Math exam Questions

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 apple’s.

purchase
more apples because the marginal utility per dollar is greater than beef’s.

purchase more beef because he likes it.

purchase
more apples because the price is very low.

2. “I like ice cream, but after eating
homemade ice cream last night, I want to have something else for desert today.”
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 – 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 consumer’s 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 – 4P

The price elasticity of demand associated with P=10

?4.00

?2.00

–1.33

–0.67

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 country’s 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 –0.50 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

Consumers’ income

Price of substitutes

Price of the product

Honda Accord and Toyota Camry
are substitutes. If Toyota Camry’s price rises, then Honda Accord’s
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 doesn’t 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 good’s 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 firm’s 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 firm’s 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 consumers’ expenditure (budget).

Diamonds are more expensive than
water because

diamonds yield higher total
utility.

market does not really reflect
water’s 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.

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