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In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future


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ECO 550 Managerial Economics & Globalization Midterm 1 Answers (Summer Semester 2017)

  1. In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.
  2. The flat-screen plasma TVs are selling extremely well.  The originators of this technology are earning higher profits.  What theory of profit best reflects the performance of the plasma screen makers?

  3. Economic profit is defined as the difference between revenue and ____.

  4. Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:

  5. The Saturn Corporation (once a division of GM) was permanently closed in 2009.  What went wrong with Saturn?

  6. Which of the following will increase (V0), the shareholder wealth maximization model of the firm: V0∙(shares outstanding) = Σt=1 (π ) / (1+ke)t   + Real Option Value.

  7. An closest example of a risk-free security is

  8. The level of an economic activity should be increased to the point where the ____ is zero.

  9. The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:

  10. Generally, investors expect that projects with high expected net present values also will be projects with

  11. The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)

  12. The ____ is the ratio of ____ to the ____.

  13. Producers' goods are:

  14. Marginal revenue (MR) is ____ when total revenue is maximized.

  15. Iron ore is an example of a:

  16. When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.

  17. An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:

  18. Auto dealers slash prices at the end of the model year in response to deficient demand/excess inventory but restaurants facing the same problem slash production because

  19. The factor(s) which cause(s) a movement along the demand curve include(s):

  20. In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?

  21. Demand functions in the multiplicative form are most common for all of the following reasons except:

  22. In testing whether each individual independent variables (Xs) in a multiple regression equation is statistically significant in explaining the dependent variable (Y), one uses the:

  23. The Identification Problem in the development of a demand function is a result of:

  24. The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:

  25. The standard deviation of the error terms in an estimated regression equation is known as:

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