Chapter\u00a01″\ufffdIntroduction\u00a0and\u00a0Goals\u00a0of\u00a0the\u00a0Firm\t\u00a0\tMULTIPLE\u00a0CHOICE\t\u00a0\t1. The\u00a0form\u00a0of\u00a0economics\u00a0most\u00a0relevant\u00a0to\u00a0managerial\u00a0decision-making\u00a0within\u00a0the\u00a0firm\u00a0is:\t\u00a0\t2. If\u00a0one\u00a0defines\u00a0incremental\u00a0cost\u00a0as\u00a0the\u00a0change\u00a0in\u00a0total\u00a0cost\u00a0resulting\u00a0from\u00a0a\u00a0decision,\u00a0and\u00a0incremental\u00a0revenue\u00a0as\u00a0the\u00a0change\u00a0in\u00a0total\u00a0revenue\u00a0resulting\u00a0from\u00a0a\u00a0decision,\u00a0any\u00a0business\u00a0decision\u00a0is\u00a0profitable\u00a0if:\t\u00a0\t3. In\u00a0the\u00a0shareholder\u00a0wealth\u00a0maximization\u00a0model,\u00a0the\u00a0value\u00a0of\u00a0a\u00a0firm’s\u00a0stock\u00a0is\u00a0equal\u00a0to\u00a0the\u00a0present\u00a0value\u00a0of\u00a0all\u00a0expected\u00a0future\u00a0____\u00a0discounted\u00a0at\u00a0the\u00a0stockholders’\u00a0required\u00a0rate\u00a0of\u00a0return.\t\u00a0\t4. Which\u00a0of\u00a0the\u00a0following\u00a0statements\u00a0concerning\u00a0the\u00a0shareholder\u00a0wealth\u00a0maximization\u00a0model\u00a0is\u00a0(are)\u00a0true?\t\u00a0\t5. According\u00a0to\u00a0the\u00a0profit-maximization\u00a0goal,\u00a0the\u00a0firm\u00a0should\u00a0attempt\u00a0to\u00a0maximize\u00a0short-run\u00a0profits\u00a0since\u00a0there\u00a0is\u00a0too\u00a0much\u00a0uncertainty\u00a0associated\u00a0with\u00a0long-run\u00a0profits.\t\u00a0\t\u00a0\t6. According\u00a0to\u00a0the\u00a0innovation\u00a0theory\u00a0of\u00a0profit,\u00a0above-normal\u00a0profits\u00a0are\u00a0necessary\u00a0to\u00a0compensate\u00a0the\u00a0owners\u00a0of\u00a0the\u00a0firm\u00a0for\u00a0the\u00a0risk\u00a0they\u00a0assume\u00a0when\u00a0making\u00a0their\u00a0investments.\t\u00a0\t7. According\u00a0to\u00a0the\u00a0managerial\u00a0efficiency\u00a0theory\u00a0of\u00a0profit,\u00a0above-normal\u00a0profits\u00a0can\u00a0arise\u00a0because\u00a0of\u00a0high-quality\u00a0managerial\u00a0skills.\t\u00a0\t8. Which\u00a0of\u00a0the\u00a0following\u00a0(if\u00a0any)\u00a0is\u00a0not\u00a0a\u00a0factor\u00a0affecting\u00a0the\u00a0profit\u00a0performance\u00a0of\u00a0firms:\t\u00a0\t9. Agency\u00a0problems\u00a0and\u00a0costs\u00a0are\u00a0incurred\u00a0whenever\u00a0the\u00a0owners\u00a0of\u00a0a\u00a0firm\u00a0delegate\u00a0decision-making\u00a0authority\u00a0to\u00a0management.\t\u00a0\t10. Economic\u00a0profit\u00a0is\u00a0defined\u00a0as\u00a0the\u00a0difference\u00a0between\u00a0revenue\u00a0and\u00a0____.\t\u00a0\t11. Income\u00a0tax\u00a0payments\u00a0are\u00a0an\u00a0example\u00a0of\u00a0____.\t\u00a0\t\u00a0\t\u00a0\t12. Various\u00a0executive\u00a0compensation\u00a0plans\u00a0have\u00a0been\u00a0employed\u00a0to\u00a0motivate\u00a0managers\u00a0to\u00a0make\u00a0decisions\u00a0that\u00a0maximize\u00a0shareholder\u00a0wealth.