Economics Midterm

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Question 1 5 out of 5 points
Economic profit is defined as the difference between revenue and ________________.

Selected Answer: total economic cost
Correct Answer: total economic cost

Question 2 5 out of 5 points
In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ___________ discounted at the stockholders' required rate of return.

Selected Answer: profits
Correct Answer: profits

Question 3 0 out of 5 points
A typical factor that creates principal-agent problems is

Selected Answer: the greater number of agents relative to the number of principals Correct Answer: unobservability of some manager-agent action

Question 4 5 out of 5 points
The net present value of an investment represents

Selected Answer:
the expectedcontribution of that investment to the goal of shareholder wealthmaximization. Correct Answer:
the expectedcontribution of that investment to the goal of shareholder wealthmaximization.

Question 5 5 out of 5 points
A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the _____________.

Selected Answer:
marginal costs

Correct Answer:
marginal costs

Question 6 0 out of 5 points

Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.

Selected Answer:
a and b
Correct Answer:
a only

Question 7 5 out of 5 points
Which one of the following factors causes a movement along the demand curve?

Selected Answer:
decrease in price of the good demanded
Correct Answer:
decrease in price of the good demanded

Question 8 5 out of 5 points
_____________ have negative calculated income elasticity.

Selected Answer:
Inferior goods
Correct Answer:
Inferior goods

Question 9 5 out of 5 points
1.A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that

Selected Answer:
b.marginal cost equals $100.
Correct Answer:
b.marginal cost equals $100.

Question 10 5 out of 5 points
To maximize profits, you should produce at the point where

Selected Answer:
d.marginal benefits and marginal costs are just equal.
Correct Answer:
d.marginal benefits and marginal costs are just equal.

Question 11 5 out of 5 points
16.As a manufacturer increases output, which of the following costs should decrease?

Selected Answer:
b.Average fixed cost.
Correct Answer:
b.Average fixed cost.

Question 12 0 out of 5 points
17.As a shoe company produces more shoes the average total cost of each shoe produced decreases. This is because

Selected Answer:
a.Total fixed costs are decreasing as more shoes are produced. Correct Answer:
c.There are scale economies.

Question 13 5 out of 5 points
According to the law of demand,

Selected Answer:
d.when price decreases, quantity demanded increases.
Correct Answer:
d.when price decreases, quantity demanded increases.

Question 14 5 out of 5 points
23.Buyers consider Marlboro cigarettes and Budweiser beer to be complements. If Marlboro just increased its prices, what would you expect to occur in the Budweiser market?

Selected Answer:
b.Demand would fall, and Budweiser would reduce price.
Correct Answer:
b.Demand would fall, and Budweiser would reduce price.

Question...
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