Quiz:

Question 1

The higher the interest rate:

Options:

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

2.The smaller the present value of a future amount.

3.the greater the present value of a future amount.

4.the greater the level of inflation.

Question 2

If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is:

Options:

1. $2,562

2. $439.

3. $3,000.

4. $3,200.

Question 3

Accounting profits are:

Options:

1. total cost minus total revenue.

2. marginal revenue minus total cost.

3. total revenue minus marginal cost.

4. total revenue minus total cost.

Question 4

Economic profits are:

Options:

1. total revenue minus total cost.

2. total revenue minus total opportunity cost.

3. marginal revenue minus marginal cost.

4. total profits of the economy as a whole.

Question 5

The primary inducement for new firms to enter an industry is:

Options:

1. availability of labor.

2. low capital costs.

3. increased technology.

4. presence of economic profits.

Question 6

If the interest rate is 5 percent, what is the present value of $10 received one year from now?

Options:

1. $9.50

2. $10.05

3. $9.52

4. $9.77

Question 7

If you put $1,000 in a savings account at an interest rate of 10 percent, how much money will you have in one year?

Options:

1. $909

2. $1,200

3. $1,100

4. $950

Question 8

When dealing with present value, a higher interest rate:

Options:

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

2. does not affect the present value of the future amount.

3. increases the present value of a future amount.

4. decreases the present value of a future amount.

Question 9

A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second, and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is 7 percent, what is the net present value of purchasing the tractor?

Options:

1. $9,362

2. $18,362

3. $6,764

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

Question 10

To maximize profits, a firm should continue to increase production of a good until:

Options:

1. marginal revenue equals marginal cost.

2. average cost equals average revenue.

3. total revenue equals total cost.

4. profits are zero.

Question 11

What is the marginal cost of producing the fifth unit?

No. units produced	Total Revenue	Total Costs
0	0	0
1	100	50
2	180	110
3	250	180
4	290	270
5	310	380

Options:

1. 0

2. 110

3. 50

4. 270

Question 12

Negotiations between the buyer and seller of a new house are an example of:

Options:

1. producerproducer rivalry.

2. monopoly.

3. consumerconsumer rivalry.

4. consumerproducer rivalry.

Question 13

Under producerproducer rivalry, individual firms want to sell the product at the maximum price consumers will pay, but they are unable to make because of:

Options:

1. competition among buyers.

2. competition among sellers.

3. cost considerations.

4. the scarcity of resources.

Question 14

Other things equal, the greater the interest rate:

Options:

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

2. the higher the NPV.

3. the higher the PV.

4. the lower the NPV.

Question 15

If the annual interest rate is 0 percent, the present value of receiving $210 in the next year is:

Options:

1. $221.

2. $200.

3. $201.

4. $210.

Question 16

What is the marginal benefit associated with producing six units of the control variable, Q (identify point D in the table)?

Control variable	Total Benefits	Total Costs	Net Benefits	Marginal Benefit	Marginal Cost	Marginal Net Benefit
Q	B(Q)	C(Q)	N(Q)	MB(Q)	MC(Q)	MNB(Q)
0	0	0	0	-	-	-
1	900	100	800	900	100	800
2	1,700	300	C	800	200	600
3	2,400	600	1,800	700	E	400
4	A	1,000	2,000	600	400	200
5	3,500	1,500	2,000	500	500	F
6	3,900	2,100	1,800	D	600	-200
7	4,200	2,800	1,400	300	700	-400
8	4,400	B	800	200	800	-600
9	4,500	4,500	0	100	900	-800
10	4,500	5,500	-1,000	0	1,000	-1,000

Options:

1. 200

2. 600

3. 400

4. 100

Question 17

Total costs in the table are:

Control variable	Total Benefits	Total Costs	Net Benefits	Marginal Benefit	Marginal Cost	Marginal Net Benefit
Q	B(Q)	C(Q)	N(Q)	MB(Q)	MC(Q)	MNB(Q)
0	0	0	0	-	-	-
1	900	100	800	900	100	800
2	1,700	300	C	800	200	600
3	2,400	600	1,800	700	E	400
4	A	1,000	2,000	600	400	200
5	3,500	1,500	2,000	500	500	F
6	3,900	2,100	1,800	D	600	-200
7	4,200	2,800	1,400	300	700	-400
8	4,400	B	800	200	800	-600
9	4,500	4,500	0	100	900	-800
10	4,500	5,500	-1,000	0	1,000	-1,000

Options:

1. decreasing at a decreasing rate.

2. decreasing at a constant rate.

3. increasing at an increasing rate.

4. increasing at a constant rate.

Question 18

The lower the interest rate:

1. the greater the present value of a future amount.

2. smaller the present value of a future amount.

3. the greater the level of inflation.

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

Question 19

Suppose total benefits and total costs are given by B(Y) = 150Y 10Y²and C(Y) = 5Y². What level of Y will yield the maximum net benefits?

Options:

1. 5

2. 7

3. 10/9

4. 150/20

Question 20

Suppose total benefits and total costs are given by B(Y) = 220Y 15Y²and C(Y) = 10Y. What level of Y will yield the maximum net benefits?

Options:

1. 5

2. 7

3. 10/9

4. 150/20

Question 21

Suppose the growth rate of the firm's profit is 7 percent, the interest rate is 9 percent, and the current profits of the firm are $60 million. What is the value of the firm?

Options:

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

2. $4,480.6 million

3. $289.4 million

4. $3,270 million