31) The 10-year protection period from generic competition for drug manufacturers is a form of A) copyright. B) trademark. C) hallmark. D) patent.   32) Network externalities A) can only exist when there are economies of scale. B) prevent the dominance of a market by one firm. C) exist when the usefulness of a product increases with the number of consumers who use […]

  31. Mystic Falls Inc. Mystic Falls Inc. bottles and sells a popular soft drink. In 2011, the company had expected to sell 1,000,000 bottles but actually bottled and sold 900,000 bottles. The standard direct materials cost for each bottle is $.40 comprised of 10 ounces at a cost of $.04 per ounce. During 2011, 10,000,000 ounces of material were purchased out of which 9,200,000 ounces […]

    Two rival firms are considering sponsoring an event. Each firm believes that sponsoring the event will increase their sales by a certain percentage. The payoff matrix showing the increase in sales for the firms is given below. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. […]

    41) With perfect price discrimination, the marginal revenue curve A) is below the demand curve. B) is above the demand curve. C) is equal to the demand curve. D) is horizontal.   Figure 16-1     42) Refer to Figure 16-1. With perfect price discrimination, the firm will produce and sell A) Q1 units. B) Q2 units. C) Q3 units. D) Q4 units. […]

    21) Which of the following would create a natural monopoly? A) ownership of all the available units of a necessary input B) an exclusive right granted to supply a good or service C) requirement of a government license before the firm can sell the good or service D) technology enabling a single firm to produce at a lower average total cost than two […]

    96.              Manufacturing overhead applied is added to direct labor incurred and to what other item to equal total manufacturing costs for the period? a.Goods available for sale. b.Raw materials purchased. c.Work in process. d.Direct materials used. 97.              Simmons Inc. applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 250, the only job still in process […]

