Course 201920 Spring 2019 BUSI 620-B06 LUO
Test Test 1
Started 2/9/19 11:52 PM
Submitted 2/10/19 1:03 AM
Due Date 2/10/19 11:59 PM
Status Completed
Attempt Score 74 out of 80 points
Time Elapsed 1 hour, 10 minutes out of 2 hours
Instructions Time limit: 2 hours
40 multiple-choice questions
Open-book/open-notes
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the test.
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Question 1
2 out of 2 points
A country that has an abundance of cheap labor will tend to
Selected
Answer: export goods that are produced using a lot of labor
Answers: import goods that are produced using a lot of labor
refrain from international trade entirely
export goods that are produced using a lot of labor
export goods that are produced using little labor
Question 2
2 out of 2 points
If three of the eleven leading indicators move up, and the remaining eight are constant, the
diffusion index is
Selected
Answer: 27.3
Answers: 37.5
27.3
45.5
72.7
Question 3
2 out of 2 points
Buyers consider gasoline and SUV to be complements. If gasoline price increases, what would
you expect to occur in the SUV market?
Selected
Answer: demand would fall and price of SUV falls
Answers: demand would raise and price of SUV falls
demand would fall and price of SUV falls
demand would fall and price of SUV raises
demand would raise and price of SUV stays the same
Question 4
2 out of 2 points
As the economy emerged from the most recent recession, household income rose by 6%. Over
the same period, total expenditures on beef increased by 3%. Assuming that all other economic
variables were held constant,
Selected
Answer: beef must be a normal good
Answers: the income elasticity of demand must be equal to 2
beef must be a normal good
beef must be an inferior good
beef must be a luxury good
Question 5
0 out of 2 points
If the price elasticity of demand for a product is -5, and the income elasticity of demand for the
product is 2.5. If a 0.5% decrease in product price as accompanied by a 1% decrease in
consumer income, the firm's total sales will
Selected
Answer: decrease
Answers: increase
be the same
decrease
decrease and then increase
Question 6
2 out of 2 points
Regression analysis was used to estimate the following seasonal forecasting equation:
St = 124 + 18 D1 - 46 D2 - 28 D3 + 2.5 T
D1 is a dummy variable that is equal to one in the first quarter and zero otherwise; D2 is a
dummy variable that is equal to one in the second quarter and zero otherwise; and D3 is a
dummy variable that is equal to one in the third quarter and zero otherwise. Forecast the level
of sales in the second quarter of time period (T=10).
Selected
Answer: 103
Answers: 167
171
103
121
Question 7
2 out of 2 points
Which of the following would most likely make the demand for an item more elastic?
Selected
Answer: there are no costs of switching to competitors’ products
Answers: buyers perceive there to be few close substitutes for the item
the item represents a small fraction of consumers’ budgets
there are no costs of switching to competitors’ products
buyers have not had time to adjust to the price change
Question 8
2 out of 2 points
Regression analysis was used to estimate the following linear trend equation:
St = 10.5 + 0.25 t
Use this equation to forecast the value of the dependent variable (St) in time period of 10.
Selected
Answer: 13
Answers: 10.75
13
35.5
2.5
Question 9
2 out of 2 points
Which of the following is a leading economic indicator?
Selected
Answer: stock prices, 500 common stocks
Answers: average prime interest rate charged by banks
stock prices, 500 common stocks
commercial and industrial loans outstanding
industrial production
Question 10
2 out of 2 points
A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average
variable cost of $150. If the firm's cost and revenue curves are linear, how much output must
the firm produce to break even?
Selected
Answer: 400
Answers: 500
400
300
The firm cannot break even.
Question 11
2 out of 2 points
If Sam’s, a local watering hole, increased the price of a pint of Guinness by 20%, it estimates
the number of MBA students purchasing Guinness would decrease by 4%. Based on this data,
Selected
Answer: total revenuees would increase because demand is inelastic
Answers: total revenues would increase because demand is elastic
total revenues would decrease because demand is elastic
total revenues would remain the same
total revenuees would increase because demand is inelastic
Question 12
2 out of 2 points
A leading indicator is a measure that usually
Selected
Answer: changes in the same directin as the general economy before the general
economy changes
Answers: changes in the same directin as the general economy before the general
economy changes
changes at the same time and in the same direction as the general economy
responds to a change in the general economy after a time lag
is constant
Question 13
2 out of 2 points
Which of the following is an explicit cost to a firm?