\u00a0These\u00a0include:\t\u00a0\t13. The\u00a0common\u00a0factors\u00a0that\u00a0give\u00a0rise\u00a0to\u00a0all\u00a0principal-agent\u00a0problems\u00a0include\u00a0the\t\u00a0\t14. The\u00a0Saturn\u00a0Corporation\u00a0(once\u00a0a\u00a0division\u00a0of\u00a0GM)\u00a0was\u00a0permanently\u00a0closed\u00a0in\u00a02009.\u00a0\u00a0What\u00a0went\u00a0wrong\u00a0with\u00a0Saturn?\t\u00a0\t15.\u00a0\u00a0A\u00a0Real\u00a0Option\u00a0Value\u00a0is:\t\u00a0\t\u00a0\t16. Which\u00a0of\u00a0the\u00a0following\u00a0will\u00a0increase\u00a0(V0),\u00a0the\u00a0shareholder\u00a0wealth\u00a0maximization\u00a0model\u00a0of\u00a0the\u00a0firm:\tV0\u2219(shares\u00a0outstanding)\u00a0=\u00a0S\u00a5t=1(pt\u00a0)\u00a0\/\u00a0(1+ke)t\u00a0\u00a0\u00a0+\u00a0Real\u00a0Option\u00a0Value.\t\u00a0\t\u00a0\t17. The\u00a0primary\u00a0objective\u00a0of\u00a0a\u00a0for-profit\u00a0firm\u00a0is\u00a0to\u00a0___________.\t\u00a0\t18. Possible\u00a0goals\u00a0of\u00a0Not-For-Profit\u00a0(NFP)\u00a0enterprises\u00a0include\u00a0all\u00a0of\u00a0the\u00a0following\u00a0EXCEPT:\u00a0\t\u00a0\t19. 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The\u00a0level\u00a0of\u00a0an\u00a0economic\u00a0activity\u00a0should\u00a0be\u00a0increased\u00a0to\u00a0the\u00a0point\u00a0where\u00a0the\u00a0____\u00a0is\u00a0zero.\t\u00a0\t3. The\u00a0net\u00a0present\u00a0value\u00a0of\u00a0an\u00a0investment\u00a0represents\t\u00a0\t4. Generally,\u00a0investors\u00a0expect\u00a0that\u00a0projects\u00a0with\u00a0high\u00a0expected\u00a0net\u00a0present\u00a0values\u00a0also\u00a0will\u00a0be\u00a0projects\u00a0with\t\u00a0\t5. An\u00a0closest\u00a0example\u00a0of\u00a0a\u00a0risk-free\u00a0security\u00a0is\t\u00a0\t6. The\u00a0standard\u00a0deviation\u00a0is\u00a0appropriate\u00a0to\u00a0compare\u00a0the\u00a0risk\u00a0between\u00a0two\u00a0investments\u00a0only\u00a0if\t\u00a0\t7. 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An\u00a0investment\u00a0advisor\u00a0plans\u00a0a\u00a0portfolio\u00a0your\u00a085\u00a0year\u00a0old\u00a0risk-averse\u00a0grandmother.\u00a0\u00a0Her\u00a0portfolio\u00a0currently\u00a0consists\u00a0of\u00a060%\u00a0bonds\u00a0and\u00a040%\u00a0blue\u00a0chip\u00a0stocks.\u00a0\u00a0This\u00a0portfolio\u00a0is\u00a0estimated\u00a0to\u00a0have\u00a0an\u00a0expected\u00a0return\u00a0of\u00a06%\u00a0and\u00a0with\u00a0a\u00a0standard\u00a0deviation\u00a012%.\u00a0\u00a0What\u00a0is\u00a0the\u00a0probability\u00a0that\u00a0she\u00a0makes\u00a0less\u00a0than\u00a00%\u00a0in\u00a0a\u00a0year?\u00a0[A\u00a0portion\u00a0of\u00a0Appendix\u00a0B1\u00a0is\u00a0given\u00a0below,\u00a0where\u00a0z\u00a0=\u00a0(x\u00a0–\u00a0m)\/s , with\u00a0m as\u00a0the\u00a0mean\u00a0and\u00a0s as\u00a0the\u00a0standard\u00a0deviation.]\t17. 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Suppose\u00a0we\u00a0estimate\u00a0that\u00a0the\u00a0demand\u00a0elasticity\u00a0for\u00a0fine\u00a0leather\u00a0jackets\u00a0is\u00a0\u00a0.7\u00a0at\u00a0their\u00a0current\u00a0prices.