1. Income tax payments are an example of __________. a. implicit costs b. explicit costs c. normal...
Question:
1. Income tax payments are an example of __________.
a. implicit costs
b. explicit costs
c. normal return on investment
d. shareholder wealth
e. none of the above
2.A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the _____________.
a. marginal returns
b. total costs
c. marginal costs
d. average costs
e. average benefits
3.The level of an economic activity should be increased to the point where the __________ is zero.
a. marginal cost
b. average cost
c. net marginal cost
d. net marginal benefit
e. none of the above
4. The net present value of an investment represents
a. an index of the desirability of the investment
b. the expected contribution of that investment to the goal of shareholder wealth maximization
c. the rate of return expected from the investment
d. a and b only
e. a and c only
5. Generally, investors expect that projects with high expected net present values also will be projects with
a. low risk
b. high risk
c. certain cash flows
d. short lives
e. none of the above
6. An excellent example of a risk-free security is
a. General Motors bonds
b. AT&T commercial paper
c. U.S. Government Treasury bills
d. San Francisco municipal bonds
e. a certificate of deposit for $150,000 held in a commercial bank
7.The standard deviation is appropriate to compare the risk between two investments only if
a. the expected returns from the investments are approximately equal
b. the investments have similar life spans
c. objective estimates of each possible outcome is available
d. the coefficient of variation is equal to 1.0
e. none of the above
8. The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
a. 68.26%
b. 2.28%
c. 34%
d. 15.87%
e. none of the above
9. Based on risk-return tradeoffs observable in the financial marketplace, which of the following securities would you expect to offer higher expected returns than corporate bonds?
a. U.S. Government bonds
b. municipal bonds
c. common stock
d. commercial paper
e. none of the above
10. The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
a. the coefficient of variation is easier to compute
b. the standard deviation is a measure of relative risk whereas the coefficient of variation is a measure of absolute risk
c. the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk
d. the standard deviation is rarely used in practice whereas the coefficient of variation is widely used
e. c and d
11. The __________ is the ratio of __________ to the _____________.
a. standard deviation; covariance; expected value
b. coefficient of variation; expected value; standard deviation
c. correlation coefficient; standard deviation; expected value
d. coefficient of variation; standard deviation; expected value
e. none of the above
12. Sources of positive net present value projects include
a. buyer preferences for established brand names
b. economies of large-scale production and distribution
c. patent control of superior product designs or production techniques
d. a and b only
e. a, b, and c
13. Which of the following best represents management's objective(s) in utilizing demand analysis?
a. it provides insights necessary for the effective manipulation of demand
b. it helps to measure the efficiency of the use of company resources
c. it aids in the forecasting of sales and revenues
d. a and b
e. a and c
14. Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.
a. as the price declines, the real income of the consumer increases
b. as the price of product A declines, it makes it more attractive than product B
c. as the price declines, the consumer will always demand more on each successive price
reduction
d. a and b
e. a and c
15. An increase in the quantity demanded could be caused by:
a. an increase in the price of substitute goods
b. a decrease in the price of complementary goods
c. an increase in consumer income levels
d. all of the above
e. none of the above
16. Iron ore is an example of a:
a. durable good
b. producers' good
c. nondurable good
d. consumer good
e. none of the above
17. If the cross-price elasticity measured between items A and B is positive, the two products are referred to as:
a. complements
b. substitutes
c. inelastic as compared to each other
d. both b and c
e. a, b, and c
18. When demand is _____________ a percentage change in ___________ is exactly offset by the same percentage change in _____________ demanded, the net result being a constant total consumer expenditure.
a. elastic; price; quantity
b. unit elastic; price; quantity
c. inelastic; quantity; price
d. inelastic; price; quantity
e. none of the above
19. Marginal revenue (MR) is ____________ when total revenue is maximized.
a. greater than one
b. equal to one
c. less than zero
d. equal to zero
e. equal to minus one
20. The factor(s) which cause(s) a movement along the demand curve include(s):
a. increase in level of advertising
b. decrease in price of complementary goods
c. increase in consumer disposable income
d. decrease in price of the good demanded
e. all of the above
21. An increase in each of the following factors would normally provide a subsequent increase in
quantity demanded, except:
a. price of substitute goods
b. level of competitor advertising
c. consumer income level
d. consumer desires for goods and services
e. a and b
22. Producers' goods are:
a. consumers' goods
b. raw materials combined to produce consumer goods
c. durable goods used by consumers
d. always more expensive when used by corporations
e. none of the above
23. The demand for durable goods tends to be more price elastic than the demand for non-durables.
a. true
b. false
24. A price elasticity (ED) of -1.50 indicates that for a ____________ increase in price, quantity demanded will ____________ by ______________.
a. one percent; increase; 1.50 units
b. one unit; increase; 1.50 units
c. one percent; decrease; 1.50 percent
d. one unit; decrease; 1.50 percent
e. ten percent; increase; fifteen percent
25. Those goods having a calculated income elasticity that is negative are called:
a. producers' goods
b. durable goods
c. inferior goods
d. nondurable goods
e. none of the above
26. An income elasticity (Ey) of 2.0 indicates that for an increase in income,
____________ will increase by __________________.
a. one percent; quantity supplied; two units
b. one unit; quantity supplied; two units
c. one percent; quantity demanded; two percent
d. one unit; quantity demanded; two units
e. ten percent; quantity supplied; two percent
27. When demand elasticity is ___________ in absolute value (or _________), an increase in price will result in a(n) __________ in total revenues.
a. less than 1; elastic; increase
b. more than 1; inelastic; decrease
c. less than 1; elastic; decrease
d. less than 1; inelastic; increase
e. none of the above
28. The basic reason(s) for the increase in quantity demanded as the result of a price reduction is (are) _____________.
a. income effect
b. substitution effect
c. complementary effect
d. a and b only
e. a, b, and c
29. Empirical estimates of the price elasticity of demand suggest that the demand for household consumption of alcoholic beverages is:
a. highly price elastic
b. price inelastic
c. unitarily elastic
d. an inferior good
e. none of the above
30. Consumers will be in equilibrium with respect to the consumption of two goods if:
a. the ratio of marginal utility to price is equal for both goods.
b. the marginal utility of the lowest price good is greater than the marginal utility of the
highest price good.
c. the ratio of the marginal utility of A to the marginal utility of B is equal to the ratio of the
price of B to the price of A.
d. the marginal utility of both goods is identical, regardless of the price.
e. none of the above.
31. Are Income tax payments an example of explicit cost?
a. True
b. False
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill