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ECON 500
Midterm Exam
1. Marginal benefit is defined as:
a. The additional benefits that arise by using an additional unit of the managerial
control variable.
b. The total benefits that arise by using an additional unit of the managerial
control variable.
c. The amount that would have to be invested today at the prevailing interest
rate to generate the given future benefit of an action.
d. The present benefit from a project minus the current cost of the project.
2. The own price elasticity of demand for apples is 1.5. If the price of apples
increases by 10 percent, what will happen to the quantity of apples demanded?
a. It will increase 15 percent.
b. It will fall 15 percent.
c. It will increase 10 percent.
d. It will fall 10 percent.
3. A profit-maximizing firm should continue to increase production of a good until:
a. net benefits are maximized.
b. total benefits are maximized.
c. profits are zero.
d. profits are positive.
4. If the absolute value of the own price elasticity of steak is 1.2, a decrease in price
will lead to:
a. a reduction in total revenue.
b. an increase in total revenue.
c. no change in total revenue.
d. None of the statements is correct.
5. Suppose market demand and supply are given by Q d = 500 2P and QS = 50 +
3P. The equilibrium price is:
a. $45.
b. $90.
c. $2250.
d. $320.
Pradip Chattopadhyay
ECON 500
6. What is the present value of $200 received in two years if the interest rate is 12.5
percent?
a. $175
b. $158.05
c. $177.78
d. $225
7. At what level of output does marginal cost equal marginal revenue?
a. 1
b. 2
c. 3
d. 5
Pradip Chattopadhyay
ECON 500
Pradip Chattopadhyay
ECON 500
a. increase by 4 percent.
b. increase by 10 percent.
c. decrease by 4 percent.
d. decrease by 10 percent.
Pradip Chattopadhyay
ECON 500
FORECAST
Nov 100
100
Dec 90
100
Jan
115
----
Feb 110
----
MARCH
a.
106.2
b.
104.7
c.
103.2
Pradip Chattopadhyay
ECON 500
d.
102.1
e.
101.7
Feb.
92
Mar.
112
Apr.
108
May
116
June
116