Question 1

​The government is looking to double the living standards of its population in 18 years,what rate of GDP growth would it need to achieve that?

Accepted Answer

A) ​1% 
B) 2% 
C) 3% 
D) ​4% 
A) ​1% 
B) 2% 
C) 3% 
D) ​4%

Question 2

​Use the following setup for the next question.
A publisher is deciding whether or not to invest in a new printer.The printer would cost $900,and would increase the cash flows in year 1 by $500 and in year 3 by $800.Cash flows do not change in year 2.If the interest rate is 12%
-​If the interest rate is 25%,but cash flows change such that the investment renders a cash flow of $500 in year 1 and $800 in year 2 instead of year 3,would the investment take place?

Accepted Answer

A) Yes since NPV>0 B) No since NPV<0 C) Yes since the present value of the cash flows is greater than zero D) No since the present value of the cash flows is lesser than zero A) Yes since NPV>0 B) No since NPV<0 C) Yes since the present value of the cash flows is greater than zero D) No since the present value of the cash flows is lesser than zero

Question 3

​Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-​If the price is $60 per unit,what is the break even amount of units for technology A?

Accepted Answer

A) ​50 
B) 100 
C) 150 
D) ​None-They would have to shut down 
A) ​50 
B) 100 
C) 150 
D) ​None-They would have to shut down

Question 4

Discontinuing a Missile Program
Merowak Missiles has developed its Democratizer Offensive Weapon System (DOWS)for the US military.After sinking $1 billion into R&D and design,it spent $0.5 billion building the tools and production facility that are unique to DOWS production.It houses these in standard factory floor space that costs $1 million.Each missile has a marginal cost of $2,000.The Pentagon is thinking of discontinuing the program because the missiles are too expensive.If Merowak were to get an order for 50,000 missiles,what would its breakeven price be?

Accepted Answer

The marginal cost of $10,000,000 ($2,000

Question 5

​Firms that anticipate hold-up,choose organizational or contractual forms

Accepted Answer

A) ​that give both parties the incentive to make relationship-specific investments 
B) that give both parties the incentive to exploit each other's positions 
C) that gives both parties an incentive to trade,even after the relationship-specific investments have been made 
D) ​Both A&C 
A) ​that give both parties the incentive to make relationship-specific investments 
B) that give both parties the incentive to exploit each other's positions 
C) that gives both parties an incentive to trade,even after the relationship-specific investments have been made 
D) ​Both A&C

Question 6

​A business produces 4,000 units per month which it sells at $20/unit.Costs include: $10,000 on raw materials,$15,000 in wages for operators and $10,000 in wages to sales people.If the business is just breaking even,what are its fixed costs:

Accepted Answer

A) ​$35,000 
B) $40,000 
C) $45,000 
D) ​$50,000 
A) ​$35,000 
B) $40,000 
C) $45,000 
D) ​$50,000

Question 7

​A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal costs are $15.The firm currently charges $18 per unit.If the interest rate is 5% then the present value of the cash flows is

Accepted Answer

A) ​$6,020.41 
B) $51,020.41 
C) -$7,380.95 
D) ​$10,000 
A) ​$6,020.41 
B) $51,020.41 
C) -$7,380.95 
D) ​$10,000

Question 8

​Use the following setup for question
A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000.
-​What is the firm's contribution margin?

Accepted Answer

A) ​$1800 
B) $800 
C) $1000 
D) ​$300 
A) ​$1800 
B) $800 
C) $1000 
D) ​$300

Question 9

​Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-​What is the cost of production at the number of units where the company is indifferent between the two technologies?

Accepted Answer

A) ​$750 
B) $850 
C) $950 
D) ​$1050 
A) ​$750 
B) $850 
C) $950 
D) ​$1050

Question 10

​Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-​Ricky is thinking about borrowing $10,000 from Fred.He promises Fred cash flows of $5000 for the next three years.If Fred's cost of capital is 10%,what is the Net Present Value of the investment for Fred?

Accepted Answer

A) ​-$126.55 
B) $1,342.76 
C) $2,434.26 
D) ​-$1,322.31 
A) ​-$126.55 
B) $1,342.76 
C) $2,434.26 
D) ​-$1,322.31

Question 11

​The higher the interest rates

Accepted Answer

A) ​the more value individuals place on future dollars 
B) the more value individuals place on current dollars 
C) individuals do not place any importance on either current or future dollars 
D) ​does not affect the investment strategy 
A) ​the more value individuals place on future dollars 
B) the more value individuals place on current dollars 
C) individuals do not place any importance on either current or future dollars 
D) ​does not affect the investment strategy

Question 12

​A business produces 5,000 units per month.It spends $12,000 on raw materials.It pays wages of $20,000.Other costs include $50,000 for rent,paid by the month.In order to break even the selling price per unit will have to be:

Accepted Answer

A) ​$25.20 
B) $16.4 
C) $20.30 
D) ​$28 
A) ​$25.20 
B) $16.4 
C) $20.30 
D) ​$28

Question 13

​If GDP is expected to increase at a steady rate of 3% per year,how many years would it take for living standards to double?

