Give explanation for each question.

29.A measure of inflation that washes out price extremes employs:

A.mean price changes.

B.Weighted average price changes.

C.the standard deviation of price changes.

D.median price changes.

Ans: D

Explanation:

30.A multiple regression model involves two or more:

A.Y variables..

B.X variables.

C.intercept terms.

D.data points.

Ans: B

Explanation:

31,High correlation among X variables leads to:

A.multi co-linearity.

B.high R square.

C.low R squared.

D.high t statistics.

Ans: A

Explanation:

Multicollinearity occurs when independent variables in a regression model are correlated. This correlation is a problem because independent variables should be independent. If the degree of correlation between variables is high enough, it can cause problems when you fit the model and interpret the results.

32.The "middle" observation is the:

A.median.

B.average.

C.mean.

D.mode.

Ans: A

Explanation:

33.A relation known with certainty is called a:

A.statistical relation.

B.multiple regression.

C.deterministic relation.

D.simple regression.

Ans: C

Explanation:

34.Statistical analysis of economic relations focuses on the estimation and interpretation of:

A.sample statistics.

B.population parameters.

C.summary measures.

D.descriptive measures.

Ans: A

Explanation:

35.Central tendency is measured by the:

A.range.

B.variance.

C.standard deviation.

D.mode.

Ans: D

Explanation:

36.In a uniform distribution, the mode:

A.equals the median.

B.is less than the mean.

C.is less than the median.

D.is greater than the mean.

Ans: A

Explanation:

37.If a distribution is skewed upward, the median:

A.is greater than the mean.

B.is less than the mean.

C.is greater than the average.

D.the mean.

Ans: B

Explanation:

38.Incorrect rejection of the hypothesis is called:

A.type I error.

B.type II error.

C.z statistical error.

D.t statistical error.

Ans: A

Explanation: This "false positive," leading to an incorrect rejection of the null hypothesis, is called a type I error.

39.A relation known with certainty is a:

A.cross-section relation,

B.deterministic relation.

C.time-series relation.

D.statistical relation.

Ans: B

Explanation:

40.If demand increases while supply decreases for a particular good:

A.the equilibrium price will increase while the quantity of the good produced and sold could increase,

decrease, or remain constant.

B.the quantity of the good produced and sold will decrease while its equilibrium price could increase,

decrease, or remain constant.

C.the quantity of the good produced and sold will increase while its equilibrium price could increase,

decrease.or remain constant.

D.its equilibrium price will decrease while the quantity of the good produced and sold could increase,

decrease, or remain constant.

Ans: A

Explanation:

41.Shortage is a condition of:

A.excess supply.

B.excess demand.

C.a deficiency in demand.

D.market equilibrium.

Ans: B

Explanation:

Shortage is astate or situation wheresomething needed cannot be obtained in sufficient amounts. An excess in demand, excess meaning an amount of something that is more than necessary, permitted, or desirable, would result in too much being asked for(demanded) and resulting in not enough (or shortage) of supply.

42.Derived demand is directly determined by:

A.utility.

B.the profitability of using inputs to produce the given output.

C.the ability to create and then satisfy consumer desires.

D.personal consumption.

Ans: D

Explanation:

43.A demand curve expresses the relation between the quantity demanded and:

A.income.

B.advertising.

C.price.

D.all of the above.

Ans: C

Explanation:

44.Change in the quantity demanded is:

A.a movement along a single demand curve,

B.an upward shift from one demand curve to another.

C.a reflection of change in one or more of the non-price variables in the product demand function.

D.a downward shift from one demand curve to another.

Ans: A

Explanation:

45.A supply curve expresses the relation between the quantity supplied and:

A.technology.

B.wage rates.

C.price.

D.all of the above.

Ans: C

Explanation:

46.Change in the quantity supplied reflects a:

A.change in price.

B.switch from one supply curve to another.

C.change in one or more non-price variables.

D.shift in supply.

Ans: A

Explanation:

47.Demand for consumption goods and services is:

A.derived demand.

B.direct demand.

C.product demand.

D.utility.

