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##### Liberty BUSI 620 - PRETEST 2014

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BUSI 620: Global Economic Environment;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. \$7,180;b. \$8,400;c. \$8,580;d. \$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. \$71;b. \$71.50;c. \$71.80;d. \$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 \$7,180;101 7,250;102 7,320;a. \$70;b. \$80;c. \$90;d. \$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 ? 15P;b. Qd = 10,000 ? 15P;c. Qd = 25,000 ? 15P;d. 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 is;Ep = (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. - 2;b. - 0.5;c. -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. 22.8;b. 23.4;c. 24.0;d. 24.6;7. The Present Value;-The Present Value (PV) of a project is given by;n;PV =? 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. \$738,167;b. \$740,000;c. \$742,890;d. \$750,000;8. The Expected Profit;-The expected profit is given by;n;E(?) =??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 0.30;300 0.45;700 0.25;a. \$500;b. \$480;c. \$600;d. \$490;9. The Equilibrium Price and Quantity;-If the Demand (QD) and Supply (QS) curves for a product are;QD = 625 - 35P;QS = 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.;a. P = \$9, Q = 310;b. P = \$8, Q = 295;c. P = \$10, Q = 325;d. P = \$6, Q = 265;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;a. 10 + 4Q + 3Q + 5Q2;b. 10 + 4Q + 3Q + 5Q2;c. 10 + 4 + 3Q + 5Q2;d. 10/Q + 4 + 3Q + 5Q2

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