BE exams

BE exams The economic way of thinking is based on the premise that: a. Only economic decisions or actions have costs associated with them b. Only non-economic decisions or actions have costs associated with them c. All decisions are costless d. All decisions involve trade-offs and thus costs are always incurred From an economic perspective, the ability to make more in itself is not a measure of efficiency: a. Efficiency is measured by the ability to produce more at a relatively lower opportunity cost b. Efficiency is measured by absolute advantage c. Efficiency is measured by maximizing or minimizing a specific variable d. Efficiency does not involve considering any trade-off incurred After graduating college, Jim had three choices, listed in order of preference: (1) Move to Florida from Philadelphia, (2) Play soccer for a major league in Philly, (3) Work in a car dealership in Philly. Jim's opportunity cost of moving to FL is: a. None of the above b. The income he could have earned as a car salesman c. Cannot be determined without knowing his salary as a soccer player d. The benefits he could have received from playing soccer If the firm you work for pays you 51 cents for every mile you drive your own car on company business, in your decision whether to use your own car or the company car, which of the following is (are) relevant to your decision? a. Monthly lease payments if you currently lease your car, not own b. The purchase price of your car c. Annual registration fees d. None of the above Some critics of the free-market system argue that: a. There is too much government intervention in the economy b. Involuntary trade benefits some at the expense of others c. In one person makes money (profits), then someone else must be losing it d. Voluntary trade ensures gains for both buyers and sellers All else equal, the demand for a good will be more responsive to changes in price (more price elastic) when: a. There are few close substitutes available for the good b. The fraction of your income or budget spent on the good is rather significant c. There is very limited time for you to respond or make adjustments after a price change d. All of the above If you are willing to sell your lawn mowing business for $320,000 and someone offers you $355,000 for it, assuming no taxes or broker fees, the transaction will generate: a. There won't be a transaction as no surplus created b. $35,000 worth of seller surplus and an unknown amount of buyer surplus c. $35,000 worth of both buyer and seller surplus d. $35,000 worth of buyer surplus The government decided to reduce taxes on fast-food to increase revenue. The government assumes that fast-food products have a. ​A demand curve that is upward sloping b. ​An elastic demand c. ​Unitary elastic demand curve d. ​An inelastic demand The owner of a bakery decides to drop the price of lemon cakes by 5%, how much does quantity sold have to rise to stop the revenue from decreasing a. ​4% b. ​3% c. ​2% d. ​5% A firm sells 300,000 units per week. It charges $ 35 per unit, the average variable costs are $40, and the average costs are $55. In the short run, the firm should a. ​Shut-down as the firm is making a loss of $15 million per week b. ​Shut-down as the firm cannot cover the variable costs c. ​Shut down because the price is lower than average cost d. ​None of the above Discount retailers such as Wal-Mart and Target are in a highly competitive market with extremely low profit margins. Only those retailers that continuously search for and discover ways to lower costs and set profit maximizing prices are able to survive. A new Wal-Mart store was recently built in Lawrence. During construction of the store, Wal-Mart incurred unexpected cost increases over the planned costs of construction because of price increases in steel, concrete and labor that occurred after construction began. As a result, the new Wal-Mart will likely: a. Increase profit margins by advertising less b. Accept the unexpected construction costs as a sunk cost and leave prices unchanged c. Make up for the unexpected construction costs by charging slightly lower prices that will lead to a greater number of goods sold d. Make up for the unexpected construction costs by charging slightly higher prices If AVC=$5 and AFC=15, then AC= a. ​$10 b. ​$20 c. ​$5 d. ​$15 Last week, the local distributor of Coca Cola reduced the case price to area grocery stores from $6.00 to $5.00. In response, area stores purchases increased from 12,000 cases to 16,500 cases. During the same period, Pepsi prices remained the same, but purchases of Pepsi by the same stores dropped from 9,000 cases to 6,000 cases. What is the cross-price elasticity of demand for Pepsi with respect to change in the price of Coke? a. 2.2 b. -2.2 c. 1.74 d. -1.74 Given the information above, can you conclude the demand for Pepsi is highly elastic? a. Yes, the demand for Pepsi is highly elastic, or highly responsive to changes in price b. No, the demand for Pepsi is rather inelastic, or not very responsive to changes in price c. The demand for Pepsi is perfectly elastic d. Cannot be determined without additional information A firm sells 300,000 units per week. It charges $ 35 per unit, the average variable costs are $40, and the average costs are $55. In the long run, the firm should a. ​Shut-down as the firm is making a loss of $15 million per week b. ​Shut-down as the firm cannot cover the variable costs c. ​Shut down because the price is lower than average cost d. ​None of the above Providers of services such as public transportation, that face a rather inelastic demand for their services, can improve their bottom line (profitability) by: a. Providing better transportation alternatives to riders b. Raising prices c. Lowering prices d. Focusing on aggressively cutting costs You are sick and tired of your old wardrobe. You decide to donate it to a charity of your choice. Your action a. ​Creates wealth by moving the clothes from lower value use to higher value use b. ​Destroys wealth since you lose your clothes c. ​Creates wealth by making you feel richer d. ​All of the above If a firm produces 8 units of output with average fixed cost = $40 and average variable cost= $25 , what is its total cost? a. ​$200 b. ​$320 c. ​$650 d. ​$520 A research firm finding concluded that the price elasticity of demand for movie tickets is more price responsive in the afternoon, but less price responsive in the evenings. Given this information, to increase overall revenues, the theater owners should: a. Increase ticket prices for the afternoon shows and reduce ticket prices for the evening shows b. Reduce ticket prices for the afternoon shows and increase ticket prices for the evening shows c. Reduce ticket prices for the afternoon shows and reduce ticket prices for the evening shows d. Increase ticket prices for the afternoon shows and increase ticket prices for the evening shows It costs your company $200 to produce a truckload of pens and pencils together. To produce the same amount of pens and pencils separately costs $120 for the pens and $110 for the pencils. If you produce two truckloads of pens, the cost per truckload is $110. Based on this information, the production of pens exhibits: a. Economies of scale b. Diseconomies of scale c. Economies of scope d. Rising average fixed costs What are economies of scope? a.​ the cost of producing two products jointly by one firm is more than the cost of producing them separately b.​ the cost of producing two products jointly by one firm is lesser than the cost of producing them separately c. ​the cost of producing two products jointly by one firm is equal to the cost of producing them separately d. ​none of the above An increase in the price of laptop memory chips causes the price for laptops _____________ and the quantity supplied for laptops ____________. ​ a. ​Decrease, decrease b. ​Increase; decrease c. ​Decrease; increase d. ​Increase; increase Which of the following statements is true a.​A firm should increase quantity as long as price is higher than average cost, regardless of the marginal cost b. ​A firm should increase quantity as long as price is greater than marginal cost c. ​A firm should increase quantity as long as marginal cost is greater than price d. A firm should increase quantity as long as average cost is greater than price​ The estimated cross-price elasticity of demand between products X and Y is -2.5. Based on this information, products X and Y are: a. Inferior, non-cyclical goods b. Complements c. Normal goods d. Substitutes Projects with a positive NPV create a. ​economic profits since they earn a return higher than the company's cost of capital b. ​accounting profits only since they earn a return lower than the company's cost of capital c. ​accounting profits only since they earn a return higher than the company's cost of capital d. ​economic profits since they earn a return lower than the company's cost of capital A few years ago, a construction manager earning $70,000/yr. working for a regional homebuilder decided to open his own home-building company. He took $100,000 out of one of his investment accounts that had and was expected to earn around 10% a year and invested the money to start up his business. He worked hard the first year, hiring only one employee (his only direct salary cost was $40,000 paid to this employee), and generated total sales of $1,000,000. Total material and sub-contracted (indirect) labor costs for the year were $900,000. Calculate the business's accounting profit for the 1st year a. -$160,000 b. -130,000 c. -$230,000 d. $60,000 What are the implicit costs for the manager of being in this business relative to his old job? a. His forgone salary of $70,000 b. His forgone wages of $70,000 and the forgone return of 10% on his investment account, totaling $80,000 c. The forgone return of 10% per year on his investment account, or $10,000 d. His forgone salary, the salary paid to his only employee, and the forgone return of 10% on his investment account, totaling $120,000 What is the economic profit (loss) of the business? a. His business generates an economic profit of $20,000 b. His business generates an economic loss of $60,000 c. His business generates an economic loss of $20,000 d. His business generates an economic loss of $10,000 How would your answer to the question above change if the manager borrowed the $100,000 at a 6% interest rate, instead of liquidating one of his investment accounts? a. It would depend on how easily the manager can borrow the funds and at what interest rate, given his credit score b. The manager would incur an additional $6,000 in costs thus making his losses worse c. This would not change my answer above. Economic profits (losses) would be the same since the two sources of capital cost the same to procure. d. The manager would reduce his economic loss by $4,000 since he won't have to sacrifice his investment income, but will have to incur (explicit) interest expense. A consumer values a car at $30,000 and a producer values the same car at $20,000. If a tax is levied on the seller, what level of tax will result in unconsummated transaction? a. ​0% b. ​25% c. ​60% d. ​40%