When analyzing a capital budgeting project, the analyst must include in his calculation all of the following except A) all revenues and costs in terms of cash flows. B) only those cash flows that will change if the proposal is accepted (i.e., incremental cash flows). C) interest payments on debt financing connected with the project. […]
International price discrimination for a good is possible if A) goods are sold through the gray market. B) the price difference between two countries is greater than the transaction costs in arbitrage. C) the price difference between two countries is less than the transaction costs in arbitrage. D) None of the above. ANSWER C […]
In economic theory, if an additional worker adds less to the total output than previous workers hired, it is because A) there may be less that this person can do, given the fixed capacity of the firm. B) he/she is less skilled than the previously hired workers. C) everyone is getting in each other’s way. […]
In the long run, a firm is said to be experiencing decreasing returns to scale if a 10 percent increase in inputs results in A) an increase in output from 100 to 110. B) a decrease in output from 100 to 90. C) an increase in output from 100 to 105. D) a decrease in […]
In finance, risk is most commonly measured by A) the probability distribution. B) the standard deviation. C) the average deviation. D) the square root of the standard deviation. ANSWER B
Increasing returns to scale result when A) in the long-run, an increase in inputs will lead to an increase in the average products of inputs. B) in the long run, an increase in inputs will lead to an equivalent increase in output. C) labor becomes more skilled. D) All of the above ANSWER A […]
A project whose acceptance eliminates another project from consideration is called A) independent. B) mutually exclusive. C) replacement. D) complementary. ANSWER B
Probabilities, which can be obtained by repetition or are based on general mathematical principles, are called A) statistical. B) empirical. C) a priori. D) subjective. ANSWER C
When the law of diminishing returns takes effect A) firms must add increasingly more input if they are to maintain the same extra amount of output. B) firms must add decreasingly more input if they are to maintain the same extra amount of output. C) more input must be added in order to increase its […]
The above figure shows the payoff matrix for two firms. A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake. A private beach on the lake must decide […]