  31.Iftheefficientmarkethypothesisiscorrect,then a.indexfundsshouldtypicallybeatmanagedfunds,andusuallydo. b.indexfundshouldtypicallybeatmanagedfunds,butusuallydonot. c.mutualfundsshouldtypicallybeatindexfunds,andusuallydo. d.mutualfundsshouldtypicallybeatindexfunds,butusuallydonot. 32.Whichofthefollowingiscorrect? a.Managedfundstypicallyhaveahigherreturnthanindexedfunds.Thistendstorefutetheefficientmarkethypothesis. b.Managedfundstypicallyhaveahigherreturnthanindexedfunds.Thistendstosupporttheefficientmarkethypothesis. c.Indexfundstypicallyhaveahigherrateofreturnthanmanagedfunds.Thistendstorefutetheefficientmarkethypothesis. d.Indexfundstypicallyhaveahigherrateofreturnthanmanagedfunds.Thistendstosupporttheefficientmarkethypothesis. 33.Whichofthefollowingisnotconsistentwiththeefficientmarkethypothesis? a.Stockpricesshouldfollowarandomwalk. b.Indexfundsshouldtypicallyoutperformhighlymanagedfunds. c.Newshasnoeffectonstockprices. d.Thereislittlepointinspendingmanyhoursstudyingthebusinesspageslookingforundervaluedstocks. 34.Accordingtotheefficientmarketshypothesis,whichofthefollowingwouldincreasethepriceofstockintheSimpsonCorporation? a.Simpsonannounces,justaseveryonehadexpected,thatithashiredanewhighlyrespectedCEO. b.Simpsonannouncesthatitsprofitswerelow,butnotaslowasthemarkethadexpected. c.AnalysisbyacolumninabusinessweeklyindicatesthatSimpsonisovervalued. d.Alloftheabovewouldincreasetheprice. 35.SupposethatinterestratesunexpectedlyriseandthatFineLineCorporationannouncesthatrevenuesfromlastquarterweredownbutnotasmuchasthepublichadanticipatedtheywouldbedown.Accordingtotheefficientmarketshypothesis,whichofthethesethingsmakethepriceofFineLineCorporationStockfall? a.boththeinterestraterisingandtherevenueannouncement b.neithertheinterestraterisingnortherevenueannouncement c.onlytheinterestraterising d.onlytherevenueannouncement 36.FundamentalanalysisshowsthatQuadrangleCompanyisfairlyvalued.ThenQuadrangleCompanyunexpectedlyimprovesitsproductiontechniquesandunexpectedlyhiresanewCEOawayfromanotherverysuccessfulcompetitor.SupposethishasnoeffectonthepriceofthestockofQuadrangleCompany. a.Fundamentalanalysiswouldnowshowthecorporationisovervalued.Thefactthatthepricewasunchangedisconsistentwiththeefficientmarketshypothesis. b.Fundamentalanalysiswouldnowshowthecorporationisovervalued.Thefactthatthepricewasunchangedisnotconsistentwiththeefficientmarketshypothesis. c.Fundamentalanalysiswouldnowshowthecorporationisundervalued.Thefactthatthepricewasunchangedisconsistentwiththeefficientmarketshypothesis. d.Fundamentalanalysiswouldnowshowthecorporationisundervalued.Thefactthatthepricewasunchangedisnotconsistentwiththeefficientmarketshypothesis. 37.Inthe1990s,FedChairpersonAlanGreenspanquestionedwhetherthestockmarket a.boomatthattimereflected“irrationalexuberance.” b.declineatthattimereflected“irrationalfunk.” c.boomatthattimereflected“rationalexuberance.” d.declineatthattimereflected“rationalfunk.” 38.Inthe1990s,FedChairAlanGreenspanbelievedthatthemarketwas a.undervalued,andevidencelatershowedthatthiswasclearlycorrect. b.undervalued,butwhetheritwasremainsdebatable. c.overvalued,andevidencelatershowedthatthiswasclearlycorrect. d.overvalued,butwhetheritwasremainsdebatable. 39.Whichofthefollowingisnotcorrect? a.Thereisagreaterreductioninriskbyincreasingthenumberofstocksinaportfoliofrom1to10,thanbyincreasingitfrom100to120stocks. b.Thehistoricalrateofreturnonstockshasbeenabout5percentagepointshigherthanthehistoricalrateofreturnonbonds. c.Stockinanindustrythatisverysensitivetoeconomicconditionsislikelytohaveahigheraveragereturnthanstockinanindustrythatisnotsosensitivetoeconomicconditions. d.Ifyouhadinformationaboutacorporationthatnooneelsehad,youcouldearnaveryhighrateofreturn.Thiscontradictstheefficientmarkethypothesis. 40.Whichofthefollowingiscorrectconcerningstockmarketirrationality? a.Bubblescouldarise,inpart,becausethepricethatpeoplepayforstockdependsonwhattheythinksomeoneelsewillpayforitinthefuture. b.Economistsalmostallagreethattheevidenceforstockmarketirrationalityisconvincingandthedeparturesfromrationalpricingareimportant. c.Someevidencefortheexistenceofmarketirrationalityisthatinformedandpresumablyrationalmanagersofmutualfundsgenerallybeatthemarket. d.Alloftheabovearecorrect.    

  8.5   Graphing Cost Curves   1) Which of the following equations is correct? A) AVC – ATC = AFC B) AVC + ATC = AFC C) AFC + AVC = ATC D) ATC + AVC = AFC   2) When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is A) impossible […]

  12.3   The Cost of Inflation   1) High inflation A) leads to a more correct allocation of resources. B) lowers the price level. C) decreases uncertainty. D) makes it easier to use money as a standard of account. E) makes money function less well as a store of value.   2) During an inflation, a household with savings of $100,000 A) gains because inflation […]

  72. Rex and Marsha each own 50 percent of the Grandiflora Corporation, an S corporation with a calendar tax year. At the beginning of the tax year, Marsha and Rex both have a basis in the stock of the corporation of $25,000. On June 30, 2014, Rex sells his interest in the corporation to George for $200,000, and for 2014 the Grandiflora Corporation has a […]