price of related

good.

The price elasticity of demand, given P=10; M=100; PR

=20, should be

?1.33.

?0.66.

?0.50.

?0.33.

For a firmâs decision-making, the

principal-agent problem arises when

the principal and the agent have

different objectives.

the agent cannot enforce the

principal to manage well.

there are too many principals but

only few agents.

the agent considers to maximize

the firmâs wealth.

Which of the following is most unlikely

to be an appropriate independent variable to construct the market demand on

DVD movie rental?

Movie

theater box office ticket price.

Number

of movie theaters.

Household

income level.

Population

of movie goers

Moving along a downward sloping

linear demand curve from top to bottom, the point elasticity of demand

is constant everywhere.

becomes more inelastic.

becomes more elastic.

changes randomly.

A simple linear regression model has

the coefficient of determination, r2=0.81. We can conclude that

the model is not a good fit.

only 19% variation of the

dependent variable are determined by other factors not considered in the

model.

about 81% of the independent

variables can determine the dependent variable.

the independent variable and the

dependent variable are not related.

The ABC Company developed the

following quarterly sales forecasting model:

Yt= 5.8 + 0.03t

where Yt = predicted sales ($million) in quarter t; t = 1 (First

quarter of 2005), 2 (Second quarter of 2005), 3 (Third quarter of 2005), and so

on. Given the model, the sales for the fourth quarter of 2012 are forecasted

as.

$6.76 million.

$7.00 million.

$14.20 million.

$15.40 million

Which of the following will never be

negative in economic theory?

Cross-price elasticity

Marginal utility

Income elasticity of demand

Marginal cost

When the price of Washington apples

increases, which of the following change is most unlikely, if all the other

factors remain?

Quantity demanded of Washington

apples decreases.

Demand on Fuji apples increases.

Supply on apple juice increases.

Quantity supplied of Washington

apple increases.

The next 3 questions (36~38) refer

to the following:

The linear regression equation, Y = a + bX, was estimated.

The following computer printout was obtained:

.png”>

when X

is zero, Y is 7.85.

when X

is zero, Y is 3.19.

when Y

is zero, X is 0.36.

when Y

is zero, X is 6.88.

The linear regression equation, Y

= a + bX, was estimated. The following computer printout

was

obtained:

.png”>

The parameter estimate of b

indicates

X

increases by 0.36 units when Y increases by one unit.

X

decreases by 1 units when Y increases by 0.36 units.

a 10-unit decrease in X

results in a 3.6 units decrease in Y.

a 10-unit increase in X

results in a 78.5 units increase in Y.

The linear regression equation, Y

= a + bX, was estimated. The following computer printout

was

obtained:

DEPENDENT

VARIABLE:

Y

R-SQUARE

F-RATIO

P-VALUE ON F

OBSERVATIONS:

21

0.8662

6.1798

0.0274

VARIABLE

PARAMETER

ESTIMATE

STANDARD

ERROR

RATIO

P-VALUE

INTERCEPT

7.85

3.19

2.94

0.0008

X

0.36

6.88

-2.46

0.0274

Assume the default level of significance is at 0.05. The regression equation is

considered as ______ for sample and (but) ______ applied significantly for

population estimation.

a good fit; can be

not a good fit; can be

a good fit; cannot be

not a good fit; cannot be

In the cost-benefit analysis, the

maximum net benefit (NB) occurs in which

the total benefit (TB) is

maximized.

the marginal cost (MC) is

minimized.

the marginal benefit (MB) and the

marginal cost (MC) are equal.

the total cost (TC) is minimized.

If consumers foresee the price of

electric car will drop significantly in the near future, then the current

market _______ of electric car will _______.

demand; increase

demand; decrease

supply; decrease

price; increase

If both demand and supply were to

increase, then the market equilibrium

quantity would

fall and price might rise or fall.

quantity would

rise and price might fall or rise.

price would

fall and quantity might rise or fall.

price would be

unchanged and quantity might fall.

The following figure shows two

demand curves at price = P*. Which of the following is most likely to explain

the shapes of demand curve correctly?

Demand on A is

more elastic.

If both A and B

represent the same product, then A is for short-run demand and B is for long-run

demand.

A has more

substitutes.

B has a smaller

share in consumersâ expenditure (budget).

Diamonds are more expensive than

water because

diamonds yield higher total

utility.

market does not really reflect

waterâs value.

diamonds are rare.

diamonds yield higher marginal

utility.

Assume that the following log-linear

regression model represents the demand on vacation travel in the United States

lnQ = 2.05 ?1.64 lnP + 1.13 lnY,

where (Q) is the annual household vacation travel mileage; (P) is the price per

mile; (Y) is the disposable household annual income.

Which of the following statements

for vacation travel is incorrect?

The price elasticity of demand is ?1.64.

It is a necessity because the

income elasticity is positive.

It is a luxury good because the

income elasticity is greater than 1.

The demand is elastic.

The next 2 questions (45~46) refer

to the following:

Level of Activity

Total Benefit

Total

Cost

Marginal Benefit

Marginal Cost

Net

Benefit

0

1

2

3

0

75

_____

_____

0

60

_____

_____

xx

_____

65

_____

xx

_____

_____

70

0

_____

25

10

The marginal benefit for the 3rd activity should be

70.

65.

60.

55.

Level of Activity

Total Benefit

Total

Cost

Marginal Benefit

Marginal Cost

Net

Benefit

0

1

2

3

0

75

_____

_____

0

60

_____

_____

xx

_____

65

_____

xx

_____

_____

70

0

_____

25

10

The optimal level of activity should be

0.

1.

2.

3.

The price is based on these factors:

Academic level

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Urgency

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