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Multiple Choice Quiz
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1
If you put $2,200 in a savings account at an interest rate of 6.5%, how much money will you have in one year?
A)$143.
B)$2,066.
C)$2,209.
D)$2343.
2
Which of the following increases the potential for sustainable long-run industry profits?
A)Entry.
B)The availability of multiple substitutes.
C)Absence of complements.
D)None of the above.
3
Opportunity cost differs from accounting costs because of
A)Implicit costs.
B)Accounting profits.
C)Economic profits.
D)Explicit costs.
4
Which of the following statements is most likely true regarding economic and accounting profits?
A)Economic profits minus accounting profits generally equal zero.
B)Economic profits plus accounting profits generally equal zero.
C)Economic profits are generally less than accounting profits.
D)Economic profits are generally greater than explicit costs.
5
If marginal benefit equals marginal cost of any activity, the economic agent
A)earns zero gross benefits.
B)positive net benefits.
C)maximizing net benefits.
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)$9,246.
B)$8,979
C)$9,615.
D)$10,691.
7
If firms in the pizza industry are earning negative economic profits, which of the following will most likely occur in the future?
A)Some firms will exit the market.
B)The economic profits of the firms in the industry will rise.
C)The market price for pizza will rise.
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 producer-producer rivalry is
A)the process of buyer bidding for a second-hand, antique clock 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 NOT one of Porter's five forces?
A)Power of pressure groups.
B)Power of Buyers.
C)Power of Sellers.
D)Rivalry.
12
If the interest rate is 2.5%, $870 received at the end of 8 years is worth how much today?
A)870/(0.025)8.
B)870/(1 + 0.025) 8.
C)870/(1 + 0.025) 8.
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)firms have incentive to maximize profits.
B)consumers are unwilling to buy expensive good and services.
C)of the benevolence of firm owners.
D)government mandates resources to be used in certain production combinations.
15
Maximizing the firm's current profits is the same as maximizing the lifetime value of the firm when the
A)interest rate is smaller than growth rate in profits.
B)period-to-period growth rate in profits is constant.
C)period-to-period interest rate is constant.
D)Both B & C.







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