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Eco 550 Midterm Part 2 Three Versions Posted Making 75 Questions

ECO 550 MIDTERM PART 2. THREE VERSIONS POSTED MAKING 75 QUESTIONS

Version 3
For studying demand relationships for a proposed new product that no one has ever used before, what would be the best method to use?
Answer

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

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:
Answer

econometric technique

time-series forecasting

opinion polling

barometric technique

judgment forecasting

The type of economic indicator that can best be used for business forecasting is the:
Answer

leading indicator

coincident indicator

lagging indicator

current business inventory indicator

optimism/pessimism indicator

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:
Answer

secular trend

cyclical variation

seasonal effect

unpredictable random factor

Time-series forecasting models:
Answer

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

The use of quarterly data to develop the forecasting model Yt = a +bYt?1 is an example of which forecasting technique?
Answer

Barometric forecasting

Time-series forecasting

Survey and opinion

Econometric methods based on an understanding of the underlying economic variables involved

Input-output analysis

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

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

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

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

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.

An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
Answer

higher anticipated costs of production in the U.S.

higher interest rates and higher inflation in the U.S.

higher growth rates in the trading partner’s economy

a change in the terms of trade

lower export industry productivity

If the British pound (?) appreciates by 10% against the dollar:
Answer

both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.

the US exporters will find it harder to sell to foreign customers in Britain.

the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.

both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.

In Chinese coastal provinces, brick housing for a fast expanding middle class is very comparable in size to housing in the U.S. for a family with median income of $51,000 because
Answer

median income per capita has risen in China to nearly equal median income in the U.S.

the Chinese government builds much of the housing in China

construction companies have begun to migrate to the coastal provinces of China

housing is an income inferior good

bricks, trade skill workers and construction labor are very cheap in China

The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
Answer

Even more intraregional trade of goods across the three countries.

Lower transaction costs of trading within North America.

A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.

Less migration of workers across the three countries.

An elimination of correlated macroeconomic shocks across the countries.

The primary purpose of the Cobb-Douglas power function is to:
Answer

allow one to make estimates of cost-output relationships

allow one to make predictions about a resulting increase in output for a given increase in the inputs

aid one in gaining accurate empirical values for economic variables

calculate a short-run linear total cost function

Marginal revenue product is defined as the amount that an additional unit of the variable input adds to ____.
Answer

marginal revenue

total output

total revenue

marginal product

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

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

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?
Answer

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

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:
Answer

stage II

stages I and II

when Ep = 1

stage III

Which of the following is never negative?
Answer

marginal product

average product

production elasticity

marginal rate of technical substitution

slope of the isocost lines

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

book value

original cost

current replacement cost

cost or market, whichever is lower

historical cost

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.

According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
Answer

decreasing returns and declining average and marginal costs

increasing returns and declining average and marginal costs

increasing returns and increasing average and marginal costs

decreasing returns and increasing average and marginal costs

The cost function is:
Answer

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

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

If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:
Answer

10.2

102

37.1

371

321

VERSION 1
Question 1

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

time-series forecasting techniques

barometric techniques

survey techniques and opinion polling

econometric techniques

input-output analysis

Question 2

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

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 3

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:
Answer

econometric technique

time-series forecasting

opinion polling

barometric technique

judgment forecasting

Question 4

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:
Answer

secular trend

cyclical variation

seasonal effect

unpredictable random factor

Question 5

An example of a time series data set is one for which the:
Answer

data would be collected for a given firm for several consecutive periods (e.g., months).

data would be collected for several different firms at a single point in time.

regression analysis comes from data randomly taken from different points in time.

data is created from a random number generation program.

use of regression analysis would impossible in time series

Question 6

Time-series forecasting models:
Answer

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 7

The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more than it should to the U.S. trade deficit with China because
Answer

Chinese assembly labor represents only 47 % of the wholesale cost

the iPad’s popularity has triggered an enormous number of unit sales

wholesale prices only count in the trade statistics if final product prices are higher

as with foreign-assembled minivans, most of the subassembly components come from the U.S.

the Chinese yuan is a managed currency

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
Answer

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

In a recession, the trade balance often improves because
Answer

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 10

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

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

The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
Answer

Even more intraregional trade of goods across the three countries.

