Eco 550 Final Exams

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1. Which of the following statements concerning the long-run average cost curve of economic theory is true? Answer

It is L-shaped

It is ∩-shaped

It is ∪-shaped

It is ∧-shaped

It is M-shaped
2.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
3.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.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 5.In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0? Answer

the identification problem

autocorrelation

multicollinearity

heteroscedasticity

agency problems
6.The method which can give some information in estimating demand of a product that hasn’t yet come to market is: Answer

the consumer survey

market experimentation

a statistical demand analysis

plotting the data

the barometric method
7.The estimated slope coefficient (b) of the regression equation (Ln Y = a + b Ln X) measures the ____ change in Y for a one ____ change in X. Answer

percentage, unit

percentage, percent

unit, unit

unit, percent

none of the above
8.All of the following are reasons why an association relationship may not imply a causal relationship except: Answer

the association may be due to pure chance

the association may be the result of the influence of a third common factor

both variables may be the cause and the effect at the same time

the association may be hypothetical
9. Income tax payments are an example of ____.
Answer

implicit costs

explicit costs

normal return on investment

shareholder wealth
10.Recently, the American Medical Association changed its recommendations on the frequency of pap-smear exams for women. The new frequency recommendation was designed to address the family histories of the patients. The optimal frequency should be where the marginal benefit of an additional pap-test: Answer

equals zero.

is greater than the marginal cost of the test

is lower than the marginal cost of an additional test

equals the marginal cost of the test

11.Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth. These include: Answer

cash bonuses based on length of service with the firm

bonuses for resisting hostile takeovers

requiring officers to own stock in the company

large corporate staffs
12.Economic profit is defined as the difference between revenue and ____. Answer

explicit cost

total economic cost

implicit cost

shareholder wealth
13.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
14.The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing...
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