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##### Liberty BUSI 620 - PRETEST 2014

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BUSI 620: Global Economic Environment;Pretest;Pretest;1. The Total Cost-The Total Cost (TC) function shows the relationship between the total cost and the output (Q)-Assume that the Total Cost function of a company is estimated to be TC = \$180 + \$70Q where Q is the output in units.-What would be the Total Cost if the company produces 120 units?;a. \$7,180b. \$8,400c. \$8,580d. \$180;2. The Average Cost-The Average Cost (AC) or the unit cost is defined as TC/Q-Use the information from #1, what would be the average cost for the company if it produces 120 units?;a. \$71b. \$71.50c. \$71.80d. \$72;3. The Marginal Cost;-The Marginal Cost (MC) is defined as (change in TC) / (change in Q) =? TC/?Q-What is MC when Q changes from 101 to 102 units? Use the following data: Q TC 100 \$7,180101 7,250102 7,320;a. \$70b. \$80c. \$90d. \$180;4. The Demand Function-The Demand Function shows the relationship between the Quantity Demanded and factors that affect the purchase.-Assume the Demand Function faced by a firm is a linear form,Qd = 7,000 ? 15P + 0.4I-Where, Qd is the Quantity of the product sold, P is the unit Price, and I is the per capita personal Income.-Show the Demand Function, if I is known to be \$25,000.;a. Qd = 7,000 ? 15Pb. Qd = 10,000 ? 15Pc. Qd = 25,000 ? 15Pd. Qd = 17,000 ? 15P;5. The Point Price Elasticity of Demand-The Price Elasticity of Demand (Ep) is defined as the percentage change in quantity demanded of the product divided by the percentage change in its Price (P). That isEp = (change in Q/Q) / (change in P/P) = (? Q/Q) / (?P/P);We have the following data:P Q\$4 200\$3 300\$2 400-What is the Point Price Elasticity of demand when the price changes from \$3 to \$2?;a. - 2b. - 0.5c. -1 d. - 1.5;6. The Linear Regression Model-A Linear Regression Model for estimating the trend is:Tt = T0 + bt-Where Tt is the Value at Time t, T0 is the Value at Time 0, which is the Base period, b is the amount of growth each period, and t is the Time period.-If we estimate the trend for a product sales from the first quarter of 2000 (t=1) to the last quarter of 2003 (t=16) to be:Tt = 12+ 0.6t-What is the product sales forecast for the third quarter of 2004 according to the above estimated trend equation?;a. 22.8b. 23.4c. 24.0d. 24.6;7. The Present Value-The Present Value (PV) of a project is given by: nPV =? Rt / (1+k)t = R1 / (1+k)1 + R2 / (1+k)2 +... + Rn / (1+k)n t=1-Where Rt is the estimated net cash flow from the project in each of the n years considered, k is the risk-adjusted discount rate, and? refers to ?the sum of.?-If k is 10%, R1=\$250,000, R2=\$300,000, R3=\$350,000, and n=3, what is the present value of the project?;a. \$738,167b. \$740,000c. \$742,890d. \$750,000;8. The Expected Profit-The expected profit is given by nE(?) =??i * Pi =?1* P1 +?2 * P2 +... +?n * Pn i=1-Where?i is the profit level associated with outcome i, Pi is the probability that outcome i will occur, and i = 1 to n refers to the number of possible outcomes.-Use the following data to calculate the expected profit for a company:Profit Probability of occurrence\$600 0.30300 0.45700 0.25;a. \$500b. \$480c. \$600d. \$490;9. The Equilibrium Price and Quantity-If the Demand (QD) and Supply (QS) curves for a product are:QD = 625 - 35PQS = 175 + 15P-The Equilibrium Price and Quantity will be the Price and Quantity when: QD = QS, that is 625 - 35P = 175 + 15P-Find the Equilibrium Price and Quantity for this product.;10. The Average Cost Equation-The equation for the Total Cost (TC) is given by:TC = 10 + 4Q + 3Q2 + 5Q3 -The equation of the Average Cost AC (= TC/Q) would be

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