ECO 550 MIDTERM PART 2. THREE VERSIONS POSTED MAKING 75 QUESTIONS
Version 3
For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
Answer
ordinary least squares regression on historical data
market experiments, where the price is set differently in two markets
consumer surveys, where potential customers hear about the product and are asked their opinions
double log functional form regression model
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:
Answer
econometric technique
time-series forecasting
opinion polling
barometric technique
judgment forecasting
The type of economic indicator that can best be used for business forecasting is the:
Answer
leading indicator
coincident indicator
lagging indicator
current business inventory indicator
optimism/pessimism indicator
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:
Answer
secular trend
cyclical variation
seasonal effect
unpredictable random factor
Time-series forecasting models:
Answer
are useful whenever changes occur rapidly and wildly
are more effective in making long-run forecasts than short-run forecasts
are based solely on historical observations of the values of the variable being forecasted
attempt to explain the underlying causal relationships which produce the observed outcome
The use of quarterly data to develop the forecasting model Yt = a +bYt?1 is an example of which forecasting technique?
Answer
Barometric forecasting
Time-series forecasting
Survey and opinion
Econometric methods based on an understanding of the underlying economic variables involved
Input-output analysis
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
Answer
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
Answer
out-of-pocket costs of production decline
free trade areas protect infant industries
economies of scale are present
manufacturers face diminishing returns
more goods are available for consumption
Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would
Answer
Decrease the demand for yen and decrease the supply of the yen.
Increase the demand for yen and decrease the supply of the yen.
Increase the demand and increase the supply of yen.
Decrease both the supply and the demand of yen.
Have no impact on the demand or supply of the yen.
An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
Answer
higher anticipated costs of production in the U.S.
higher interest rates and higher inflation in the U.S.
higher growth rates in the trading partner’s economy
a change in the terms of trade
lower export industry productivity
If the British pound (?) appreciates by 10% against the dollar:
Answer
both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.
the US exporters will find it harder to sell to foreign customers in Britain.
the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.
both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.
In Chinese coastal provinces, brick housing for a fast expanding middle class is very comparable in size to housing in the U.S. for a family with median income of $51,000 because
Answer
median income per capita has risen in China to nearly equal median income in the U.S.
the Chinese government builds much of the housing in China
construction companies have begun to migrate to the coastal provinces of China
housing is an income inferior good
bricks, trade skill workers and construction labor are very cheap in China
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:
Answer
Even more intraregional trade of goods across the three countries.
Lower transaction costs of trading within North America.
A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
Less migration of workers across the three countries.
An elimination of correlated macroeconomic shocks across the countries.
The primary purpose of the Cobb-Douglas power function is to:
Answer
allow one to make estimates of cost-output relationships
allow one to make predictions about a resulting increase in output for a given increase in the inputs
aid one in gaining accurate empirical values for economic variables
calculate a short-run linear total cost function
Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.
Answer
marginal revenue
total output
total revenue
marginal product
The marginal rate of technical substitution may be defined as all of the following except:
Answer
the rate at which one input may be substituted for another input in the production process, while total output remains constant
equal to the negative slope of the isoquant at any point on the isoquant
the rate at which all combinations of inputs have equal total costs
equal to the ratio of the marginal products of X and Y
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?
Answer
The firm should use relatively more capital
The firm should use relatively more labor
The firm should not make any changes they are currently efficient
Using the Equimarginal Criterion, we cant determine the firms efficiency level
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:
Answer
stage II
stages I and II
when Ep = 1
stage III
Which of the following is never negative?
Answer
marginal product
average product
production elasticity
marginal rate of technical substitution
slope of the isocost lines
What method of inventory valuation should be used for economic decision-making problems?
Answer
book value
original cost
current replacement cost
cost or market, whichever is lower
historical cost
For a short-run cost function which of the following statements is (are) not true?
Answer
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.
According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
Answer
decreasing returns and declining average and marginal costs
increasing returns and declining average and marginal costs
increasing returns and increasing average and marginal costs
decreasing returns and increasing average and marginal costs
The cost function is:
Answer
a means for expressing output as a function of cost
a schedule or mathematical relationship showing the total cost of producing various quantities of output
similar to a profit and loss statement
incapable in being developed from statistical regression analysis
Economies of scale exist whenever long-run average costs:
Answer
Increase as output is increased
Remain constant as output is increased
Decrease as output is increased
Decline and then rise as output is increased
If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:
Answer
10.2
102
37.1
371
321
VERSION 1
Question 1
Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?