Lower transaction costs of trading within North America.

A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.

Less migration of workers across the three countries.

An elimination of correlated macroeconomic shocks across the countries.

Question 12

Purchasing power parity or PPP says the ratios composed of:
Answer

interest rates explain the direction of exchange rates.

growth rates explain the direction of exchange rates.

inflation rates explain the direction of exchange rates.

services explain the direction exchange rates.

public opinion polls explain the direction of exchange rates

Question 13

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

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

In a relationship among total, average and marginal products, where TP is maximized:
Answer

AP is maximized

AP is equal to zero

MP is maximized

MP is equal to zero

Question 15

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?
Answer

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 16

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

right angles

parallel lines

concentric circles

right triangles

Question 17

The primary purpose of the Cobb-Douglas power function is to:
Answer

allow one to make estimates of cost-output relationships

allow one to make predictions about a resulting increase in output for a given increase in the inputs

aid one in gaining accurate empirical values for economic variables

calculate a short-run linear total cost function

Question 18

The marginal product is defined as:
Answer

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 19

Which of the following is never negative?
Answer

marginal product

average product

production elasticity

marginal rate of technical substitution

slope of the isocost lines

Question 20

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

book value

original cost

current replacement cost

cost or market, whichever is lower

historical cost

Question 21

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

Question 22

If TC = 321 + 55Q – 5Q2, then average total cost at Q = 10 is:
Answer

10.2

102

37.1

371

321

Question 23

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.

Question 24

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

Question 25

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

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

VERSION 2

Question 1

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:
Answer

secular trend

cyclical variation

seasonal effect

unpredictable random factor
4 points
Question 2

Time-series forecasting models:
Answer

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
4 points
Question 3

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

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

4 points
Question 4

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.
Answer

opinion polling

barometric forecasting

econometric forecasting

time-series forecasting
4 points
Question 5

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading, coincident or lagging indicators is known as:
Answer

econometric technique

time-series forecasting

opinion polling

barometric technique

judgment forecasting
4 points
Question 6

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

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
4 points
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?
Answer

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.
4 points
Question 8

Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
Answer

sacrifice market share abroad but build market share at home

increase production volume to realize learning curve advantages

sell foreign plants and equipment to lower their debt

reduce the costs of transportation
4 points
Question 9

An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
Answer

higher anticipated costs of production in the U.S.

higher interest rates and higher inflation in the U.S.

higher growth rates in the trading partner’s economy

a change in the terms of trade

lower export industry productivity
4 points
Question 10

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
4 points
Question 11

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

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
4 points
Question 12

If the British pound (?) appreciates by 10% against the dollar:
Answer

both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.

the US exporters will find it harder to sell to foreign customers in Britain.

the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.

both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.
4 points
Question 13

The import of Apple iPads assembled in Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more than it should to the U.S. trade deficit with China because
Answer

Chinese assembly labor represents only 47 % of the wholesale cost

the iPad’s popularity has triggered an enormous number of unit sales

wholesale prices only count in the trade statistics if final product prices are higher

as with foreign-assembled minivans, most of the subassembly components come from the U.S.

the Chinese yuan is a managed currency
4 points
Question 14

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?
Answer

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
4 points
Question 15

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:
Answer

stage II

stages I and II

when Ep = 1

stage III
4 points
Question 16

Which of the following is never negative?
Answer

marginal product

average product

production elasticity

marginal rate of technical substitution

slope of the isocost lines
4 points
Question 17

The combinations of inputs costing a constant C dollars is called:
Answer

an isocost line

an isoquant curve

the MRTS

an isorevenue line
4 points
Question 18

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

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
4 points
Question 19

In a relationship among total, average and marginal products, where TP is maximized:
Answer

AP is maximized

AP is equal to zero

MP is maximized

MP is equal to zero
4 points
Question 20

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

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
4 points
Question 21

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
4 points
Question 22

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

book value

original cost

current replacement cost

cost or market, whichever is lower

historical cost
4 points
Question 23

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 points
Question 24

The cost function is:
Answer

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
4 points
Question 25

According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
Answer

decreasing returns and declining average and marginal costs

increasing returns and declining average and marginal costs

increasing returns and increasing average and marginal costs

decreasing returns and increasing average and marginal costs

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