Ans: B

Explanation:

48.Derived demand is the:

A.demand for inputs used in the production of the good sold.

B.demand for products other than raw materials.

C.first derivative of the demand function.

D.demand for consumption products.

Ans: A

Explanation:

49.If the production of two goods is complementary a decrease in the price of one will:

A.increase supply of the other.

B.increase the quantity supplied of the other.

C.decrease the price of the other.

D.decrease supply of the other.

Ans: A

Explanation:

52.The increase in overall consumption made possible by a price cut is the:

A.income effect.

B.substitution effect.

C.income and substitution effect.

D.consumption effect.

Ans: C

Explanation:

53.The point advertising elasticity reveals is the:

A.percentage change in demand following a change in advertising.

B.percentage change in the quantity demanded following a change in advertising.

C.percentage change in advertising following a change in the quantity demanded.

D.percentage change in advertising following a change in demand.

Ans: B

Explanation:

54.If marginal cost is $25 and price elasticity of demand is -2.5, the profit maximizing price equals:

A.$25

B.$17.86

C.$41.67

D.$35

Ans: C

Explanation:

55.If marginal revenue [MR] is $25,000- $300Qand

marginal cost [MC] is $5000 + $100Qthe profit maximizing price is:

A.$50

B.$25,000

C.$17,500

D.$10.000

Ans: D

Explanation:

56.Elasticity is:

A.percentage change in a dependent variable [Y] resulting from a one-percent change in the value of

an independent variable [X].

B.change in a dependent variable [Y], resulting from a change in the value of an independent

variable [X].

C.change in an independent variable [X]. resulting from a change in the value of a dependent variable [Y].

D.percentage change in an independent variable [X], resulting from a one-percent change in the value

of a dependent variable [Y].

Ans: A

Explanation:

57.According to the law of diminishing marginal utility:

A.as the consumption of a given product rises, the added benefit eventually diminishes.

B.as the production cost for a given product rises, the added benefit eventually diminishes.

C.the demand curve for some products is upward sloping.

D.as the price of a given product rises, the added benefit eventually diminishes.

Ans: A

Explanation: The "Law of Diminishing Marginal Utility" states that for any good or service, the marginal utility of that good or service decreases as the quantity of the good increases, ceteris paribus. In other words, total utility increases more and more slowly as the quantity consumed increases.

58.An indifference curve is a set of market baskets that:

A.contain the same goods.

B.provide the same utility.

C.have identical marginal rates of substitution.

D.can be obtained for the same cost.

Ans: B

Explanation:

59.The change to a new indifference curve following a rise in aggregate consumption caused by a price cut is:

A.a price effect.

B.an income effect.

C.a substitution effect.

D.a consumption effect.

Ans: B

Explanation:

60.The movement along an indifference curve reflecting the substitution of cheaper products for more

expensive ones is:

A.utility effect.

B.substitution effect.

C.income effect.

D.supply effect.

Ans: B

Explanation:

61.Two products are complements, if the:

A.cross-price elasticity of demand is less than zero.

B.cross-price elasticity of demand equals zero.

C.cross-price elasticity of demand is greater than zero.

D.price elasticity of demand for each good is greater than zero.

Ans: A

Explanation:

62,If the income elasticity of demand for a good is greater than one, the good is:

A.a non-cyclical normal good.

B.a cyclical normal good.

C.neither a normal nor an inferior good.

D.an inferior good.

Ans: B

Explanation:

63.The foregone value associated with the current rather than next-best use of a given asset is called:

A.current cost.

B.replacement cost.

C.historical cost.

D.opportunity cost,

Ans: D

Explanation:

.64.Unlike the marginal cost concept the incremental cost concept:

A.does not focus on individual managerial decisions.

B.is not relevant for optimal output determination.

C.embodies sunk costs.

D.can involve multiple units of output.

Ans: D

Explanation:

65.With the opportunity for beneficial learning, a firm's learning curve is:

A.downward sloping.

B.horizontal.

C.vertical.

D.upward sloping.

Ans: A

Explanation:

66.The percentage change in profit that results from 1% change in units sold equals:

A.the cost elasticity.

