ECO 550 MIDTERM EXAM PART 2 LATEST(TWO VERSION)

VERSION 1

Question 1

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

Answer

[removed]		time-series forecasting techniques
[removed]		barometric techniques
[removed]		survey techniques and opinion polling
[removed]		econometric techniques
[removed]		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

[removed]		ordinary least squares regression on historical data
[removed]		market experiments, where the price is set differently in two markets
[removed]		consumer surveys, where potential customers hear about the product and are asked their opinions
[removed]		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

[removed]		econometric technique
[removed]		time-series forecasting
[removed]		opinion polling
[removed]		barometric technique
[removed]		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

[removed]		secular trend
[removed]		cyclical variation
[removed]		seasonal effect
[removed]		unpredictable random factor

Question 5

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

Answer

[removed]		data would be collected for a given firm for several consecutive periods (e.g., months).
[removed]		data would be collected for several different firms at a single point in time.
[removed]		regression analysis comes from data randomly taken from different points in time.
[removed]		data is created from a random number generation program.
[removed]		use of regression analysis would impossible in time series

Question 6

Time-series forecasting models:

Answer

[removed]		are useful whenever changes occur rapidly and wildly
[removed]		are more effective in making long-run forecasts than short-run forecasts
[removed]		are based solely on historical observations of the values of the variable being forecasted
[removed]		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

[removed]		Chinese assembly labor represents only 47 % of the wholesale cost
[removed]		the iPad’s popularity has triggered an enormous number of unit sales
[removed]		wholesale prices only count in the trade statistics if final product prices are higher
[removed]		as with foreign-assembled minivans, most of the subassembly components come from the U.S.
[removed]		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

[removed]		increase exports
[removed]		reduce the competitive pressure on prices
[removed]		lower the value of the currency in the country with the higher inflation rate
[removed]		increase foreign aid
[removed]		increase the speculative demand for the currency

Question 9

In a recession, the trade balance often improves because

Answer

[removed]		service exports exceed manufactured good exports
[removed]		banks sell depressed assets
[removed]		fewer households can afford luxury imports
[removed]		direct investment abroad declines
[removed]		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

[removed]		domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
[removed]		domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
[removed]		domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
[removed]		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

[removed]		Even more intraregional trade of goods across the three countries.
[removed]		Lower transaction costs of trading within North America.
[removed]		A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
[removed]		Less migration of workers across the three countries.
[removed]		An elimination of correlated macroeconomic shocks across the countries.

Question 12

Purchasing power parity or PPP says the ratios composed of:

Answer

[removed]		interest rates explain the direction of exchange rates.
[removed]		growth rates explain the direction of exchange rates.
[removed]		inflation rates explain the direction of exchange rates.
[removed]		services explain the direction exchange rates.
[removed]		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

[removed]		Decrease the demand for yen and decrease the supply of the yen.
[removed]		Increase the demand for yen and decrease the supply of the yen.
[removed]		Increase the demand and increase the supply of yen.
[removed]		Decrease both the supply and the demand of yen.
[removed]		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

[removed]		AP is maximized
[removed]		AP is equal to zero
[removed]		MP is maximized
[removed]		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

[removed]		The firm should use relatively more capital
[removed]		The firm should use relatively more labor
[removed]		The firm should not make any changes – they are currently efficient
[removed]		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

[removed]		right angles
[removed]		parallel lines
[removed]		concentric circles
[removed]		right triangles

Question 17

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

Answer

[removed]		allow one to make estimates of cost-output relationships
[removed]		allow one to make predictions about a resulting increase in output for a given increase in the inputs
[removed]		aid one in gaining accurate empirical values for economic variables
[removed]		calculate a short-run linear total cost function

Question 18

The marginal product is defined as:

Answer

[removed]		The ratio of total output to the amount of the variable input used in producing the output
[removed]		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
[removed]		The percentage change in output resulting from a given percentage change in the amount
[removed]		The amount of fixed cost involved.

Question 19

Which of the following is never negative?

Answer

[removed]		marginal product
[removed]		average product
[removed]		production elasticity
[removed]		marginal rate of technical substitution
[removed]		slope of the isocost lines

Question 20

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

Answer

[removed]		book value
[removed]		original cost
[removed]		current replacement cost
[removed]		cost or market, whichever is lower
[removed]		historical cost

Question 21

Economies of scale exist whenever long-run average costs:

Answer

[removed]		Increase as output is increased
[removed]		Remain constant as output is increased
[removed]		Decrease as output is increased
[removed]		Decline and then rise as output is increased

Question 22

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

Answer

[removed]		10.2
[removed]		102
[removed]		37.1
[removed]		371
[removed]		321

Question 23

For a short-run cost function which of the following statements is (are) not true?

