1The value of a firm is a. smaller the higher is the risk premium used to compute the firm’s value. b. larger the higher is the risk premium used to compute the firm’s value. c. the price for which the firm can be sold minus the present value of the expected future profits. d. both b and c 2A price-taking firm can exert no control over price because a. the firm’s demand curve is downward sloping. b. of a lack of substitutes for the product. c. the firm’s individual production is insignificant relative to production in the industry. d. many other firms produce a product that is nearly identical to its product. e. oth c and d 3Which of the following statements is true? a. Shareholders as a group have little or no ability to force managers to pursue maximization of the firm’s value. b. The effectiveness of a board of directors in monitoring managers will be enhanced by appointing members from the firm who are well-informed about the management problems facing the firm. c. Reducing the amount of debt financing can reduce the divergence between the shareholders’ interests and the owner’s interests. d. Equity ownership by managers is thought to be one of the most effective corporate control mechanisms. e. All of the above are true. When a firm earns less than a normal profit, a. the revenues generated cannot pay all explicit costs and the opportunity cost of using owner-supplied resources. b. accounting profit is negative. c. economic profit is zero. d. normal profit is negative. e. all of the above 5Economic profit is the best measure of a firm’s performance because a. normal profit is generally too difficult to measure. b. economic profit fully accounts for all sources of revenue. c. only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit. d. he opportunity cost of using ALL resources is subtracted from total revenue. 6The market demand curve for a given good shifts when there is a change in any of the following factors EXCEPT a. the price of the good. b. the level of consumers’ income. c. the prices of goods related in consumption. d. the tastes of consumers. 7Which of the following would increase the supply of corn? a. an increase in the price of pesticides b. a decrease in the demand for corn c. a fall in the price of corn d. a severe drought in the corn belt e. a decrease in the price of wheat 8If M = $15,000 and [pic] = $20, the demand function is a. [pic]. b. pic]. a. [pic]. b. [pic]. c. [pic]. 9If M = $15,000 and [pic]= $20 and the supply function is[pic], then, when the price of the good is $40, a. there is equilibrium in the market. b. there is a shortage of 180 units of the good. c. there is a surplus of 180 units of the good. d. there is a shortage of 80 units of the good. Question 10 refer to the following figure: [pic] 10If price is $16 there is a. a shortage of 250 units. b. a surplus of 250 units. c. a shortage of 125 units. d. a surplus of 125 units. e. equilibrium in the market. 11For an unconstrained maximization problem a. the decision maker seeks to maximize net benefits. . the decision maker seeks to maximize total benefits. c. the decision maker does not take cost into account because there is no constraint. d. the decision maker does not take the objective function into account because there is no constraint. e. none of the above The next 2 questions refer to the following: An agency is having problems with personal phone calls made during working hours. Each minute of a personal call costs the agency $0. 50 in wasted wages. The agency decides to hire operators to monitor calls in order to attain the optimal number of personal calls (minimize total cost of personal calls). |Total minutes of personal | |Number of Operators |calls (per hour) | |0 |600 | |1 |480 | |2 |410 | |3 |370 | |4 |350 | 12If operators receive $25 an hour, how many operators should the agency hire? a. 0 b. 1 c. 2 d. 3 e. 4 3If operators receive $25 an hour, what is the minimum possible total cost of personal calls (per hour)? a. $460 b. $255 c. $120 d. $ 85 e. none of the above The next question refer to the following: A manager in charge of new product development can hire engineers and market researchers. The annual salary of an engineer is $40,000 while a market researcher receives $20,000. The marginal contribution of engineers and market researchers are: |Engineers (E) |Market Researchers (R) | |Worker |Additional Worker |Additional | | |New Products | |New Products | |1st |240 |1st |80 | |2nd |200 |2nd |70 | |3rd |160 |3rd |60 | |4th |100 |4th |50 | |5th |40 |5th |40 | 14How should a manager with an annual budget of $140,000, allocate this budget in order to maximize the number of new products developed? a. Hire one engineer and five market researchers b. Hire two engineers and three market researchers c. Hire three engineers and one market researcher d. Hire four engineers and four market researchers Answer the next question using the following marginal benefit and marginal cost functions for activity A: MB = 100 ( 5A MC = 20 + 3A 15The optimal level of A is a. 40 b. 30 c. 20 d. 10 e. 0 16The sample regression line a. hows the actual (or true) relation between the dependent and independent variables. b. is used to estimate the population regression line. c. connects the data points in a sample. d. is estimated by the population regression line. e. maximizes the sum of the squared differences between the data points in a sample and the sample regression line. 17To test whether the overall regression equation is statistically significant one uses a. the t-statistic. b. the R2-statistic. c. the F-statistic. d. the standard error statistic. The next question refer to the following: The linear regression equation, Y = a + bX, was estimated. The following computer printout was obtained:

DEPENDENT VARIABLE: YR-SQUAREF-RATIOP-VALUE ON F OBSERVATIONS: 180. 30667. 0760. 0171 PARAMETER STANDARD VARIABLE ESTIMATEERRORT-RATIOP-VALUE INTERCEPT15. 485. 093. 040. 0008 X- 21. 368. 03- 2. 660. 0171 18The parameter estimate of a indicates a. when X is zero, Y is 5. 09. b. when X is zero, Y is 15. 48. c. when Y is zero, X is –21. 36. d. when Y is zero, X is 8. 03. The next question refer to the following: A firm is experiencing theft problems at its warehouse. A consultant to the firm believes that the dollar loss from theft each week (T) depends on the number of security guards (G) and on the unemployment rate in the county where the warehouse is located (U measured as a percent).

In order to test this hypothesis, the consultant estimated the regression equation T = a + bG + cU and obtained the following results: DEPENDENT VARIABLE: TR-SQUAREF-RATIOP-VALUE ON F OBSERVATIONS: 270. 779342. 380. 0001 PARAMETER STANDARD VARIABLE ESTIMATEERRORT-RATIOP-VALUE INTERCEPT5150. 431740. 722. 960. 0068 G- 480. 92130. 66- 3. 680. 0012 U211. 075. 02. 810. 0096 19Hiring one more guard per week will decrease the losses due to theft at the warehouse by _________ per week. a. $5,150 b. $211 c. $130 d. $480. 92 20If the p-value is 10%, then the a. level of significance is 10%. b. level of confidence is 90%. c. probability of a Type I error is 90%. d. both a and b e. all of the above

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