\u00a0\u00a0Then\u00a0we\u00a0know\u00a0that:\t\u00a0\t\u00a0\t2. If\u00a0demand\u00a0were\u00a0inelastic,\u00a0then\u00a0we\u00a0should\u00a0immediately:\t\u00a0\t3. 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Suppose\u00a0nominal\u00a0interest\u00a0rates\u00a0in\u00a0the\u00a0U.S.\u00a0rise\u00a0from\u00a04.6%\u00a0to\u00a05%\u00a0and\u00a0decline\u00a0in\u00a0Britain\u00a0from\u00a06%\u00a0to\u00a05.5%,\u00a0while\u00a0U.S.\u00a0consumer\u00a0inflation\u00a0remains\u00a0unchanged\u00a0at\u00a01.9%\u00a0and\u00a0British\u00a0inflation\u00a0declines\u00a0from\u00a04%\u00a0to\u00a03%.\u00a0In\u00a0addition\u00a0suppose,\u00a0real\u00a0growth\u00a0in\u00a0the\u00a0U.S.\u00a0is\u00a0forecasted\u00a0for\u00a0next\u00a0year\u00a0at\u00a04%\u00a0and\u00a0in\u00a0Britain\u00a0real\u00a0growth\u00a0is\u00a0forecasted\u00a0at\u00a05%.\u00a0Finally,\u00a0suppose\u00a0producer\u00a0price\u00a0inflation\u00a0in\u00a0the\u00a0U.S.\u00a0is\u00a0declining\u00a0from\u00a02%\u00a0to\u00a01%\u00a0while\u00a0in\u00a0Britain\u00a0producer\u00a0price\u00a0inflation\u00a0is\u00a0rising\u00a0from\u00a02%\u00a0to\u00a03.2%.\u00a0Explain\u00a0what\u00a0effect\u00a0each\u00a0of\u00a0these\u00a0factors\u00a0would\u00a0have\u00a0on\u00a0the\u00a0long-term\u00a0trend\u00a0exchange\u00a0rate\u00a0(\u00a0\u00a0per\u00a0$)\u00a0and\u00a0why?\t\u00a0\tChapter\u00a07″\ufffdProduction\u00a0Economics\t\u00a0\tMULTIPLE\u00a0CHOICE\t\u00a0\t\u00a0\t1. What’s\u00a0true\u00a0about\u00a0both\u00a0the\u00a0short-run\u00a0and\u00a0long-run\u00a0in\u00a0terms\u00a0of\u00a0production\u00a0and\u00a0cost\u00a0analysis?\t\u00a0\t2. The\u00a0marginal\u00a0product\u00a0is\u00a0defined\u00a0as:\t\u00a0\t3. Fill\u00a0in\u00a0the\u00a0missing\u00a0data\u00a0to\u00a0solve\u00a0this\u00a0problem.\t\u00a0\t4. The\u00a0following\u00a0is\u00a0a\u00a0Cobb-Douglas\u00a0production\u00a0function:\u00a0\u00a0Q\u00a0=\u00a01.75K0.5\u2219L0.5.\u00a0\u00a0What\u00a0is\u00a0correct\u00a0here?\t5. Suppose\u00a0you\u00a0have\u00a0a\u00a0Cobb-Douglas\u00a0function\u00a0with\u00a0a\u00a0capital\u00a0elasticity\u00a0of\u00a0output\u00a0(\u03b1)\u00a0of\u00a00.28\u00a0and\u00a0a\u00a0labor\u00a0elasticity\u00a0of\u00a0output\u00a0(\u03b2)\u00a0of\u00a00.84.\u00a0\u00a0What\u00a0statement\u00a0is\u00a0correct?\t\u00a0\t6. The\u00a0Cobb-Douglas\u00a0production\u00a0function\u00a0is:\u00a0\u00a0Q\u00a0=\u00a01.4*L0.6*K0.5.\u00a0\u00a0What\u00a0would\u00a0be\u00a0the\u00a0percentage\u00a0change\u00a0in\u00a0output\u00a0(%\u2206Q)\u00a0if\u00a0labor\u00a0grows\u00a0by\u00a03.0%\u00a0and\u00a0capital\u00a0is\u00a0cut\u00a0by\u00a05.0%?\u00a0\t\u00a0\t7. If\u00a0the\u00a0marginal\u00a0product\u00a0of\u00a0labor\u00a0is\u00a0100\u00a0and\u00a0the\u00a0price\u00a0of\u00a0labor\u00a0is\u00a010,\u00a0while\u00a0the\u00a0marginal\u00a0product\u00a0of\u00a0capital\u00a0is\u00a0200\u00a0and\u00a0the\u00a0price\u00a0of\u00a0capital\u00a0is\u00a0$30,\u00a0then\u00a0what\u00a0should\u00a0the\u00a0firm?