Managerial Economic Homework 1

Topics: Costs, Marginal cost, Microeconomics Pages: 7 (1335 words) Published: June 25, 2013
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Question 1
1 out of 1 points
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| When are buyers and sellers likely to engage in an exchange? Answer | | | | | Selected Answer:|  d.  All of the above statements are correct | Correct Answer:|  d.  All of the above statements are correct |

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* Question 2
2 out of 2 points
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| In a transaction for a rare painting valued at $1,000,000, by an avid collector, and at $950,000 by the seller, what sales tax would result in an unconsummated wealth-creating transaction? Select All That Apply Answer | | | | | Selected Answers: |  d.  An 10% tax

 f.  A tax of $55,000
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Correct Answers:|  d.  An 10% tax
 f.  A tax of $55,000
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Response Feedback: | A tax that amounts to $55,000 and a tax of 10% (amounts to $95,000) cause the seller to adjust the price to $1,005,000 and $1,045,000. This is above the value placed by the buyer. As such, the transaction does not go through. |

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* Question 3
1 out of 1 points
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| Economic profits are: Answer | | | |
| Selected Answer:|  b.  [Total Sales Revenue] - [Market Value of all the Resources Employed in the Production Process] | Correct Answer:|  b.  [Total Sales Revenue] - [Market Value of all the Resources Employed in the Production Process] |

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* Question 4
1 out of 1 points
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| Which of the following is an implicit cost to a firm that produces a good or service? Answer | | | | | Selected Answer:|  c.  Sacrificed profits from producing an alternative good or service | Correct Answer:|  c.  Sacrificed profits from producing an alternative good or service |

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* Question 5
1 out of 1 points
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| As more firms enter an industry (the number of competitors increases), and holding all else equal, you can expect: Answer | | | | | Selected Answer:|  b.  Economic profits to decrease | Correct Answer:|  b.  Economic profits to decrease |

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* Question 6
1 out of 1 points
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| A hedge fund manager generated a 15% return (after fees) last year. Funds indexed to the S&P 500 used as his benchmark earned 13%. Taking the opportunity cost of equity capital into account, what was the fund manager's total return? Answer | | | | | Selected Answer:|  a.  2 percent|

Correct Answer:|  a.  2 percent|
Response Feedback: | Your capital had alternative uses. The manager generated a return of 15%, but by entrusting him with your capital you sacrificed 13% that you could've earned investing in a indexed fund. The return offered was 15% - 13% = 2%.

This is why investment managers often include benchmarks to evaluate how well they fared over a given period (quarter, year, etc).|
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* Question 7
1 out of 1 points
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| Have you ever noticed that the grounds of city-owned parks are often more polluted than those of country clubs? A possible reason for this is:Answer | | | | | Selected Answer:|  b.  Property rights are more clearly assigned in the case of the country club (or any private club for that matter) than in the case of a public park providing a greater incentive to take good care of the grounds| Correct Answer:|  b.  Property rights are more clearly assigned in the case of the country club (or any private club for that matter) than in the case of a public park providing a greater incentive to take good care of the grounds|

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* Question 8
1 out of 1 points
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| To maximize the net benefit of performing an activity (such as studying for a test), you should continue to perform the activity (study) until the total benefit equals the total cost, thus guaranteeing the maximal net benefit from the activity. Answer | | | | | Selected Answer: |  False|

Correct Answer: |  False|
Response Feedback: | You should continue to study as long as MB (additional...
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