Answer
time-series forecasting techniques
barometric techniques
survey techniques and opinion polling
econometric techniques
input-output analysis
Question 2
For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
Answer
ordinary least squares regression on historical data
market experiments, where the price is set differently in two markets
consumer surveys, where potential customers hear about the product and are asked their opinions
double log functional form regression model
Question 3
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:
Answer
econometric technique
time-series forecasting
opinion polling
barometric technique
judgment forecasting
Question 4
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:
Answer
secular trend
cyclical variation
seasonal effect
unpredictable random factor
Question 5
An example of a time series data set is one for which the:
Answer
data would be collected for a given firm for several consecutive periods (e.g., months).
data would be collected for several different firms at a single point in time.
regression analysis comes from data randomly taken from different points in time.
data is created from a random number generation program.
use of regression analysis would impossible in time series
Question 6
Time-series forecasting models:
Answer
are useful whenever changes occur rapidly and wildly
are more effective in making long-run forecasts than short-run forecasts
are based solely on historical observations of the values of the variable being forecasted
attempt to explain the underlying causal relationships which produce the observed outcome
Question 7
The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more than it should to the U.S. trade deficit with China because
Answer
Chinese assembly labor represents only 47 % of the wholesale cost
the iPads popularity has triggered an enormous number of unit sales
wholesale prices only count in the trade statistics if final product prices are higher
as with foreign-assembled minivans, most of the subassembly components come from the U.S.
the Chinese yuan is a managed currency
Question 8
The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
Answer
increase exports
reduce the competitive pressure on prices
lower the value of the currency in the country with the higher inflation rate
increase foreign aid
increase the speculative demand for the currency
Question 9
In a recession, the trade balance often improves because
Answer
service exports exceed manufactured good exports
banks sell depressed assets
fewer households can afford luxury imports
direct investment abroad declines
the capital account exceeds the current account
Question 10
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
Answer
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
Question 11
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:
Answer
Even more intraregional trade of goods across the three countries.
Lower transaction costs of trading within North America.
A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
Less migration of workers across the three countries.
An elimination of correlated macroeconomic shocks across the countries.
Question 12
Purchasing power parity or PPP says the ratios composed of:
Answer
interest rates explain the direction of exchange rates.
growth rates explain the direction of exchange rates.
inflation rates explain the direction of exchange rates.
services explain the direction exchange rates.
public opinion polls explain the direction of exchange rates
Question 13
Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would
Answer
Decrease the demand for yen and decrease the supply of the yen.
Increase the demand for yen and decrease the supply of the yen.
Increase the demand and increase the supply of yen.
Decrease both the supply and the demand of yen.
Have no impact on the demand or supply of the yen
Question 14
In a relationship among total, average and marginal products, where TP is maximized:
Answer
AP is maximized
AP is equal to zero
MP is maximized
MP is equal to zero
Question 15
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?
Answer
The firm should use relatively more capital
The firm should use relatively more labor
The firm should not make any changes they are currently efficient
Using the Equimarginal Criterion, we cant determine the firms efficiency level
Question 16
The isoquants for inputs that are perfect complements for one another consist of a series of:
Answer
right angles
parallel lines
concentric circles
right triangles
Question 17
The primary purpose of the Cobb-Douglas power function is to:
Answer
allow one to make estimates of cost-output relationships
allow one to make predictions about a resulting increase in output for a given increase in the inputs
aid one in gaining accurate empirical values for economic variables
calculate a short-run linear total cost function
Question 18
The marginal product is defined as:
Answer
The ratio of total output to the amount of the variable input used in producing the output
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
The percentage change in output resulting from a given percentage change in the amount
The amount of fixed cost involved.
Question 19
Which of the following is never negative?
Answer
marginal product
average product
production elasticity
marginal rate of technical substitution
slope of the isocost lines
Question 20
What method of inventory valuation should be used for economic decision-making problems?
Answer
book value
original cost
current replacement cost
cost or market, whichever is lower
historical cost
Question 21
Economies of scale exist whenever long-run average costs:
Answer
Increase as output is increased
Remain constant as output is increased
Decrease as output is increased
Decline and then rise as output is increased
Question 22
If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:
Answer
10.2
102
37.1
371
321
Question 23
For a short-run cost function which of the following statements is (are) not true?
Answer
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.