\u00a0\u00a0\t\u00a0\t8. The\u00a0marginal\u00a0rate\u00a0of\u00a0technical\u00a0substitution\u00a0may\u00a0be\u00a0defined\u00a0as\u00a0all\u00a0of\u00a0the\u00a0following\u00a0except:\t\u00a0\t9. The\u00a0law\u00a0of\u00a0diminishing\u00a0marginal\u00a0returns:\t\u00a0\t10. The\u00a0combinations\u00a0of\u00a0inputs\u00a0costing\u00a0a\u00a0constant\u00a0C\u00a0dollars\u00a0is\u00a0called:\t\u00a0\t11. In\u00a0a\u00a0relationship\u00a0among\u00a0total,\u00a0average\u00a0and\u00a0marginal\u00a0products,\u00a0where\u00a0TP\u00a0is\u00a0maximized:\t\u00a0\t12. Holding\u00a0the\u00a0total\u00a0output\u00a0constant,\u00a0the\u00a0rate\u00a0at\u00a0which\u00a0one\u00a0input\u00a0X\u00a0may\u00a0be\u00a0substituted\u00a0for\u00a0another\u00a0input\u00a0Y\u00a0in\u00a0a\u00a0production\u00a0process\u00a0is:\t\u00a0\t13. Which\u00a0of\u00a0the\u00a0following\u00a0is\u00a0never\u00a0negative?\t\u00a0\t14. Concerning\u00a0the\u00a0maximization\u00a0of\u00a0output\u00a0subject\u00a0to\u00a0a\u00a0cost\u00a0constraint,\u00a0which\u00a0of\u00a0the\u00a0following\u00a0statements\u00a0(if\u00a0any)\u00a0are\u00a0true?\t\u00a0\t15. In\u00a0a\u00a0production\u00a0process,\u00a0an\u00a0excessive\u00a0amount\u00a0of\u00a0the\u00a0variable\u00a0input\u00a0relative\u00a0to\u00a0the\u00a0fixed\u00a0input\u00a0is\u00a0being\u00a0used\u00a0to\u00a0produce\u00a0the\u00a0desired\u00a0output.\u00a0This\u00a0statement\u00a0is\u00a0true\u00a0for:\t\u00a0\t16. Marginal\u00a0revenue\u00a0product\u00a0is:\t\u00a0\t17. The\u00a0isoquants\u00a0for\u00a0inputs\u00a0that\u00a0are\u00a0perfect\u00a0substitutes\u00a0for\u00a0one\u00a0another\u00a0consist\u00a0of\u00a0a\u00a0series\u00a0of:\t18. In\u00a0production\u00a0and\u00a0cost\u00a0analysis,\u00a0the\u00a0short\u00a0run\u00a0is\u00a0the\u00a0period\u00a0of\u00a0time\u00a0in\u00a0which\u00a0one\u00a0(or\u00a0more)\u00a0of\u00a0the\u00a0resources\u00a0employed\u00a0in\u00a0the\u00a0production\u00a0process\u00a0is\u00a0fixed\u00a0or\u00a0incapable\u00a0of\u00a0being\u00a0varied.\t\u00a0\t19. Marginal\u00a0revenue\u00a0product\u00a0is\u00a0defined\u00a0as\u00a0the\u00a0amount\u00a0that\u00a0an\u00a0additional\u00a0unit\u00a0of\u00a0the\u00a0variable\u00a0input\u00a0adds\u00a0to\u00a0____.\t\u00a0\t20. Marginal\u00a0factor\u00a0cost\u00a0is\u00a0defined\u00a0as\u00a0the\u00a0amount\u00a0that\u00a0an\u00a0additional\u00a0unit\u00a0of\u00a0the\u00a0variable\u00a0input\u00a0adds\u00a0to\u00a0____.\t21. The\u00a0isoquants\u00a0for\u00a0inputs\u00a0that\u00a0are\u00a0perfect\u00a0complements\u00a0for\u00a0one\u00a0another\u00a0consist\u00a0of\u00a0a\u00a0series\u00a0of:\t\u00a0\t22. Given\u00a0a\u00a0Cobb-Douglas\u00a0production\u00a0function\u00a0estimate\u00a0of\u00a0Q\u00a0=\u00a01.19L.72K.18\u00a0for\u00a0a\u00a0given\u00a0industry,&<\/p>\n","protected":false},"excerpt":{"rendered":"
