Key Concepts in Business Economics and Market Analysis
Classified in Economy
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Multiple Choice Questions
The optimal use of a variable input occurs when the marginal revenue product equals marginal factor cost.
In which range of market share is a firm typically considered dominant? 30% to 85%
Which of the following is usually not a source of sustainable competitive advantage? A firm may have a large marketing budget.
Before launching a new type of product, what should a company do? Sensitivity analysis
The type of economic indicator used to predict future economic activity is a leading indicator.
Which of the following is not part of the four-step forecasting process? Developing internal controls
In which model is the new forecast equal to the old forecast plus some proportion of the last observed forecast error? First-order exponential smoothing
An oligopoly is characterized by which of the following? A, B, and C
XYZ Inc. has successfully adopted a policy of being a price leader, but not a product innovator. Which of the following best describes their situation? Allocatively efficient, technically inefficient
One explanation for the recent trend toward increasing globalization of U.S. firms is that regulation prohibited diversification.
What did Rex Tillerson, former CEO of ExxonMobil, do to ensure the company's success? Align his incentives with those of the shareholders
Some firms profit from being the first to introduce a new product.
As a percent of U.S. GDP, exports have increased in recent years.
Generally, investors expect a positive relationship between risk and return. Which level of risk are they usually willing to accept? High risk, high return
In the case of pure monopoly, which of the following is true? A and B only
Dummy variables can be incorporated into a regression model to account for seasonal effects.
Which best describes the Chinese economy since 2000? High growth from 2000-2010, moderate growth since 2010
OPEC's long-term sustainability is primarily dependent on Saudi Arabia's willingness to act as the swing producer.
As a percent of U.S. GDP, exports have increased in recent years.
The main difference between pure competition and monopolistic competition is the degree of product differentiation.
Which of the following is not an assumption of the law of one price? No exchange rate risk
Which of the following would tend to make demand inelastic? The proportion of the budget spent on the good is small
A reduction in gasoline prices would likely lead to an increase in the demand for sport utility vehicles. This statement contains one error; the lower gasoline prices would cause an increase in the quantity demanded for sport utility vehicles, not an increase in demand.
When government licensing restricts the number of firms in an industry, it often leads to rent-seeking behavior.
Without effective management, employees may be tempted to shirk their responsibilities.
Corporate managers who pursue their own interests rather than the interests of shareholders are exhibiting the principal-agent problem.
All of the following are criteria used to select a forecasting technique except the time required to gather the data.
In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future profits (cash flows), discounted at the shareholders' required rate of return.
The cost-based strategy that involves targeting a specific segment of the market is called focused cost leadership.
The law of diminishing marginal returns applies to which of the following? None of the above
Which of the following is not a product differentiation strategy? Conducting an industry analysis
What are the two essential characteristics of a public good? Non-excludable and non-depletable
If the Board of Regents announces a tuition increase and total tuition revenue decreases, then demand for education at this university is elastic.
In the U.S. breakfast cereal market, a few large firms dominate. This market is best described as concentrated.
At a price of $5, Sam buys 10 units of a product. When the price increases to $6, he buys 8 units. What has happened? Sam's quantity demanded has decreased, and his demand has remained unchanged.
Risk is best defined as the potential variability of outcomes.
In the Cournot duopoly model, each firm makes its production decision based on the assumption that the other firm will keep its output constant.
A decrease in the price of a good would increase the quantity demanded for the good.
All of the following are criteria used to select a forecasting technique except the time required to gather the data.
Even ideal cartels tend to be unstable because firms can benefit by secretly selling more than their allotted quota.
Which of the following is not one of Porter's Five Forces? Threat of collusion among existing competitors
What did Milton Friedman say about corporate social responsibility? The social responsibility of business is to increase its profits.
The marginal rate of technical substitution is the rate at which one input can be substituted for another while holding output constant.
A three-sigma event is considered to be statistically unlikely. Which of the following is true about such events? A and B
Barometric price leadership occurs when one firm in the industry initiates a price change, and the other firms follow.
Possible goals of not-for-profit organizations include which of the following? Maximize total costs
When property rights are properly defined, externalities are minimized.
The paper market in Scranton, Pennsylvania, is characterized by a few firms with low barriers to entry. This market is likely contestable.
Which of the following is true about both short-run and long-run competitive equilibrium? All of the above
ABC, Inc. has contracted to sell products to a foreign firm, and the payment will be made in the foreign currency. This situation exposes ABC to transaction risk exposure.