Selected
Answer: the cost of borrowing a loan from a bank
Answers: the rental value of property owned by the firm
the cost of the owner’s time
the cost of borrowing a loan from a bank
none of the above is an explicit cost
Question 14
2 out of 2 points
Which of the following would be referred to as "outsourcing"?
Selected
Answer: subcontracting production to firms in other countries
Answers: marketing products outside of a firm's home country
hiring temporary workers for the Thanksgiving shopping season
subcontracting production to firms in other countries
identifying and implementing production innovations
Question 15
2 out of 2 points
What is the present value of $1.21 received at the end of two years if the interest rate is 10%
and compounding is annual?
Selected
Answer: $1.00
Answers: $1.31
$1.21
$1.10
$1.00
Question 16
2 out of 2 points
If the t ratio for the slope of a simple linear regression equation is equal to 1.614 and the
critical values of the t distribution at the 1% and 5% levels of significance, respectively, are
3.499 and 2.365, then the slope is
Selected
Answer: not significantly different from zero
Answers: not significantly different from zero
significantly different from zero at both the 1% and the 5% levels
significantly different from zero at the 1% level but not at the 5% level
significantly different from zero at the 5% level but not at the 1% level
Question 17
2 out of 2 points
The level of sales in May, June, July, and August were 84, 92, 83, and 89, respectively. What is
the four-period moving average forecast of sales in September?
Selected
Answer: 87
Answers: 90
87
85
88
Question 18
2 out of 2 points
The Country Music Hall of Fame is considering lowering admission prices to increase gross
revenue. This plan will work if the price elasticity of demand for tickets is
Selected
Answer: elastic
Answers: inelastic
elastic
unit elastic
inverted
Question 19
0 out of 2 points
The forecast level of sales for the month of May was 240 units. Actual sales in May turned out
to be 200 units. Use an exponential smoothing coefficient of 0.8 to forecast sales for June.
Selected
Answer: 220
Answers: 230
220
210
208
Question 20
2 out of 2 points
Which of the following is a business function that is a part of logistics?
Selected
Answer: all of the above
Answers: purchasing
transportation
warehousing
all of the above
Question 21
2 out of 2 points
Monica quit her $50,000 per year job, purchased a building that was previously rented by the
operator of a candy store for $1,500 per month, and used the space to breed and sell tropical
fish. In her first year she made a business profit of $60,000. What was her economic profit?
Selected
Answer: she made an economic loss of $8,000
Answers: her economic profit was the same as her business profit
$42,000
$10,000
she made an economic loss of $8,000
Question 22
2 out of 2 points
The price of a firm's product increases from $5 to $6. As a result, the quantity demanded of the
product declines from 600,000 to 500,000. The price elasticity of demand for the good is equal
to (Use the arc price elasticity of demand)
Selected
Answer: -1
Answers: -5.
-3
-1
0.1
Question 23
2 out of 2 points
In a free-enterprise system, profit is socially desirable because it
Selected
Answer: attracts resources to the most desirable types of production
Answers: reallocates wealth from small firms to large firms
attracts resources to the most desirable types of production
allows firms to operate at higher levels of cost
permits firms to hire less workers and thereby reduces the labor cost
Question 24
2 out of 2 points
A multiple regression analysis based on a data set that consists of 30 observations yielded the
following estimated demand equation:
Q = 120 - 1.1 P + 0.04 I + 0.90 A
where P is price, I is income, and A is advertising. If price is equal to $1,000, income is equal
$20,000, and advertising expenditures are equal to $500, then the predicted quantity demanded
(Q) is
Selected
Answer: 270
Answers: 120
270
340
510
Question 25
2 out of 2 points
If you are trying to determine the value of a firm, which of the following factors would be
relevant?
Selected
Answer: all of the above are relevant
Answers: the interest rate (the discount rate)
costs incurred by the firm
revenues generated by the firm
all of the above are relevant
Question 26
2 out of 2 points
Which of the following is a question that is uniquely relevant to the subject of business ethics?
Selected
Answer: should a firm buy foreign products that are made using child labor?
Answers: should a firm buy foreign products that are made using child labor?
should a firm falsify financial information reported to stockholders?
should a firm collude with its competitors in setting prices?
should a firm attempt to reduce its costs of production in order to compete
more effectively?
Question 27
2 out of 2 points
Use the information about marginal cost (MC) and marginal revenue (MR) that is presented in
the table below to determine the profit maximizing level of output.
Output 1 2 3 4 5 6 7 8 9
MC 10 11 13 16 20 25 31 38 48
MR 50 45 40 35 30 25 20 15 10
Selected
Answer: 6
Answers: 1
3
6
9
Question 28
2 out of 2 points
A computer manufacturer can produce 5 computers for $5,000 and 10 computers for $7,500.
