131) If two goods, X and Y, have a positive cross elasticity of demand, then we know that they A) are both normal goods. B) are complements. C) are both inferior goods. D) each have a price elasticity greater than one. E) are substitutes. 132) Suppose the cross elasticity of demand between two goods, X and Y, is negative. If the price of X […]

  21) The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________. A) 0 tons per week B) 200 tons per week C) 400 tons per week D) 300 tons per week E) 500 tons per week […]

  11) The leading center of Eurocurrency trading is A) New York City. B) Chicago. C) London. D) Paris. E) Frankfurt.     12) The Fed’s Regulation Q A) placed a ceiling on the interest rates U.S. banks could pay on time deposits to foreigners. B) placed a ceiling on the interest rates U.S. banks could pay on time deposits. C) placed a ceiling on […]

  81.Whichofthefollowingisnotcorrect? a.Ariskaversepersonmightbewillingtoholdstocks. b.Otherthingsthesame,aportfoliowiththestocksofalargenumberofcompanieshaslessrisk. c.Otherthingsthesame,thelargeraportionofsavingsapersoninvestsinstocks,thegreaterhisexpectedreturn. d.Diversificationcaneliminatemarketriskbutnotfirm-specificrisk. 82.Anincreaseinthenumberofcorporationsinaportfoliofrom1to10reduces a.marketriskbymorethananincreasefrom110to120. b.marketriskbylessthananincreasefrom110to120. c.firm-specificriskbymorethananincreasefrom110to120. d.firm-specificriskbylessthananincreasefrom110to120. 83.Anincreaseinthenumberofcorporationsinaportfoliofrom110to120reduces a.marketriskbymorethananincreasefrom1to10. b.marketriskbylessthananincreasefrom1to10. c.firm-specificriskbymorethananincreasefrom1to10. d.firm-specificriskbylessthananincreasefrom1to10. 84.Angelareadsfinancialadvicecolumnsandconcludesthefollowing.Which,ifany,ofherconclusionsareincorrect? a.Higheraveragereturnscomeatthepriceofhigherrisk. b.Peoplewhoareriskaverseshouldneverholdstock. c.Diversificationcannoteliminatealloftheriskinstockportfolio. d.Noneofherconclusionsareincorrect. 85.Kurtdecidedtoincreasethenumberofstocksinhisportfolio.Indoingso,Kurtreduced a.boththefirm-specificriskandthemarketriskofhisportfolio. b.thefirm-specificrisk,butnotthemarketriskofhisportfolio. c.themarketrisk,butnotthefirm-specificriskofhisportfolio. d.neitherthemarketrisknorthefirm-specificriskofhisportfolio. 86.Davidincreasesthenumberofcompaniesinwhichheholdsstocks. a.Thisreducesrisk’sstandarddeviationandfirm-specificrisk. b.Thisreducesrisk’sstandarddeviationandmarketrisk. c.Thisraisesmarketrisk,butlowersfirm-specificrisk.Whathappenstooverallriskisunclear. d.Thisraisesfirm-specificrisk,butlowersmarketrisk.Whathappenstooverallriskisunclear. 87.Phillipisamortgagebroker,whoispaidbycommission.Wheninterestratesdecline,hedoesalotofbusinessandearnsalotofmoney,asmorepeoplebuyhousesorrefinancetheirmortgages.Butwheninterestratesrise,businessfallssubstantially.Todiversify,Phillipshouldchooseinvestmentsthat a.provideahigherreturnthanthemarketaverage. b.providealowerreturnthanthemarketaverage. c.payhigherreturnswheninterestratesriseandlowerreturnswheninterestratesfall. d.paylowerreturnswheninterestratesriseandhigherreturnswheninterestratesfall. 88.Todiversify,ahomeownerwithavariable-ratemortgageshouldchooseinvestmentsthat a.payhigherreturnswheninterestratesriseandlowerreturnswheninterestratesfall. b.paylowerreturnswheninterestratesriseandhigherreturnswheninterestratesfall. c.provideahigherreturnthanthemarketaverage. d.providealowerreturnthanthemarketaverage. 89.Missyrecentlyrearrangedherportfoliosothatithasahigheraveragereturn.Asaresultofthisrearranging,Missy a.raisedbothfirm-specificriskandmarketrisk. b.raisedfirm-specificrisk,butnotmarketrisk. c.raisedmarketrisk,butnotfirm-specificrisk. d.Noneoftheaboveiscorrect. 90.Kyleputsagreaterproportionofhisportfoliointogovernmentbonds.Kyle’saction a.increasesbothriskandtheaveragerateofreturn. b.decreasesbothriskandtheaveragerateofreturn. c.increasesrisk,butdecreasestheaveragerateofreturn. d.decreasesrisk,butincreasestheaveragerateofreturn.    

    40. The purpose of a margin account for a futures contract is to:  A. guarantee a minimum margin of profit for the contract holder. B. allow futures traders to have more than one contract at once. C. provide a cushion for the exchange against defaults on the contract. D. hold interest payments until expiration. 41. The process of marking a futures contract to market means that:  A. the profitability of […]

  12.5   Integrative Questions   1) Moral hazard typically occurs because A) people are dishonest. B) agreements sometimes create incentives that are costly to monitor so people can act in their self interest. C) workers possess diminishing marginal productivity. D) screening leads to informed people revealing their relevant private information. E) workers possess adverse selection.   2) Moral hazard results from _____ information and adverse […]

  41. Rolling Hills ConstructionRolling Hills Construction Co. assigns overhead to specific jobs based on actual direct labor cost (dollars). The following information is available for the month of June:  Estimated direct labor hours 2,000 hours Estimated direct labor cost per hour $12/hour Estimated overhead costs $3,000 Actual direct labor hours 2,300 hours Actual direct labor cost per hour $13/hour Actual overhead costs $3,300     […]

    21) Which of the following is one of the five competitive forces proposed by Porter? A) employee productivity B) threat of substitutes C) market volatility D) governmental influence   22) Durodoll is a leading manufacturer of decorative crafts in Canada. Which of the following, if true, will indicate that the threat of new entrants is high for Durodoll? A) Durodoll has a patent […]

  111) To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla’s Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers A) face no trade-off because the […]

  31) The Shiny Watch company, a manufacturer of expensive watches, requires all of its retailers to sell its watches for a specific price. Which of the following statements are true? i.The Shiny Watch company is engaged in predatory pricing. ii.The Shiny Watch company is definitely violating the law iii.The Shiny Watch company creates an efficient outcome it its retailers provide an efficient level of […]