ECO 550/ECO 550 MIDTERM PART 2

Question 1

Time-series forecasting models:

Answer

are useful whenever changes occur rapidly and
wildly

are more effective in making long-run
forecasts than short-run forecasts

are based solely on historical observations
of the values of the variable being forecasted

attempt to explain the underlying causal
relationships which produce the observed outcome Question 2

Smoothing techniques are a form of ____
techniques which assume that there is an underlying pattern to be found in the
historical values of a variable that is being forecast.

Answer

opinion polling

barometric forecasting

econometric forecasting

time-series forecasting

Question 3

Consumer expenditure plans is an example of a
forecasting method. Which of the general categories best described this
example?

Answer

time-series forecasting techniques

barometric techniques

survey techniques and opinion polling

econometric techniques

input-output analysis

Question 4

The type of economic indicator that can best
be used for business forecasting is the:

Answer

leading indicator

coincident indicator

lagging indicator

current business inventory indicator

optimism/pessimism indicator

Question 5

The forecasting technique which attempts to
forecast short-run changes and makes use of economic indicators known as
leading, coincident or lagging indicators is known as: Answer

econometric technique

time-series forecasting

opinion polling

barometric technique

judgment forecasting

Question
6

The use of quarterly data to develop the
forecasting model Yt = a +bYt?1 is an example of which forecasting technique?
Answer

Barometric forecasting

Time-series forecasting

Survey and opinion

Econometric methods based on an understanding
of the underlying economic variables involved

Input-output analysis

Question 7

Purchasing power parity or PPP says the
ratios composed of: Answer

interest rates explain the direction of
exchange rates.

growth rates explain the direction of
exchange rates.

inflation rates explain the direction of
exchange rates.

services explain the direction exchange
rates.

public opinion polls explain the direction of
exchange rates.

Question 8

If the British pound (?) appreciates by 10%
against the dollar: Answer

both the US importers from Britain and US
exporters to Britain will be helped by the appreciating pound.

the US exporters will find it harder to sell
to foreign customers in Britain.

the US importer of British goods will tend to
find that their cost of goods rises, hurting its bottom line.

both US importers of British goods and
exporters to Britain will be unaffected by changes in foreign exchange rates.

Question 9

If Ben Bernanke, Chair of the Federal Reserve
Board, begins to tighten monetary policy by raising US interest rates next
year, what is the likely impact on the value of the dollar? Answer

The value of the dollar falls when US
interest rates rise.

The value of the dollar rises when US
interest rates rise.

The value of the dollar is not related to US
interest rates.

This is known as Purchasing Power Parity or
PPP.

Question 10

An increase in the exchange rate of the U.S.
dollar relative to a trading partner can result from Answer

higher anticipated costs of production in the
U.S.

higher interest rates and higher inflation in
the U.S.

higher growth rates in the trading partner’s
economy

a change in the terms of trade

lower export industry productivity

Question 11

The import of Apple iPads assembled in
Shanghai at a $295 wholesale price ($213 cost and $82 profit margin) adds more
than it should to the U.S. trade deficit with China because

Answer

Chinese assembly labor represents only 47 %
of the wholesale cost

the iPad’s popularity has triggered an
enormous number of unit sales

wholesale prices only count in the trade statistics
if final product prices are higher

as with foreign-assembled minivans, most of
the subassembly components come from the U.S.

the Chinese yuan is a managed currency

Question 12

In a recession, the trade balance often
improves because Answer

service exports exceed manufactured good
exports

banks sell depressed assets

fewer households can afford luxury imports

direct investment abroad declines

the capital account exceeds the current
account

Question 13

In a production process, an excessive amount of
the variable input relative to the fixed input is being used to produce the
desired output. This statement is true for: Answer

stage II

stages I and II

when Ep = 1

stage III

Question 14

Which of the following is never negative?
Answer

marginal product

average product

production elasticity

marginal rate of technical substitution

slope of the isocost lines

Question 15

The marginal rate of technical substitution
may be defined as all of the following except:

Answer

the rate at which one input may be
substituted for another input in the production process, while total output
remains constant

equal to the negative slope of the isoquant
at any point on the isoquant

the rate at which all combinations of inputs
have equal total costs

equal to the ratio of the marginal products
of X and Y

Question 16

Marginal factor cost is defined as the amount
that an additional unit of the variable input adds to ____.

Answer

marginal cost

variable cost

marginal rate of technical substitution

total cost

Question 17

The primary purpose of the Cobb-Douglas power
function is to:

Answer

allow one to make estimates of cost-output
relationships

allow one to make predictions about a
resulting increase in output for a given increase in the inputs

aid one in gaining accurate empirical values
for economic variables

calculate a short-run linear total cost
function

Question 18

The isoquants for inputs that are perfect
complements for one another consist of a series of: Answer

right angles

parallel lines

concentric circles

right triangles

Question 19

The cost function is:

Answer

a means for expressing output as a function
of cost

a schedule or mathematical relationship
showing the total cost of producing various quantities of output

similar to a profit and loss statement

incapable in being developed from statistical
regression analysis

Question 20

What method of inventory valuation should be
used for economic decision-making problems? Answer

book value

original cost

current replacement cost

cost or market, whichever is lower

historical cost

Question 21

Economies of Scope refers to situations where
per unit costs are:

Answer

Unaffected when two or more products are
produced

Reduced when two or more products are
produced

Increased when two or more products are
produced

Demonstrating constant returns to scale

Demonstrating decreasing returns to scale

Question 22

According to the theory of cost,
specialization in the use of variable resources in the short-run results
initially in:

Answer

decreasing returns and declining average and
marginal costs

increasing returns and declining average and
marginal costs

increasing returns and increasing average and
marginal costs

decreasing returns and increasing average and
marginal costs

Question 23

Economies of scale exist whenever long-run
average costs:

Answer

Increase as output is increased

Remain constant as output is increased

Decrease as output is increased

Decline and then rise as output is increased

Question 24

If TC = 321 + 55Q – 5Q2, then average total
cost at Q = 10 is: Answer

10.2

102

37.1

371

321

Question 25

An example of a time series data set is one
for which the:
Answer
data would be collected for a given firm for several consecutive periods (e.g.,
months).
data would be collected for several different firms at a single point in time.
regression analysis comes from data randomly taken from different points in
time.
data is created from a random number generation program.
use of regression analysis would impossible in time series.

Explanation & Answer

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