Chapter\u00a01″\ufffdIntroduction\u00a0and\u00a0Goals\u00a0of\u00a0the\u00a0Firm \u00a0 MULTIPLE\u00a0CHOICE \u00a0 1. The\u00a0form\u00a0of\u00a0economics\u00a0most\u00a0relevant\u00a0to\u00a0managerial\u00a0decision-making\u00a0within\u00a0the\u00a0firm\u00a0is: \u00a0 2. If\u00a0one\u00a0defines\u00a0incremental\u00a0cost\u00a0as\u00a0the\u00a0change\u00a0in\u00a0total\u00a0cost\u00a0resulting\u00a0from\u00a0a\u00a0decision,\u00a0and\u00a0incremental\u00a0revenue\u00a0as\u00a0the\u00a0change\u00a0in\u00a0total\u00a0revenue\u00a0resulting\u00a0from\u00a0a\u00a0decision,\u00a0any\u00a0business\u00a0decision\u00a0is\u00a0profitable\u00a0if: \u00a0 3. In\u00a0the\u00a0shareholder\u00a0wealth\u00a0maximization\u00a0model,\u00a0the\u00a0value\u00a0of\u00a0a\u00a0firm’s\u00a0stock\u00a0is\u00a0equal\u00a0to\u00a0the\u00a0present\u00a0value\u00a0of\u00a0all\u00a0expected\u00a0future\u00a0____\u00a0discounted\u00a0at\u00a0the\u00a0stockholders’\u00a0required\u00a0rate\u00a0of\u00a0return. \u00a0 4. Which\u00a0of\u00a0the\u00a0following\u00a0statements\u00a0concerning\u00a0the\u00a0shareholder\u00a0wealth\u00a0maximization\u00a0model\u00a0is\u00a0(are)\u00a0true? \u00a0 5. According\u00a0to\u00a0the\u00a0profit-maximization\u00a0goal,\u00a0the\u00a0firm\u00a0should\u00a0attempt\u00a0to\u00a0maximize\u00a0short-run\u00a0profits\u00a0since\u00a0there\u00a0is\u00a0too\u00a0much\u00a0uncertainty\u00a0associated\u00a0with\u00a0long-run\u00a0profits. \u00a0 \u00a0 6. According\u00a0to\u00a0the\u00a0innovation\u00a0theory\u00a0of\u00a0profit,\u00a0above-normal\u00a0profits\u00a0are\u00a0necessary\u00a0to\u00a0compensate\u00a0the\u00a0owners\u00a0of\u00a0the\u00a0firm\u00a0for\u00a0the\u00a0risk\u00a0they\u00a0assume\u00a0when\u00a0making\u00a0their\u00a0investments. \u00a0 7. According\u00a0to\u00a0the\u00a0managerial\u00a0efficiency\u00a0theory\u00a0of\u00a0profit,\u00a0above-normal\u00a0profits\u00a0can\u00a0arise\u00a0because\u00a0of\u00a0high-quality\u00a0managerial\u00a0skills. \u00a0 8. Which\u00a0of\u00a0the\u00a0following\u00a0(if\u00a0any)\u00a0is\u00a0not\u00a0a\u00a0factor\u00a0affecting\u00a0the\u00a0profit\u00a0performance\u00a0of\u00a0firms: \u00a0 9. Agency\u00a0problems\u00a0and\u00a0costs\u00a0are\u00a0incurred\u00a0whenever\u00a0the\u00a0owners\u00a0of\u00a0a\u00a0firm\u00a0delegate\u00a0decision-making\u00a0authority\u00a0to\u00a0management. \u00a0 10. Economic\u00a0profit\u00a0is\u00a0defined\u00a0as\u00a0the\u00a0difference\u00a0between\u00a0revenue\u00a0and\u00a0____. \u00a0 11. Income\u00a0tax\u00a0payments\u00a0are\u00a0an\u00a0example\u00a0of\u00a0____. \u00a0 \u00a0 \u00a0 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-210785","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210785","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=210785"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/210785\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=210785"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=210785"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=210785"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}