Based on this information, what is the marginal cost per computer of the 6th through
10th computer?
Selected
Answer: $500
Answers: $500
$750
$1,000
$2,500
Question 29
2 out of 2 points
A basketball company is considering purchasing a new machine that
doubles capacity from producing 100 balls to 200 balls per day. The
machine will occupy 1,000 square feet of unused space on the factory floor.
Which costs are irrelevant in this decision to purchase a machine?
Selected
Answer: rental expense associated with the 20,000 square feet factory
Answers: rental expense associated with the 20,000 square feet factory
additional personnel required to operate the machine
additional electricity required to operate the machine
maintenance cost for routine cleaning of the machine
Question 30
2 out of 2 points
The theory of the firm postulates that the primary objective of managers is to maximize
Selected
Answer: the firm’s wealth or value which is given by the present value of all its
expected future profits
Answers: the firm's total revenue
the the firm's output
the firm’s wealth or value which is given by the present value of all its
expected future profits
all of the above
Question 31
2 out of 2 points
The price elasticity of demand for a firm's product is equal to -1.8. The firm currently sells
4,000 units per day at a price of $2. If the firm increases its product price by 10%, then it can
expect to sell approximately
Selected
Answer: 3,280 units
Answers: 4,280 units
3,280 units
2,720 units
1,980 units
Question 32
0 out of 2 points
Which of the following is not a qualitative forecasting technique?
Selected
Answer: perspectives of foreign advisory councils
Answers: surveys of consumer expenditure plans
perspectives of foreign advisory councils
consumer intention polling
time-series analysis
Question 33
2 out of 2 points
Economies of scope refers to the decrease in average total cost that can occur when a firm
Selected
Answer: produces more than one product
Answers: produces more than one product
has monopoly power in world markets
controls the raw materials used as inputs
narrows the scope of its regional markets
Question 34
2 out of 2 points
One difference between foreign and domestic demand for a commodity exported by the U.S. is
that
Selected
Answer: foreign demand depends on the exchange rate between domestic and foreign
currencies
Answers: foreign demand is unrelated to the dollar price of the commodity
foreign demand depends on the exchange rate between domestic and foreign
currencies
only the domestic price elasticity of demand depends on the availability of
substitute commodities
foreign-made commodities are not good substitutes for U.S. made commodities
Question 35
2 out of 2 points
Application of simple linear regression analysis to the estimation of a demand equation has
yielded the following:
Q = 24 - 2 P
If the current product price is P=$6 and the quantity sold per time period is Q=10, then the
error (e) for the current time period is equal to (actual quantity sold - estimated quantity sold)
Selected
Answer: -2
Answers: 1
-1
2
-2
Question 36
2 out of 2 points
Of the following types of costs, which is most likely a fixed cost for a shoe manufacturer?
Selected
Answer: an NBA player’s lump-sum royalty payment to endorse the shoe
Answers: inventory costs
costs of the leather used to produce shoes
electricity costs to run manufacturing equipment
an NBA player’s lump-sum royalty payment to endorse the shoe
Question 37
2 out of 2 points
A firm currently produces 2,500 units of output per week. After an additional worker is hired,
output rises to 2,620 units per week. If the weekly wage paid to a worker is $480, what is the
firm's short-run marginal cost?
Selected
Answer: $4
Answers: $4
$120
$480
$40
Question 38
2 out of 2 points
Mr. D’s Barbeque of Pickwick, TN produces 10,000 dry-rubbed rib slabs per year. Annually
Mr. D’s fixed costs are $50,000. The average variable cost per slab is a constant $2. The
average total cost per slab then is
Selected
Answer: $7
Answers: $7
2
5
3
Question 39
2 out of 2 points
A security system company’s total production costs depend on the number of systems
produced according to the following equation,
Total costs = $10,000,000 + $2,000 Q where Q is the quantity produced. What is the average
total cost of production when 20,000 uits are produced?
Selected
Answer: $2,500
Answers: $4,500
$3.500
$2,500
$1,500
Question 40
2 out of 2 points
Which of the following is not viewed by firms as an advantage of electronic commerce over
traditional commerce?
Selected
Answer: consumers have the ability to easily compare product prices
Answers: consumers have the ability to easily compare product prices
the cost of executing a transactiion is much lower
firms have the ability to gather useful information about buyers
firms can reduce their reaction times to changing market conditions and
increase their sales reach
