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Eco 550 Midterm Part 2 Latest May 2015 And Other 3 Versions Posted


Question 1

For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?

ordinary least squares regression on historical data

market experiments, where the price is set differently in two markets

consumer surveys, where potential customers hear about the product and are asked their opinions

double log functional form regression model

Question 2

Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.

opinion polling

barometric forecasting

econometric forecasting

time-series forecasting
Question 3

Consumer expenditure plans is an example of a forecasting method. Which of the general categories best described this example?

time-series forecasting techniques

barometric techniques

survey techniques and opinion polling

econometric techniques

input-output analysis

Question 4

If two alternative economic models are offered, other things equal, we would

tend to pick the one with the lowest R2.

select the model that is the most expensive to estimate.

pick the model that was the most complex.

select the model that gave the most accurate forecasts

Question 5

Time-series forecasting models:

are useful whenever changes occur rapidly and wildly

are more effective in making long-run forecasts than short-run forecasts

are based solely on historical observations of the values of the variable being forecasted

attempt to explain the underlying causal relationships which produce the observed outcome

Question 6

The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:

secular trend

cyclical variation

seasonal effect

unpredictable random factor

Question 7

If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar?

The value of the dollar falls when US interest rates rise.

The value of the dollar rises when US interest rates rise.

The value of the dollar is not related to US interest rates.

This is known as Purchasing Power Parity or PPP

Question 8

The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time

increase exports

reduce the competitive pressure on prices

lower the value of the currency in the country with the higher inflation rate

increase foreign aid

increase the speculative demand for the currency
Question 9

Trading partners should specialize in producing goods in accordance with comparative advantage, then trade and diversify in consumption because

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

Question 10

An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?

domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase

domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase

domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease

domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease

Question 11

In a recession, the trade balance often improves because

service exports exceed manufactured good exports

banks sell depressed assets

fewer households can afford luxury imports

direct investment abroad declines

the capital account exceeds the current account

Question 12

European Union labor costs exceed U.S. and British labor costs primarily because

worker productivity is lower in the EU

union wages are higher in the EU

layoffs and plant closings are more restrictive in the U.S. and Britain

the amount of paid time off is higher in the EU

labor-management relations are better in the EU

Question 13

Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would

Decrease the demand for yen and decrease the supply of the yen.

Increase the demand for yen and decrease the supply of the yen.

Increase the demand and increase the supply of yen.

Decrease both the supply and the demand of yen.

Have no impact on the demand or supply of the yen.

Question 14

The isoquants for inputs that are perfect substitutes for one another consist of a series of:

right angles

parallel lines

concentric circles

right triangles

Question 15

The marginal product is defined as:

The ratio of total output to the amount of the variable input used in producing the output

The incremental change in total output that can be produced by the use of one more unit of the variable input in the production process

The percentage change in output resulting from a given percentage change in the amount

The amount of fixed cost involved

Question 16

If the marginal product of labor is 100 and the price of labor is 10, while the marginal product of capital is 200 and the price of capital is $30, then what should the firm?

The firm should use relatively more capital

The firm should use relatively more labor

The firm should not make any changes – they are currently efficient

Using the Equimarginal Criterion, we can’t determine the firm’s efficiency level

Question 17

Given a Cobb-Douglas production function estimate of Q = 1.19L.72K.18 for a given industry, this industry would have:

increasing returns to scale

constant returns to scale

decreasing returns to scale

negative returns to scale

Question 18

In a production process, an excessive amount of the variable input relative to the fixed input is being used to produce the desired output. This statement is true for:

stage II

stages I and II

when Ep = 1

stage III

Question 19

The marginal rate of technical substitution may be defined as all of the following except:

the rate at which one input may be substituted for another input in the production process, while total output remains constant

equal to the negative slope of the isoquant at any point on the isoquant

the rate at which all combinations of inputs have equal total costs

equal to the ratio of the marginal products of X and Y

Question 20

The cost function is:

a means for expressing output as a function of cost

a schedule or mathematical relationship showing the total cost of producing various quantities of output

similar to a profit and loss statement

incapable in being developed from statistical regression analysis

Question 21

Economies of Scope refers to situations where per unit costs are:

Unaffected when two or more products are produced

Reduced when two or more products are produced

Increased when two or more products are produced

Demonstrating constant returns to scale

Demonstrating decreasing returns to scale

Question 22

Economies of scale exist whenever long-run average costs:

Increase as output is increased

Remain constant as output is increased

Decrease as output is increased

Decline and then rise as output is increased

Question 23

The existence of diseconomies of scale (size) for the firm is hypothesized to result from:

transportation costs

imperfections in the labor market

imperfections in the capital markets

problems of coordination and control encountered by management

Question 24

What method of inventory valuation should be used for economic decision-making problems?

book value

original cost

current replacement cost

cost or market, whichever is lower

historical cost

Question 25

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Opportunity costs

Marginal costs

Relevant costs

Sunk costs


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