Answer

[removed]		The average fixed cost function is monotonically decreasing.
[removed]		The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum.
[removed]		The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum.
[removed]		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

[removed]		transportation costs
[removed]		imperfections in the labor market
[removed]		imperfections in the capital markets
[removed]		problems of coordination and control encountered by management

Question 25

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

Answer

[removed]		Unaffected when two or more products are produced
[removed]		Reduced when two or more products are produced
[removed]		Increased when two or more products are produced
[removed]		Demonstrating constant returns to scale
[removed]		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

[removed]		secular trend
[removed]		cyclical variation
[removed]		seasonal effect
[removed]		unpredictable random factor

4 points

Question 2

Time-series forecasting models:

Answer

[removed]		are useful whenever changes occur rapidly and wildly
[removed]		are more effective in making long-run forecasts than short-run forecasts
[removed]		are based solely on historical observations of the values of the variable being forecasted
[removed]		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

[removed]		tend to pick the one with the lowest R2.
[removed]		select the model that is the most expensive to estimate.
[removed]		pick the model that was the most complex.
[removed]		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

[removed]		opinion polling
[removed]		barometric forecasting
[removed]		econometric forecasting
[removed]		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

[removed]		econometric technique
[removed]		time-series forecasting
[removed]		opinion polling
[removed]		barometric technique
[removed]		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

[removed]		ordinary least squares regression on historical data
[removed]		market experiments, where the price is set differently in two markets
[removed]		consumer surveys, where potential customers hear about the product and are asked their opinions
[removed]		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

[removed]		The value of the dollar falls when US interest rates rise.
[removed]		The value of the dollar rises when US interest rates rise.
[removed]		The value of the dollar is not related to US interest rates.
[removed]		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

[removed]		sacrifice market share abroad but build market share at home
[removed]		increase production volume to realize learning curve advantages
[removed]		sell foreign plants and equipment to lower their debt
[removed]		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

[removed]		higher anticipated costs of production in the U.S.
[removed]		higher interest rates and higher inflation in the U.S.
[removed]		higher growth rates in the trading partner's economy
[removed]		a change in the terms of trade
[removed]		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

[removed]		out-of-pocket costs of production decline
[removed]		free trade areas protect infant industries
[removed]		economies of scale are present
[removed]		manufacturers face diminishing returns
[removed]		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

[removed]		domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
[removed]		domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
[removed]		domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
[removed]		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

[removed]		both the US importers from Britain and US exporters to Britain will be helped by the appreciating pound.
[removed]		the US exporters will find it harder to sell to foreign customers in Britain.
[removed]		the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.
[removed]		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

[removed]		Chinese assembly labor represents only 47 % of the wholesale cost
[removed]		the iPad’s popularity has triggered an enormous number of unit sales
[removed]		wholesale prices only count in the trade statistics if final product prices are higher
[removed]		as with foreign-assembled minivans, most of the subassembly components come from the U.S.
[removed]		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

[removed]		The firm should use relatively more capital
[removed]		The firm should use relatively more labor
[removed]		The firm should not make any changes – they are currently efficient
[removed]		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

[removed]		stage II
[removed]		stages I and II
[removed]		when Ep = 1
[removed]		stage III

4 points

Question 16

Which of the following is never negative?

Answer

[removed]		marginal product
[removed]		average product
[removed]		production elasticity
[removed]		marginal rate of technical substitution
[removed]		slope of the isocost lines

4 points

Question 17

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

Answer

[removed]		an isocost line
[removed]		an isoquant curve
[removed]		the MRTS
[removed]		an isorevenue line

4 points

Question 18

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

Answer

[removed]		the rate at which one input may be substituted for another input in the production process, while total output remains constant
[removed]		equal to the negative slope of the isoquant at any point on the isoquant
[removed]		the rate at which all combinations of inputs have equal total costs
[removed]		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

[removed]		AP is maximized
[removed]		AP is equal to zero
[removed]		MP is maximized
[removed]		MP is equal to zero

4 points

Question 20

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

Answer

[removed]		Unaffected when two or more products are produced
[removed]		Reduced when two or more products are produced
[removed]		Increased when two or more products are produced
[removed]		Demonstrating constant returns to scale
[removed]		Demonstrating decreasing returns to scale

4 points

Question 21

Economies of scale exist whenever long-run average costs:

Answer

[removed]		Increase as output is increased
[removed]		Remain constant as output is increased
[removed]		Decrease as output is increased
[removed]		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

[removed]		book value
[removed]		original cost
[removed]		current replacement cost
[removed]		cost or market, whichever is lower
[removed]		historical cost

4 points

Question 23

For a short-run cost function which of the following statements is (are) not true?

Answer

[removed]		The average fixed cost function is monotonically decreasing.
[removed]		The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum.
[removed]		The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum.
[removed]		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

[removed]		a means for expressing output as a function of cost
[removed]		a schedule or mathematical relationship showing the total cost of producing various quantities of output
[removed]		similar to a profit and loss statement
[removed]		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

[removed]		decreasing returns and declining average and marginal costs
[removed]		increasing returns and declining average and marginal costs
[removed]		increasing returns and increasing average and marginal costs
[removed]		decreasing returns and increasing average and marginal costs

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