Multiple Choice Answers

A production with the form Q = 150L.75 K.50 will have __________ in the long run.
A. increasing returns to scale
B. decreasing returns to scale
C. constant returns to scale
D. diminishing returns to the variable input

If the demand for product A displays high and positive cross-price elasticity with respect to the price of product B, then:
A. the demand for product A is likely to have a low price elasticity.
B. products A and B are substitutes.
C. products A and B are complements.
D. the demand for product B is likely to have a low price elasticity.

Assume Seat Comfy Inc. produces table and chairs with the following total cost function TC=10,000+10Q+0.1Q2 in which Q=quantity of chairs produced. If SeatComfy can sell as many chairs it wishes at the current market price of $45, how many chairs should it produce to maximize its short-run profits?
A. 350
B. 700
C. 175
D. 45

The Marginal Product curve of input Y shows:
A. how the quantity of output produced changes for each amount of input Y, whether or not all other inputs are held constant.
B. how the quantity of output produced changes for each amount of input Y, holding all other inputs constant.
C. how the average quantity of output produced varies with input Y, whether or not all other inputs are held constant.
D. how the average quantity of output produced varies with input Y, holding all other inputs constant.

A production with the form Q = 40 L.75 K.20 will have __________ in the long run.
A. increasing returns to scale
B. decreasing returns to scale
C. constant returns to scale
D. diminishing returns to the variable input

Assume your company produces good X using only two inputs, capital (K) and labor (L). Also, assume L is measured on the vertical axis and K on the horizontal axis. If the prices of inputs are PK=$30 and PL=15 and your company is behaving efficiently, what is the slope of the isoquant at the current input mix?
A. -2
B. -1/2
C. 2
D. 1/2

Bright Light Ltd. estimates the demand curve for its table lamps to be Q = 1,000 – 4 P. That is, P = 250- .25Q. Which of the following is false?
A. The maximum total revenue Bright Light can obtain is $62,500.
B. The Marginal Revenue curve for Bright Light’s table lamps is given by MR = 250 – ½ Q.
C. The elasticity of demand for Bright Light’s table lamps is equal to 7.5 when their price is $125.
D. Bright Light maximizes its total revenues when selling 500 lamps.

If Tiger Toys faces a demand curve of P = 85 – .25Q and a MC = ATC = 20, then the output would be:
A. 65 units.
B. 85 units.
C. 130 units.
D. 32.5 units.

If Tiger Toys faces a demand curve of P = 85 – .25Q and a MC = ATC = 20, then the economic profits would be:
A. $130.00.
B. $6,825.00.
C. $2,600.00.
D. $4,225.00.

If Tiger Toys faces a demand curve of P = 85 – .25Q and a MC = ATC = 20, then the markup would be:
A. $52.50.
B. $20.00.
C. $32.50.
D. $65.00.

What happens to producer surplus and consumer surplus if transactions costs are reduced?
Dan Davis of VIP Inc, is owner and CEO of a company, who has successfully led the company through his decision making over the years. He is retiring at the end of this year, and does not intend to change any aspects of decision making, rewards, or performance evaluation in VIP Inc, What will happen to the company? Why?

Multiple Choice Answers

Question 1 of 20
The GDP is the value of all final goods and services produced:
A. within the nations boundaries.
B. by domestically owned companies.
C. by citizens of the country.
D. by domestically controlled companies.

Question 2 of 20
Net domestic product is usually preferred to GDP by economists because net national product:
A. includes depreciation.
B. excludes depreciation.
C. includes indirect business taxes.
D. excludes indirect business taxes.

Question 3 of 20
The largest item amount among those listed here is:
A. national income.
B. net interest.
C. net domestic product.
D. corporate profits.

Question 4 of 20
Which is NOT counted in GDP?
A. A Social Security check sent to a retiree
B. Government spending on highway building
C. Money spent on an airline ticket
D. Money spent by a company to build a new office park

Question 5 of 20
The smallest component of national income is:
A. rent.
B. interest.
C. profits.
D. salaries and wages.