Accepted Answer

A) ​10 
B) 20 
C) 24 
D) ​30 
A) ​10 
B) 20 
C) 24 
D) ​30

Question 14

​A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment is

Accepted Answer

A) ​$1041.32 
B) $541.32 
C) $1090.91 
D) ​$590.91 
A) ​$1041.32 
B) $541.32 
C) $1090.91 
D) ​$590.91

Question 15

​Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-​If the interest is 5%,should the firm undertake the investment?

Accepted Answer

A) ​Yes,since NPV=0 
B) Yes,since NPV0 
D) ​No,since NPV=0 
A) ​Yes,since NPV=0 
B) Yes,since NPV0 
D) ​No,since NPV=0

Question 16

​Use the following setup for the next question.
A publisher is deciding whether or not to invest in a new printer.The printer would cost $900,and would increase the cash flows in year 1 by $500 and in year 3 by $800.Cash flows do not change in year 2.If the interest rate is 12%
-​If the interest rate rises to 25% would the investment still take place?

Accepted Answer

A) Yes since NPV>0 B) No since NPV<0 C) Yes since the present value of the cash flows is greater than zero D) No since the present value of the cash flows is lesser than zero A) Yes since NPV>0 B) No since NPV<0 C) Yes since the present value of the cash flows is greater than zero D) No since the present value of the cash flows is lesser than zero

Question 17

​A firm sells 1000 units per week.It charges $70 per unit,the average variable costs are $25,and the average costs are $65.In the long run,the firm should

Accepted Answer

A) ​Shut down since price is greater than average cost 
B) Continue operating price is higher than average cost,its making a profit 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) ​Shut-down because it is cost effective to pay off the remaining fixed costs 
A) ​Shut down since price is greater than average cost 
B) Continue operating price is higher than average cost,its making a profit 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) ​Shut-down because it is cost effective to pay off the remaining fixed costs

Question 18

​If the annual interest rate is 0%,the net present value of receiving $550 in the next year is

Accepted Answer

A) ​$550 
B) $551 
C) $549 
D) ​$500 
A) ​$550 
B) $551 
C) $549 
D) ​$500

Question 19

​Which of the following variables are needed to determine the break-even quantity?

Accepted Answer

A) ​Marginal costs 
B) Fixed Costs 
C) Selling Price 
D) ​All of the above 
A) ​Marginal costs 
B) Fixed Costs 
C) Selling Price 
D) ​All of the above

Question 20

​A firm sells 1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.In the long run,the firm should

Accepted Answer

A) ​Shut-down as the firm is making a loss of $10,000 per week 
B) Shut-down as price is lower than average cost 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) ​Shut-down because it is cost effective to pay off the remaining fixed costs 
A) ​Shut-down as the firm is making a loss of $10,000 per week 
B) Shut-down as price is lower than average cost 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) ​Shut-down because it is cost effective to pay off the remaining fixed costs

The government is looking to double the living standards of its population in 18 years,what rate of GDP growth would it need to achieve that?

Firms that anticipate hold-up,choose organizational or contractual forms

A business produces 4,000 units per month which it sells at $20/unit.Costs include: $10,000 on raw materials,$15,000 in wages for operators and $10,000 in wages to sales people.If the business is just breaking even,what are its fixed costs:

Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -What is the firm's contribution margin?

The higher the interest rates

A business produces 5,000 units per month.It spends $12,000 on raw materials.It pays wages of $20,000.Other costs include $50,000 for rent,paid by the month.In order to break even the selling price per unit will have to be:

If GDP is expected to increase at a steady rate of 3% per year,how many years would it take for living standards to double?

A publisher is deciding whether or not to invest in a new printer.The printer would cost $500,and it would increase cash flows by $600 for the next two years.If the cost of capital is 10% then the net present value of the investment is

A firm sells 1000 units per week.It charges $70 per unit,the average variable costs are $25,and the average costs are $65.In the long run,the firm should

If the annual interest rate is 0%,the net present value of receiving $550 in the next year is

Which of the following variables are needed to determine the break-even quantity?

A firm sells 1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.In the long run,the firm should

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 4: Investment Decisions: Look Ahead and Reason Back