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##### If the interest rate is 10% and cash flows are \$1,000 at the end of year 1

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1.;If the interest rate is 10% and cash flows are \$1,000 at the end of year 1 and \$2,000 at;the end of year 2, then the present value of these cash flows is;A. \$2,562;2.;D. \$3,000;Total revenue minus total cost;Marginal revenue minus marginal cost;Total revenue minus total opportunity cost;Total profits of the economy as a whole;A farm must decide whether or not to purchase a new tractor. The tractor will reduce;costs by \$2,000 in the first year, \$2,500 in the second, and \$3,000 in the third and final;year of usefulness. The tractor costs \$9,000 today, while the above cost savings will be;realized at the end of each year. If the interest rate is 7%, what is the net present value;of purchasing the tractor?;A. \$6,764;4.;C. \$ 439;Economic profits are;A.;B.;C.;D.;3.;B. \$3,200;B. \$9,362;C. \$18,362;D. None of the above;To maximize profits, a firm should continue to increase production of a good until;A. Total revenue equal total cost;B. Profits are zero;C. Marginal revenue equals marginal cost D. Average cost equals average revenue;5.;Suppose total benefits and total costs are given by B(Y) = 100Y-8Y(squared) and;C(Y)=10Y(squared). What is the maximum level of net benefits?;A. 92;6.;B. 139;C. 78;D. None of the above;Which of the following is the main goal of a continuing company?;A. To maximize the value of the firm.;C. To improve product quality;7.;B. To minimize costs;D. To enhance the service to its customers;The value of the firm is;A. The current value of profits;B. The present discounted value of all future;profits;C. The average value of all future profits;8.;D. The total value of all future profits;Which of the following is the incorrect statement?;A.;B.;C.;D.;9.;The marginal benefits curve is the slope of the total benefits curve;dB(Q)/dQ = MB;The slope of the net benefit curve is horizontal where MB = MC;The difference in the slope of the total benefit curve and the total cost curve is;maximized at the optimal level of Q.;Trade will take place;A. If the maximum that a consumer is willing and able to pay is less than the minimum;price the producer is willing and able to accept for a good.;B. If the maximum that a consumer is willing and able to pay is greater than the;minimum price the producer is willing and able to accept for a good;C. Only if the maximum that a consumer is willing and able to pay is equal to the;minimum price the producer is willing and able to accept for a good;D. None of the above.;10.;Suppose the growth rate of the firms profits is 5%, the interest rate is 6%, and the;current profits of the firm are \$100 million dollars. What is the value of the firm?;A. \$111.5million;11.;C. \$10,600 million;D. None of the above;In a competitive market, the market demand is Qd(demand) = 60- 6P and the market;supply is Qs(supply) = 4P. The full economic price under a price ceiling of \$3 is;A. 6;12.;B. \$1,766.6 million;B. 7;C. 8;D. 9;Suppose the demand for good X is given by Qxd = 10-2Px + Py + M. The price of good;X is \$1, the price of good Y is \$10, and income is \$100. Given these prices and income;how much of good X will be purchased?;A. 115;B. 515;C. 1,000;D. None of the above;13.;Suppose market demand and supply are given by Qd = 100-2P and Qs =5+3P. The;equilibrium price is;A. \$15;B. \$19;C. \$17;D. \$20;14.;Suppose market demand and supply are given by Qd = 100-2P and Qs =5+3P. If a price;ceiling of \$15 is imposed, what will be the resulting full economic price?;A. \$19;B. \$21;C. \$6;D. \$25;15.;Suppose market demand and supply are given by Qd = 100-2P and Qs =5 + 3P. If the;Government sets a price floor of \$30 and agrees to purchase all surplus at \$30 per unit;the total cost to the Government will be;A. \$1,650;B. \$1,375;C. \$900;D. \$1,125;16.;Suppose the supply increases and demand decreases. What effect will this have on;price;and quantity?;A.;B.;C.;D.;17.;Suppose the demand for X is given by Qxd = 100-2Px + 4Py + 10M + 2A, where Px;represents the price of good X, Py is the price of good Y, M is income and A is the;amount of advertising on good X. Based on this information, we know that good X is;A.;B.;C.;D.;18.;Price will increase and quantity may rise or fall;Price will decrease and quantity will increase;Price will decrease and quantity will decrease;None of the above;A substitute for good Y and a normal good.;A complement for good Y and an inferior