Question 6 of 20
Our GDP includes all the output produced by Americans:
A. and foreigners within our borders.
B. within our borders.
C. within our borders and abroad.
D. within our borders and by American-owned, multinational companies with offices and factories abroad.

Question 7 of 20
Which of the following is the best example of an intermediate product?
A. A road
B. Steel
C. Bread
D. A TV set

Question 8 of 20
Which of the following would increase GDP?
A. More imports
B. Additional leisure time
C. Government removing more litter
D. People engaging in more “do-it-yourself” projects

Question 9 of 20
National income accountants can avoid multiple accounting by:
A. including transfers in their calculations.
B. counting both intermediate and final goods.
C. only counting final goods.
D. only counting intermediate goods.

Question 10 of 20
The concept of “net domestic investment” refers to:
A. the amount of machinery and equipment used up in producing the GDP in a given year.
B. the difference between the market value and book value of outstanding capital stock.
C. gross domestic investment less net exports.
D. total investment less the amount of investment goods used up in accomplishing the year’s production.

Question 11 of 20
GDP can increase at a faster rate than real GDP only if:
A. there is inflation.
B. the unemployment rate is increasing.
C. the value of the dollar is stable.
D. the population is growing.

Question 12 of 20
Which statement is true?
A. GDP is a virtually perfect measure of national output.
B. GDP takes into account pollution, crime, and even personal satisfaction.
C. GDP is a single number that seeks to measure our national output.
D. There is no relationship between our GDP and our national output.

Question 13 of 20
Which of the following is an intermediate good or service?
A. A paint gun purchased by Handy Andy
B. A dozen boxes of Girl Scout cookies purchased by your instructor
C. A computer purchased by a farmer in Smallville, Kansas
D. Glue purchased by McGraw-Hill to bind your textbook

Question 14 of 20
__________ is the market value of a firm’s output less the value of the inputs the firm has bought from the previous seller.
A. Value added
B. Net Domestic Product
C. Real GDP
D. Genuine Progress Index

Question 15 of 20
Which is the smallest?
A. Net domestic product
B. National income
C. Government expenditures
D. Net exports

Question 16 of 20
GDP is a less than perfect measure of economic well-being. It may be faulted for each of these practices EXCEPT that it:
A. does not take leisure time into account.
B. involves multiple counting.
C. does not take psychic costs into account.
D. does not take psychic income into account.

Question 17 of 20
Net domestic product is equal to:
A. gross national product.
B. the inflation rate.
C. national income (NI) plus corporate profits taxes.
D. NI plus indirect business taxes.

Question 18 of 20
We do NOT count __________ as part of GOP
A. price increases
B. transfer payments
C. final goods
D. depreciation

Question 19 of 20
About seven out of ten dollars of our GDP is spent on:
A. government purchases.
B. net exports.
C. investment spending.
D. consumer goods.

Question 20 of 20
The value actually earned by members of households who supply the inputs necessary to produce GDP is called:
A. net investment.
B. national income
C. personal income.
D. disposable income.

Multiple Choice Answers

1. Dividend payments are categorized as:
 cash flow from operating activities.
 cash flow from investment activities.
 cash flow from financing activities.
 all of the above.

2.  The world of finance can be divided into three broad areas: the banking system, financial management and investments/financial markets.

3.  Bondholders are rewarded by receiving interest and a share of the company’s profits.

4. Net working capital can be referred to as:
 total assets minus current liabilities
 current assets minus total liabilities
 cash minus current liabilities
 current assets minus current liabilities

5.  The CFO is the person primarily responsible for judging the financial viability of projects proposed by other executives.

6.  The proprietorship form of organization gives the business owner the protection of limited liability

7. A business’s financial statements are numerical representations of what it is physically doing

8. The income statement measures the flow of funds in and out of the firm over a period of time.

9. Three years ago a piece of equipment was purchased for $10,000. Assuming an eight-year life and straight-line depreciation, financial statements for the third year will show:
 depreciation expense of $3,000 on the income statement, and accumulated depreciation of $3,000 on the balance sheet.
 depreciation expense of $1,250 on the income statement, and accumulated depreciation of $3,000 on the balance sheet.
 depreciation expense of $1,250 on the income statement, and accumulated depreciation of $3,750 on the balance sheet.
 depreciation expense of $1,250 on the income statement, and accumulated depreciation of $1,250 on the balance sheet.

