Please take your time to answer the questions below as this is a final and the goal is 100%

1. Suppose the interest rate is 5 percent, the expected growth rate of the firm is 2 percent, and the firm is expected to continue forever. If current profits are $1,000, what is the value of the firm?

A. $35,000

B. $26,500

C. $30,000

D. $31,000

2. The higher the interest rate, the greater the:

A. Neither present value nor net present value is correct.

B. Both present value and net present value are correct.

C. net present value.

D. present value.

3. The opportunity cost of an action is the:

A. cost of all alternative actions that could have been taken.

B. monetary payment the action required.

C. value of the most highly valued alternative action given up.

D. None of the statements associated with this question are correct.

4. In a competitive market, the market demand is Q^d= 60 - 6P and the market supply is Q^s= 4P. The full economic price under a price ceiling of $3 is

A. 6.

B. 7.

C. 8.

D. 9.

5. In a competitive market, the market demand is Q^d= 70 - 3P and the market supply is Q^s= 6P. A price ceiling of $4 will result in a

A, surplus of 34 units.

B. shortage of 34 units.

C. surplus of 58 units.

D. shortage of 24 units.

6. The own price elasticity of demand for apples is 1.5. If the price of apples falls by 6 percent, what will happen to the quantity of apples demanded?

A. It will increase 4 percent.

B. It will fall 4 percent.

C. It will increase 9 percent.

D. It will fall 6 percent.

7. Assume that the price elasticity of demand is 2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to:

A. remain constant.

B. decrease.

C. increase.

D. either increase or remain constant, depending upon the size of the price increase.

8. A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is 2.0 and the cross-price elasticity of demand between Y and X is 1.5, then a 4 percent increase in the price of X will:

A. decrease total revenues from X and Y by $400.

B. increase total revenues from X and Y by $800.

C. increase total revenues from X and Y by $8,000.

D. increase total revenues from X and Y by $400.

9. If the slope of the indifference curve is steeper than the slope of the budget line, and X is on the horizontal axis:

A. MRS < P_X/P_Y.

B. the consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices.

C. MRS < P_X/P_Y.

D. the consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices.

10. If the price of computers decreases, then the:

A. inventory of computers increases.

B. inventory of computer software increases.

C. sales of a substitute, such as a telephone, decrease.

D. sales of a substitute, such as a telephone, increase.

11. Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume:

A. more of good X and less of good Y.

B. more of good X and more of good Y.

C. less of good X and less of good Y.

D. less of good X and more of good Y.

12. What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_x= $10, P_y= $20, X = 20, and M = 400?

A. 10

B. 0

C. 5

D. 20

13. Suppose the cost function is C(Q) = 50 + Q 10Q²+ 2Q³. At 10 units of output, the average cost curve is:

A. in the declining stage.

B. at the minimum level.

C. at the maximum level.

D. in the increasing stage

14. A price elasticity of zero corresponds to a demand curve that is:

A. vertical.

B. either vertical or horizontal

C. downward sloping with a slope always equal to 1.

D. horizontal.

15. Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:

A. one.

B. infinite.

C. zero

D. unknown.

16 For the cost function C(Q) = 100 + 2Q + 3Q², the total variable cost of producing 2 units of output is:

A. 12.

B. 16.

C. 4.

D. None of the answers are correct.

17. Suppose the demand for good x is ln Q_x^d= 21 0.8 ln P_x 1.6 ln P_y+ 6.2 ln M + 0.4 ln A_x. Then we know good x is:

A. an elastic good.

B. a normal good.

C. an inferior good.

D. a Giffen good.

18.

Price of Good X (Px)	Quantity of Good X (Qx)	Own Price Elasticity	Total Revenue
0	100	0.00	0
5	90	-0.11	450
A	80	-0.25	800
15	70	-0.43	1050
20	60	-0.67	1200
25	50	C	1250
30	B	-1.50	1200
35	30	-2.33	1050
40	20	-4.00	D
45	10	-9.00	450
50	0	-	0

The demand function in the accompanying table is Q_X^d= 100 2P_X. Based on this information, when Q_X= 80, the price, P_X(pointA), is:

A. $20.

B. $10.

C. $15.

D. $5.

19. When there are economies of scope between products, selling off an unprofitable subsidiary could lead to:

A. only a minor reduction in costs.

B. a major reduction in costs.

C. only a minor reduction in sales.

D. a major reduction in sales.

20. If a manager is not the owner, the manager:

A. bears the full cost of bad decisions.

B. receives the full benefit of good decisions.

C. does not receive the full benefit nor the full cost of his or her decisions.

None of the statements is correct.

21. A long-term contract

A. is most likely in complex exchange environments.

B. occurs when a firm produces its own inputs.

C. is shorter when specialized investments are important.

D. exists when a firm is legally bound to purchase inputs from a particular supplier.

22. The principal-agent problem happens because the owner cannot:

A. monitor the efforts of the manager.

B. evaluate the efforts of the manager.

C. spend time at the physical plant site.

D. control the production process.

23. Relationship-specific exchange:

A. makes firms use spot markets.

B. reduces worker shirking.

C. is a consequence of profit sharing.

D. occurs because of specialized investments

24. Which of the following is NOT a solution to the manager-worker principal-agent problem?

A. Piece rates

B. Sales sharing

C. Fixed hourly wages

D. Spot checks

25. A profit-sharing pay scheme:

A. decreases productivity but increases profits.

B. increases productivity but decreases profits.

C. decreases both productivity and profits.

D. increases both productivity and profits.