Question 24
The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
Answer
transportation costs
imperfections in the labor market
imperfections in the capital markets
problems of coordination and control encountered by management
Question 25
Economies of Scope refers to situations where per unit costs are:
Answer
Unaffected when two or more products are produced
Reduced when two or more products are produced
Increased when two or more products are produced
Demonstrating constant returns to scale
Demonstrating decreasing returns to scale
VERSION 2
Question 1
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:
Answer
secular trend
cyclical variation
seasonal effect
unpredictable random factor
4 points
Question 2
Time-series forecasting models:
Answer
are useful whenever changes occur rapidly and wildly
are more effective in making long-run forecasts than short-run forecasts
are based solely on historical observations of the values of the variable being forecasted
attempt to explain the underlying causal relationships which produce the observed outcome
4 points
Question 3
If two alternative economic models are offered, other things equal, we would
Answer
tend to pick the one with the lowest R2.
select the model that is the most expensive to estimate.
pick the model that was the most complex.
select the model that gave the most accurate forecasts
4 points
Question 4
Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.
Answer
opinion polling
barometric forecasting
econometric forecasting
time-series forecasting
4 points
Question 5
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:
Answer
econometric technique
time-series forecasting
opinion polling
barometric technique
judgment forecasting
4 points
Question 6
For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
Answer
ordinary least squares regression on historical data
market experiments, where the price is set differently in two markets
consumer surveys, where potential customers hear about the product and are asked their opinions
double log functional form regression model
4 points
Question 7
If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar?
Answer
The value of the dollar falls when US interest rates rise.
The value of the dollar rises when US interest rates rise.
The value of the dollar is not related to US interest rates.
This is known as Purchasing Power Parity or PPP.
4 points
Question 8
Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
Answer
sacrifice market share abroad but build market share at home
increase production volume to realize learning curve advantages
sell foreign plants and equipment to lower their debt
reduce the costs of transportation
4 points
Question 9
An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
Answer
higher anticipated costs of production in the U.S.
higher interest rates and higher inflation in the U.S.
higher growth rates in the trading partner’s economy
a change in the terms of trade
lower export industry productivity
4 points
Question 10
Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because
Answer
out-of-pocket costs of production decline
free trade areas protect infant industries
economies of scale are present
manufacturers face diminishing returns
more goods are available for consumption
4 points
Question 11
An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
Answer
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
4 points
Question 12
If the British pound (?) appreciates by 10% against the dollar:
Answer
both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.
the US exporters will find it harder to sell to foreign customers in Britain.
the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.
both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.
4 points
Question 13
The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more than it should to the U.S. trade deficit with China because
Answer
Chinese assembly labor represents only 47 % of the wholesale cost
the iPads popularity has triggered an enormous number of unit sales
wholesale prices only count in the trade statistics if final product prices are higher
as with foreign-assembled minivans, most of the subassembly components come from the U.S.
the Chinese yuan is a managed currency
4 points
Question 14
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?
Answer
The firm should use relatively more capital
The firm should use relatively more labor
The firm should not make any changes they are currently efficient
Using the Equimarginal Criterion, we cant determine the firms efficiency level
4 points
Question 15
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:
Answer
stage II
stages I and II
when Ep = 1
stage III
4 points
Question 16
Which of the following is never negative?
Answer
marginal product
average product
production elasticity
marginal rate of technical substitution
slope of the isocost lines
4 points
Question 17
The combinations of inputs costing a constant C dollars is called:
Answer
an isocost line
an isoquant curve
the MRTS
an isorevenue line
4 points
Question 18
The marginal rate of technical substitution may be defined as all of the following except:
Answer
the rate at which one input may be substituted for another input in the production process, while total output remains constant
equal to the negative slope of the isoquant at any point on the isoquant
the rate at which all combinations of inputs have equal total costs
equal to the ratio of the marginal products of X and Y
4 points
Question 19
In a relationship among total, average and marginal products, where TP is maximized:
Answer
AP is maximized
AP is equal to zero
MP is maximized
MP is equal to zero
4 points
Question 20
Economies of Scope refers to situations where per unit costs are:
Answer
Unaffected when two or more products are produced
Reduced when two or more products are produced
Increased when two or more products are produced
Demonstrating constant returns to scale
Demonstrating decreasing returns to scale
4 points
Question 21
Economies of scale exist whenever long-run average costs:
Answer
Increase as output is increased
Remain constant as output is increased
Decrease as output is increased
Decline and then rise as output is increased
4 points
Question 22
What method of inventory valuation should be used for economic decision-making problems?
Answer
book value
original cost
current replacement cost
cost or market, whichever is lower
historical cost
4 points
Question 23
For a short-run cost function which of the following statements is (are) not true?
Answer
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.
4 points
Question 24
The cost function is:
Answer
a means for expressing output as a function of cost
a schedule or mathematical relationship showing the total cost of producing various quantities of output
similar to a profit and loss statement
incapable in being developed from statistical regression analysis
4 points
Question 25
According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
Answer
decreasing returns and declining average and marginal costs
increasing returns and declining average and marginal costs
increasing returns and increasing average and marginal costs
decreasing returns and increasing average and marginal costs
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