good.;A complement for good Y and a normal good.;A substitute for good Y and an inferior good.;Consumer surplus is;A.;B.;C.;D.;The value consumers get from a supplier;The value consumers do not pay because of a discount by supplier;The value consumers get from a good but do not pay for;Equal to the amount consumers pay for a good.;19.;The market supply curve indicates the total quantity all producers in a competitve;market;would produce at each price;A. Holding only input price fixed;C. Holding all supply shifters fixed;20.;B. Allowing input price to vary;D. Allowing all supply shifters to vary;The supply function for good X is given by Qxs = 1,000 + Px- 5Py -2Pw, where Px is;the price of X, Py is the price of good Y and Pw is the price of input W. If Px = 100, Py;=150, Pw = 50, then the supply curve is;A. Qxs =550;B. Qxs =150+Px;C. Qxs =550 + Px;D. Qxs = 150 -Px;21. The demand for good X has been estimated by Qxd = 12 - 3Px + 4Py. Suppose that;good;X sells at \$2 per unit and good Y sells for \$1 per unit. Calculate the own price;elasticity.;A. -0.2;B. -0.3;C. -0.4;D. -0.5;E. -0.6;22.;Suppose Qxd = 10,000 - 2Px+ 3Py -4.5M, where Px =\$100, Py= \$50, and M = \$2,000.;What is the own-price elasticity of demand?;A. -2.34;23.;B. -.78;C. -.21;If the income elasticity for lobster is.4, a 40% increase in income will lead to a;A. 10% drop in demand for lobster;C. 20% increase in demand for lobster;24.;B. Unitary;B. F-statistic;D. Perfectly elastic;C. R-square;D. B and C;A study has estimated the effect of changes in interest rates and consumer confidence;on the demand for money to be: log M = 14.666 +.021 log C -.036 log r, where M;denotes real money balance. C is an index of consumer confidence, and r is the interest;rate paid on bank deposits. Based on this study, a 5% increase in interest rates will;cause the demand for money to;A. Drop by 1.8%;27.;C. Elastic;Which of the following can be used to quantify the overall statistical significance of a;regression?;A. t-statistic;26.;B. 16% increase in demand for lobster;D. 4% increase in demand for lobster;Suppose the demand function is given by Qxd = 8Px(to the.5), Py(to the.5), M(to the.;12) H. Then the demand for good X is;A. Inelastic;25.;D. -1.21;B. Increase by 1.8% C. Drop by.18%;D. Increase by.18%;The demand for good X is estimated to be Qxd = 10,000 - 4Px+ 5Py+ 2M + Ax, where;Px is the price of X, Py is the price of good Y, M is income, and Ax is the amount of;advertising on X. Suppose the present price of good X is \$50, Py is \$100, M is \$;25,000, and Ax =1,000 units. What is the demand curve for good X?;A. 61,500;B. 61,300;C. 61,300 - 4P;D. 61,500 - 4P;28.;When the own price elasticity of good X is -3.5 then total revenue can be increase by;A.Increasing the price B.Decreasing the quantity supplied C.Decreasing the price;29.;The management of Local Cinema has estimated the monthly demand for tickets to be;log Q = 22,328 -.41 log P + 0.5 log M -.33 log A + log Pvcr, where Q = quantity of;tickets demanded, P = price per ticket, M = income, A = advertising outlay, and Pvcr =;price of a VCR tape rental. It is known that P = \$5.50, M = \$9,000, A = \$900, and Pvcr;= \$3.00. Determine the own-price elasticity of demand for movie tickets.;A. -.29;30.;B. -.32;C. -.39;D. -.41;If the demand function for a particular good is Q = 20 - 8P, then the price elasticity of;demand (in absoulte value) at a price of \$1 is;A. 8;31.;B. 2;D. Diminishing MRS;B. -4;C. -20;D. 25;B. \$240;C. \$100;D. \$200;B. M/Px;C. M/Py;D. PyY;Diminishing marginal rate of substitution implies that;A.;B.;C.;D.;36.;C. More is better;The horizontal intercept of the budget line is;A. -Px/Py;35.;B. Transitivity;The total earnings of a worker are represented by E = 100 + \$10 (24 - L), where E is;earnings and L is the number of hours of leisure. How much will the worker earn;if he takes 14 hours of leisure per day?;A. \$150;34.;E. None of the above;Given that income is \$500 and Px = \$20 and Py = \$5, what is the market rate of;substitution between goods X and Y?;A. 100;33.;D. 1/8;Joe prefers a three pack of beer to a six pack. What properties does this preference;violate?;A. Completeness;32.;C. 2/3;Indifference curves are convex from the origin.;Indifference curves are concave from the origin.;Indifference curves are either convex or concave from the origin.;Indiffercnce curves are straight lines.;At the equilibrium consumption bundle, which of the following holds?;A. MRSx,y=Px/Py B. MRSx,y= -Px/Py C. MRSx,y= -Py/Px D. MRSx,y=Py/Px;37.;Suppose a worker is offered a wage of \$8 per