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Multiple Choice Quiz
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1
If you put $1200 in a savings account at an interest rate of 4.5%, how much money will you have in one year?
A)$1,466.
B)$1,246.
C)$1,148.
D)$1,254.
2
Which of the following reduces the potential for sustainable long run industry profits?
A)Entry.
B)Absence of substitutes.
C)Absence of complements.
D)None of the above.
3
Opportunity cost differs from accounting costs because of
A)Explicit costs.
B)Accounting profits.
C)Economic profits.
D)Implicit costs.
4
Which of the following statements is most likely true regarding economic and accounting profits?
A)Economic profits are generally less than accounting profits.
B)Economic profits plus accounting profits generally equal zero.
C)Economic profits minus accounting profits generally equal zero.
D)Economic profits are generally greater than explicit costs.
5
If marginal cost equals marginal revenue at the current production level, the firm is
A)Earning zero economic profits.
B)Earning zero accounting profits.
C)Maximizing profits.
D)All of the above.
6
If the interest rate is 7% and cash flows are $4,000 at the end of year one and $6,000 at the end of year two, then the present value of these cash flows is
A)$8,979.
B)$11,149.
C)$309.
D)$9,346.
7
If firms in the pizza industry are earning positive economic profits, which of the following will most likely occur in the future?
A)Additional firms will enter the market.
B)The economic profits of the firms in the industry will decline.
C)The market price for pizza will fall.
D)All of the above.
8
If the interest rate is 6.5%, what is the present value of $500 received in one year?
A)$303.
B)$469.
C)$532.
D)$577.
9
If the interest rate is 4%, the present value of $1000 received at the end of 3 years is
A)$970.
B)$1,040.
C)$889.
D)$961.
10
A good example of consumer-consumer rivalry is
A)the process of bidding in an auction.
B)negotiations between buyer and seller of a new house.
C)the competition between pizza restaurants.
D)None of the above.
11
Which of the following is one of the five forces?
A)Rivalry.
B)Power of Buyers.
C)Power of Sellers.
D)All of the above.
12
If the interest rate is 3%, $750 received at the end of 6 years is worth how much today?
A)750/(0.03)6.
B)750/(1 + .03)6.
C)750/(1 + 3)6.
D)None of the above.
13
Suppose the growth rate of the firm's profit is 3%, the interest rate is 7%, and the current profits of the firm are 150 million dollars: What is the value of the firm?
A)$296 million.
B)$3,863 million.
C)$4,013 million.
D)$5,607 million.
14
Scarce resources are allocated towards the production of goods most valued by society because
A)government mandates resources to be used in certain production combinations.
B)consumers are unwilling to buy expensive good and services.
C)firms have incentive to maximize profits.
D)of the benevolence of firm owners.
15
Maximizing the firm's current profits is the same as maximizing the lifetime value of the firm when the
A)growth rate in profits is larger than the interest rate.
B)growth rate in profits and the interest rate are equal.
C)interest rate is constant and is smaller than the growth rate in profits.
D)interest rate is larger than the growth rate in profits and both are constant.







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