B.the returns to scope economics.

C.marginal profit.

D.the degree of operating leverage.

Ans: C

Explanation:

67.Sunk costs:

A.typically involve multiple units of output.

B.do not vary across decision alternatives.

C.come into play when judging the costs of adding a new product line, advertising campaign,

production shift.

D.play an important role in determining the optimal course of action.

Ans: B

Explanation:

68.Learning involves:

A.movements along a single LRAC curve.

B.movements along a single SRAC curve.

C.shifts in SRAC curves over time.

D.shifts in LRAC curves over time.

Ans: A

Explanation:

69.The foregone value is:

A.explicit cost.

B.implicit cost.

C.replacement cost.

D.opportunity cost.

Ans: D

Explanation:

70.Incremental cost is the change in:

A.total cost caused by a given managerial decision.

B.non-cash expenses caused by a given managerial decision.

C,out-of-pocket costs caused by a given managerial decision.

D.variable costs caused by a managerial decision.

Ans: A

Explanation:

71.Non-cash expenses are:

A.explicit costs.

B.implicit costs.

C.sunk costs.

D.incremental costs.

Ans: B

Explanation:

72.In the decision process, management should ignore:

A.implicit costs.

B.historical costs.

C.sunk costs.

D.incremental costs.

Ans: C

Explanation:

73.The long-run is a period of time:

A.during which at least one input is variable.

B.during which at least one input is fixed.

C.sufficient to vary all inputs

D.greater than one year.

Ans: C

Explanation:

74.Fixed costs include:

A.variable labor expenses.

B.output-related energy costs.

C.output-related raw material costs.

D.variable interest costs for borrowed capital.

Ans: B

Explanation:

75.Marginal cost equals:

A.average variable cost at its maximum point.

B.the change in total fixed cost divided by the change in quantity.

C.the change in total variable cost divided by the change in quantity.

D.total cost divided by quantity.

Ans: C

Explanation:

76.If the productivity of variable factors is decreasing in the short-run:

A.marginal cost must increase as output increases.

B.average cost must decrease as output increases.

C.average cost must increase as output increases.

D.marginal cost must decrease as output increases.

Ans: A

Explanation:

77.If the slope of long=run total cost function decreases as output increases,

the firm's underlyingproduction function exhibits:

A.constant returns to scale.

B.decreasing returns to scale.

C.decreasing returns to a factor input.

D.increasing returns to scale.

Ans: D

Explanation:

78.Each point on a long-run average cost curve is the minimum:

A.point on the short-run marginal cost curve.

B.short-run average cost of production.

C.long-run average cost of production.

D.point on the short-run average cost curve.

Ans: D

Explanation:

79.A firm;s capacity is the output:

A.maximum that can be produced in the long-run.

B.level where short-run average costs are minimized.

C.level where long-run average costs are minimized.

D,maximum capacity that can be produced in the short-run.

Ans: C

Explanation:

80.Three University of Florida engineering students are considering operating a mobile car clinic

in Gainesville during their summer break. This is an alternative to summer employment stacking

plastic cups at a local injection molding manufacturer where they would earn $8,000 each over

the three month summer period. A van equipped for such services can be leased from an owner

taking a long vacation in the Bahamas at the cost of $4,500 for the summer.Additional projected

costs are $2,500 for insurance, and $5 per service call for materials and supplies.Their service

calls would be priced at $30 per unit, plus cost of any parts which will be purchased from parts

outlets.

A.What is the accounting cost function for this business? [ignore costs of parts]

B.What is the economic cost function for this business?

C.What is the break-even number of units for this business? [Assume $30 for price and ignore

interest costs associated with the timing of lease payments]

81.Fisherman's Wharf Cotton Inc.sells souvenir T-shirts at San Francisco's Pier 9 at a price of $10.

Of this amount [$10], $6 is profit contribution.The shop is considering an attempt to

differentiate its product from several other competitors by using a higher quality T-shirts.

Doing so would increase its unit cost by $1 per t-shirt.Current monthly profits are $5,000 on

2,500 unit sales.