hour, plus a fixed payment of \$100 per;day, and he can use 24 hours per day. What is the equation for the workers opportunity;set? (E is total earnings and L is leisure).;A. E=100-8L;38.;B. E=192-8L;C. E=292-8L;D. None of the above;The revenues earned by the firm from the consumer may be maximized under;A The regular price offer B.The buy one get one free C 50% discount D. 40%;discount;39.;If sugar and Nutrasweet are substitutes, then we can be certain that a decrease in the;price of sugar will lead to;A.;B.;C.;D.;40.;An increase in the consumption of Nutrasweet.;An increase in the consumption of sugar.;An increase in the consumption of sugar and Nutrasweet.;None of the above.;If money income doubles and the prices of all goods triples, then;A. The budget line remains unchanged;B. The consumer is worse off due to;inflation;C. The consumer will buy more of normal goods. D. The budget line will shift out;41.;For the cost function C(Q) = 100 + 2Q + 3Q(squared), the marginal cost of producing 2;units of output is;A. 2;42.;B. 3;C. Linear;D. None of the above;The MRTS is equal to the ratio of input prices.;The marginal product per dollar spent on all inputs are equal.;The marginal products of all inputs are equal.;A and B;The production function for a competitive firm is Q = K(to the.5)L(to the.5). The firm;sell its output at a price of \$10, and can hire labor at a wage rate of \$5. Capital is fixed;at one unit. The profit-maximizing quantity of labor is;A. 2/5;45.;B. Leontief;Which of the following conditions is true when a producer minimizes the cost of;producing a given level of output?;A.;B.;C.;D.;44.;D. 14;The production function Q = L(to the.5) K(to the.5) is called;A. Cobb Douglas;43.;C. 12;B. 1;C. 10;D. None of the above;Total product begins to fall when;A. Marginal product is maximized;C. Average product is negative;B. Average product is below zero.;D. Marginal product is zero.;46.;It is profitable to hire labor so long as;A. The MP(labor) is greater than wage;C. The VMP(labor) is less than wage;47.;to;48.;The marginal rate of technical substitution;A. Determines the rate at which a producer can substitute between two inputs in order;increase one additional unit of output.;B. Is the absolute value of the slope of the isoquant.;C. Is the absolute value of marginal revenue.;D. Is constant along the isoquant curve.;Suppose the cost function is C(Q) = 50 + Q -10Q(squared)+ 2Q(cubed). What is the;total cost of producing 10 units?;A. \$2,060;49.;B. \$1,060;C. \$560;D. \$1,010;The long-run average cost curve defines the minimum average cost of producing;alternative levels of output, allowing for optimal selection of;A. Fixed factors of production;C. All factors of production;50.;B. The MP(labor) is less than wage.;D. The VMP(labor) is greater than wage;B. Variable factors of production;D. Sunk cost factors of production;Two firms producing identical products may merge due to the existence of;A. Economies of scope;C. Cost complementarity;B. Economies of scale;D. All of the above;E. A and C only;1. A firm will have constant profits of \$100,000 per year for the next four years and the;interest;rate is 6%. Assuming these profits are realized at the end of each year, what is the;present;value of these future profits?;A. \$325, 816;B. \$376,741;C. \$400,000;D. \$346,510;2. The supply function for good X is given by Qxs = 1000 + Px-5Py-2Pw, where Px is;the price of X, Py is the price of good Y, and Pw is the price of input W. If the price of;input W increases by \$10, then the supply of good X;A. Will increase by 10 units.;C. Will decrease by 10 units.;B. Will increase by 20 units;C. None of the above;3. The cross-price elasticity of demand for textbooks and copies of old exams is -3.5. If the;price of copies of old exams increase by 10%, the quantity demanded of textbooks will;A. Fall by 3.5%;B. Rise by 3.5%;C. Fall by 35%;D. Rise by 35%;4. Mitchells money income is \$150, the price of X is \$2, and the price of Y is \$2. Given these;prices and income, Mitchell buys 50 units of X and 25 units of Y. Call this combination of X;and Y bundle J. At bundle J, Mitchells MRS is 2. At bundle J, if Mitchell increases;consumption of Y by 1 unit, how many units of X must he give up in order to satisfy his;budget constraint?;A. 1/2;B. 1;C. 2;D. 4;5. For the cost function C(Q) = 1000 + 14Q + 9Q(squared)+3Q(cubed), what is the marginal;cost of producing the fourth unit of output?;A. \$42;B. \$295;C. \$230;D. \$116

Paper#29336 | Written in 18-Jul-2015

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