10. Municipal bonds are debt obligations of the states, municipalities and political subdivisions. They are exempt from federal taxation.

11. The statement, “you can’t know where you’re going ’till you know where you came from,” means that the past, with consideration of current information, is usually one of the best indicators of the firm’s future performance.

12. Both accounting and finance are concerned primarily with the creation of financial statements and their use as tools for evaluating the firm’s future prospects.

13. In addition to raising money, the government uses the tax system to
 Promote a larger and more comprehensive government authority
 Incentivize desirable behavior on the part of taxpayers
 Support our position as the world’s strongest nation
 Keep the nation growing as rapidly as possible

14. The ultimate test of a firm’s efficient use of its stockholders’ money is its return on equity.

15. Differences between net income and cash flow come from:
 accounts receivable
 short-term securities
 All of the above
 A and B only

16. A high inventory turnover ratio would be important to a company whose product has a high level of spoilage.

17. A debt to equity ratio of 2:1 suggests that for every dollar the firm has in equity, it has two dollars of long-term debt.

Financial assets are valuable because they give owners rights to future cash flows.

19. Cash flow from operating activities is increased by:
 an increase in accounts receivable
 an increase in inventory
 a decrease in accounts payable
 all of the above

The stock market is really the entire network of investors, brokers, and exchanges all connected together.

Multiple Choice Answers

Question 1  
Position defense means occupying the most desirable market space in consumers’ minds, making the brand almost impregnable.
 A. true
 B. false
 C. doesn’t that require padding?  

Question 2  
Epic Inc., a firm that produces chairs for offices, uses comparative advertising to inform the consumers that its products offer the same features and quality as the competitor’s. This is an example of a(n) ________ attack.
 A. frontal
 B. flank
 C. bypass
 D. encirclement
 E. guerilla  

Question 3  
Oliver, a company that produces different types of olive oil, launched a promotional campaign focusing on the alternative uses of olive oil. What strategy is the company implementing to expand its total market demand?
 A. advertising new and different applications of the brand
 B. protecting its market share
 C. improving the current level of product performance
 D. using the new-market segment strategy to attract new customers
 E. using the market-penetration strategy to attract new customers  

Question 4  
After Olay entered and took over the Indian market with its anti-aging lotion, Ponds decided to defend its home turf by investing heavily in a similar product, but that which used only natural ingredients. This is an example of a ________.
 A. contraction defense
 B. position defense
 C. mobile defense
 D. flank defense
 E. counteroffensive defense  

Question 5  
Guerrilla attacks consist of small, intermittent attacks, conventional and unconventional, including selective price cuts, intense promotional blitzes, and occasional legal action.
 A. true
 B. false
 C. guerrillas, gorillas. I used to get those two mixed up… til I went to the jungle…  

Question 6  
When large companies can no longer defend all their territory, they launch a ________ defense where they give up weaker markets and reassign resources to stronger ones.
 A. preemptive
 B. flank
 C. mobile
 D. contraction
 E. position  

Question 7  
In his article, “Innovative Imitation”, Theodore Levitt argues that ________.
 A. imitation should be against the law because of the intellectual property decision involved
 B. product imitation might be as profitable as product innovation
 C. innovation cannot begin unless dissatisfaction with imitation occurs
 D. imitation is wrong and should be punished
 E. chocolate is better than vanilla  

Question 8  
Which of the following marketing strategies requires either identifying additional opportunities to use the brand in the same basic way or identifying completely new and different ways to use the brand?
 A. increasing product innovation
 B. increasing the amount of consumption
 C. increasing frequency of consumption
 D. decreasing the level of consumption
 E. increasing dedication to consumption  

Question 9  
As the marketing manager of a company that manufactures floor tiles, Fidel Smith is given a target to achieve 500 new customers by the end of summer. He decides to search the market for probable customers who might use the product but do not at present. Which of the following strategies is Fidel pursuing to increase the market demand for his product?
 A. needs-assessment strategy
 B. new-market segment strategy
 C. market-penetration strategy
 D. geographical-expansion strategy
 E. consolidation strategy  

Question 10  
A dance school in the Bronx teaches professional hip-hop and salsa. It is experiencing an increase in student admissions, which is leading to substantial improvement in profits. The school is going through the ________ phase of its life cycle.
 A. introduction
 B. maturity
 C. decline
 D. stagnancy
 E. growth

Question 11  
Trendz Inc. is a leading brand of fashion clothing and accessories based in Houston. After gaining a strong foothold in the U.S., the company wants to foray into foreign markets. The management at Trends knows that people residing in other countries are likely to have different tastes and preferences, so they may have to redesign some of their offerings. Which of the following strategies is Trendz using?
 A. outsourcing strategy
 B. product differentiation strategy
 C. market-penetration strategy
 D. ethnocentric strategy
 E. geographic-expansion strategy  

Question 12  
Selective price cuts, intense promotional blitzes, and occasional legal action are commonplace in the strategic design of a(n) ________.
  A. frontal attack
 B. guerilla warfare
 C. encirclement attack
 D. flank attack  

Question 13  
An alternative to being a market follower in a large market is to be a leader in a small market. This type of competitor is called a ________.
 A. a mini kingdom
 B. marketing king
 C. strategic clone
 D. market nicher
 E. guerilla marketer  

Question 14  
After a couple of years of successful business, an experimental theatre company based in Aurora is unable to sell tickets for its theatre shows. They have been using profits from previous shows to run the business. The company is in the ________ phase of its life cycle.
 A. obsolescence
 B. introduction
 C. decline
 D. growth
 E. maturity  

Question 15  
The ________ has the largest market share and usually shows the way to other firms in price changes, new-product introductions, distribution coverage, and promotional intensity.
 A. market follower
 B. market nicher
 C. market entrant
 D. market challenger
 E. market leader  

Question 16  
When food product companies advertise recipes that use their branded products in entirely different ways, they are increasing the ________ of the brand.
 A. frequency of consumption
 B. awareness consumption
 C. level of consumption
 D. amount of consumption
 E. dedication to consumption  

Question 17  
In a pure ________ attack, the attacker matches its opponent’s product, advertising, price, and distribution.
 A. encirclement
 B. flank
 C. bypass
 D. guerilla
 E. frontal

Question 18  
When a firm looks for new users in groups that might use the product but do not, the firm is using the ________ strategy.
 A. market-penetration
 B. geographical-expansion
 C. diversification
 D. product development  

Question 19  
The market leader should look for new customers or more usage from existing customers.
 A. true
 B. false
 C. doesn’t it matter whether you’re in the northern or southern hemisphere?

Question 20  
Redo is a market follower in the wristwatch industry. After noticing a shortfall in the market leader’s product, Redo improves its product to suit consumer needs and becomes a challenger for the market leader. This is an example of ________.
  A. innovator
 B. imitator
 C. adapter
 D. cloner
 E. counterfeiter

Question 21  
A market-penetration strategy is one where a company searches for new customers in a group that has never used a product before.
 A. true
 B. false
 C. penetration? Sounds messy.  

Question 22  
A(n) ________ is another name for identifying shifts in market segments that are causing gaps to develop, then rushing in to fill the gaps and developing them into strong segments.
 A. encircling strategy
 B. counteroffensive strategy
 C. bypass strategy
 D. flanking strategy
 E. frontal attack strategy  

Question 23  
As a market-follower strategy, an adapter takes the leader’s products and adapts or improves them.
 A. true
 B. false
 C. hey! That’s stealing! Isn’t it?  

Question 24  
Which of the following is the most constructive response a market leader can make when defending its market share?
 A. maintain basic cost control
 B. provide expected benefits
 C. meet challengers with a swift response
 D. innovate continuously
 E. provide desired benefits  

Question 25  
When “petroleum” companies such as BP sought to recast themselves as “energy” companies, increasing their research into the oil, coal, nuclear, hydroelectric, and chemical industries, these companies were employing a ________ strategy.
 A. preemptive defense
 B. contraction defense
 C. mobile defense
 D. flank defense
 E. counteroffensive defense

Multiple Choice Answers

1. By the early 2000s, which country was Taiwan’s third-largest trading partner?
A. South Korea
B. Japan
C. United States
D. China

2. In China in the 1980s, commune-based agriculture was replaced by the _______ responsibility system.
A. Confucian
B. household
C. cultural
D. community

3. The seat of the Japanese Emperors moved from Kyoto to Edo
A. immediately after Edo was renamed Tokyo.
B. under the Meiji Emperor.
C. when Shinto became Japan’s dominant religion.
D. during the rule of the Samurai. 

4. Which of the following cities is located on the most densely populated island of Indonesia?
A. Kuala Lumpur
B. Bangkok
C. Manila
D. Jakarta 

5. The earliest Chinese civilization along the lower valley of the Yellow River was based on the cultivation of
A. millet.
B. wheat.
C. rice.
D. wheat and rice.

6. Which of the following statements is true regarding gender equality in Southeast Asia?
A. Mao Zedong declared that “Women hold up half the sky.”
B. South Korea is the only Southeast Asian country that supports absolute gender equality.
C. Traditional Confucian views no longer maintain the inferiority of women.
D. Japan’s nationalists support female succession to the Chrysanthemum Throne.

7. The rise of China’s naval power under Admiral Cheng-Ho occurred during the _______ dynasty.
A. Ming
B. Zhou
C. Qin
D. Tang

8. Which of the following statements is true of Singapore?
A. Singapore is member of the Federation of Malaysia.
B. Singapore is a major manufacturer of computer hard drives.
C. Singapore’s government condemned U.S. military actions in Afghanistan.
D. Singapore finally became self-governing in 1965.

9. Distinguishing unique patterns of biodiversity in eastern and western areas of Southeast Asia, the Wallace Line is found between
A. Borneo and Sulawesi.
B. East Timor and New Guinea.
C. Borneo to the east and Sumatra and the Malay Peninsula to the west.
D. the South China Sea and the Philippine Sea

10. The visit of an influential nuclear physicist to a population symposium in 1979 led to
A. the election of Deng Xiaoping in China.
B. the one-child policy in China.
C. new nuclear-power safety measures in populated areas in China.
D. the two-child policy in China.

11. With respect to major rivers, the Mekong is to Vietnam as the Irrawady is to
A. Myanmar.
B. Cambodia.
C. Laos.
D. Thailand.

12. Toyota’s remarkable growth as a multinational company is uniquely associated with which of the following?
A. Jidoka
B. Chaebols
C. Kaizen and jidoka
D. Kaizen and chaebols

13. Until the mid-1900s, most Chinese cities were
A. nonexistent.
B. market and administrative centers.
C. very few in number.
D. small towns.

14. Which of the following statements is true of population and population density in Southeast Asia?
A. In the Koreas and Taiwan, population densities are found in eastern coastal areas.
B. Population policies caused the population in China to decline during the 1950s.
C. Around 70 percent of Japan’s population lives in the region between Tokyo and Osaka.
D. More than half the population of Mongolia lives in Ulan Bator.

15. The Demilitarized Zone between North and South Korea was established in
A. 1945.
B. 1963.
C. 1911.
D. 1953.

16. In terms of GNI PPP, excluding Singapore, the wealthiest nations of Southeast Asia are
A. Thailand and Malaysia.
B. Cambodia and Laos.
C. Indonesia and Vietnam.
D. Indonesia and the Philippines.

17. Which of the following mainland countries of Southeast Asia was never a European colony?
A. Thailand
B. Laos
C. Burma (Myanmar)
D. Cambodia

18. _______ has the largest metropolitan economy in the world.
A. Tokyo
B. Seoul
C. Taipei
D. Hong Kong

19. From 800–1200, the Khmer and Mon peoples moved into the northern regions of
A. Cambodia.
B. Thailand.
C. Vietnam.
D. Myanmar 

20. The Indonesian name for Borneo is
A. Sulawesi.
B. Brunei.
C. Irian Jaya.
D. Kalimantan.