A.Assuming average variable costs are constant at all output levels, whatis souvenir

shop's total cost function before the proposed change?

B.What will the total cost function be if higher quality T-shirts are used?

C.Assume T-shirt prices remain stable at $10.What percentage increase in sales

would be necessary to maintain current profit levels?

82.For a firm in a monopollistically competitive market, equilibrium is:

A.MC=AC

B.MR=AR

C.MR=MC

D.AP=AC

Ans: C

Explanation:

83.In oligopoly, equilibrium is:

A.MC=AC

B.MC < AC

C.MR=MC

D.MC > AC

Ans: C

Explanation:

84.A perfect functioning cartel results in a:

A.monopoly equilibrium.

B.oligopoly equilibrium.

C.perfectly competitive equilibrium.

D.monopolistically competitive equilibrium.

Ans: A

Explanation:

85.A successfully exploited niche market involves elements of:

A.perfect competition.

B,monopolistic competition.

C.monopoly.

D.monopsony.

Ans: B

Explanation:

86.In both monopolistic competition and oligopoly market structures:

A.there is easy entry and exit.

B.consumers perceive differences among the products of various competitors.

C.economic profits may be earned in the long-run.

D.there are many sellers.

Ans: B

Explanation:

87.When prices in monopolistically competitive markets exceed those in a perfectly competitive

equilibrium, this difference is the cost of:

A.information.

B.market power.

C.inefficiency.

D.product differentiation.

Ans: D

Explanation:

88.Monopolistic competition always entails:

A.declining LRAC.

B.vigorous price competition.

C.increasing LRAC.

D.constant LRAC.

Ans: B

Explanation:

89.Monopolistic competition is characterized by:

A.homogeneous products.

B.barriers to entry and exit.

C.perfect dissemination of information.

D.few buyers and sellers.

Ans: C

Explanation:

90.Above-normal rates of return in long-run equilibrium require:

A.homogeneous products.

B.barriers to entry and exit.

C.few buyers and sellers.

D.differentiated products.

Ans: B

Explanation:

91.The kinked demand curve theory of oligopoly assumes that rival firms:

A.react to price increases.

B.react to price increases and decreases.

C.do not react to price changes.

Dreact to price decreases.

Ans: D

Explanation:

92.In equilibrium monopolistic competition results in:

A.P > AC and MR=MC.

B.P=MR and AC=MC.

C.P

D.P=AC and MR=MC

Ans: D

Explanation: In equilibrium monopolistic competition results in price is equals to average cost and marginal revenue is equal to marginal cost

93.Equilibrium in oligopoly markets is characterized by:

A.P>AC and MR=MC

B.P=MR and AC=MC

C.P

D.P=AC and MR=MC

Ans: D

Explanation:

94.An example of failure by market structure is given by:

A.inferior product quality.

B.air pollution.

C.false advertising.

D.price regulation.

Ans: B

Explanation:

95.The economic cost of a tax is paid at the point of:

A.tax burden.

B.tax collection.

C.tax incidence.

D.tax assessment.

Ans: C

Explanation:

96.The burden of a per unit tax on a product will fall primarily on producers, when:

A.the tax is collected from customers.

B.demand is highly elastic with respect to price.

C.the demand is highly inelastic with respect to price.

D.the tax is collected from producers.

Ans: B

Explanation:

97.A natural monopoly exists if:

A.marginal revenue is falling as output expands.

B.price equals average cost.

C.average cost falls as output expands.

D.marginal revenue equals marginal cost.

Ans: C

Explanation:

98.Regulatory commissions seek to set a "fair" price that:

A.maximizes producers' output.

B.equals average cost.

C.equals average revenue.

D.maximizes consumer surplus.

Ans: C

Explanation:

99.A per unit tax will cause prices to increase leas, when:

A.marginal cost is constant.

B.marginal cost is falling.

C.marginal cost is rising.

D.average cost is falling.

Ans: A

Explanation:

100.Efficient markets are characterized by:

A. symmetric information.

B.easy entry and exit.

C.symmetric insurance.

D.all of the above.

Ans: A

Explanation: