Sample Midterm Test: Business Economics

SAMPLE MID-TERM EXAM
1.Choose the only one false statement!

Goods are substitutes when an increase in the price of one good increases the demand for the other
good.
Substitute goods are two alternative goods that could be used for the same purpose.
Goods are complements when an increase in the price of one good increases the demand for the other
good.
The cost of substitution might be high if there is switching costs for consumers.
2.Choose the only one false statement!

The activities of market development strategy include price reductions, sales force promotions
expansion in the present market
Product Development in the Ansoff Matrix is the approach in which organizations deliver
either new products or modified products in existing markets.
Diversification is by far the riskiest strategic option of the Ansoff Matrix.
Learning-by-doing results in decreasing production cost per unit as the cumulative output
produced increases, and firms use the innovation more efficiently.
3. Choose the only one false statement!

When rivalry is high, competitors are likely to actively engage in advertising and price wars.
Rivalry will be more intense when barriers to exit are low.

Barriers to exit can for example be long-term loan agreements and high fixed costs.
If rivalry is fierce, then competitors are trying to steal profit and market share within the
industry.
4.Choose the only one correct statement!

A shorter time frame tends to decrease research and development cost.
An inverse relationship exists between time and research and development costs.
The time-cost trade-off function describes this relationship between time and production cost.
A development project of short duration is likely to have lower net revenue.
5. Which is the only one correct statement?
Suppliers may have more power if they are in concentrated numbers compared to sellers
Suppliers may have more power if there are low switching costs associated with a move to
another supplier.
Suppliers may have more power if they are unable to integrate forward or begin producing the
product themselves
Suppliers may have more power if there are many buyers and none make up significant
portions of sales
6.Suppose the price of gasoline has risen, which has led to a decrease in car
sales. Which is the only one correct statement?
The gasoline and car are perfect substitutes
The gasoline and car are complements
The gasoline and car are unrelated goods
The gasoline and car are homogeneous goods

Rivalry is low when there are a lot of competitors that are roughly equal in size and power
Rivalry is low when the industry is growing slowly
Rivalry is high and when consumers can easily switch to a competitors offering for little cost
Rivalry will be more intense when barriers to exit are low

An industry is unattractive if barriers of entry are high
An industry is unattractive if bargaining power of buyers is strong

An industry is unattractive if bargaining power of suppliers is low
An industry is unattractive if there are a few substitute goods
9. What are the elements of the „Five Forces Framework”?

Entry; Power of Buyer, Power of Input Suppliers; Industry Rivalry, Environmental Factors
Power of Buyer; Power of Input Suppliers; Power of Rivals; Power of Employees, Power of
Government
Entry; Exit; Power of Input Suppliers, Power of Rivals, Environmental Factors
Entry; Power of Buyer, Power of Input Suppliers; Industry Rivalry; Complements and
Substitutes
10. Why do we need the weighted avarage models? Choose the only one correct
statements!
Because of the ability to give more importance to what happened recently, without losing the
impact of the past
Because of the ability to give more importance to what happened in the past
Because of the ability to give more importance to what happened recently
Because it is much easier to use than the exponential smoothing method
11. Assume that the total cost function of a firm is the following: TC=20+10Q+5Q 2.
Which is the only one correct statement?
The fixed cost is 20 and the average cost is 20/Q+10
The fixed cost is 20, the marginal cost is 10+25Q, and the average cost is undeterminable.
The fixed cost is 20, the marginal cost is 10+25Q, and the average cost is 20/Q+10+5Q
The fixed cost is 20, the marginal cost is 20/Q+10+5Q, and the average cost is 10+25Q.
12. Which is the only one false statement?

The multiproduct-cost function exhibits cost complementarity if an increase in the output of
product 2 increases the marginal cost of producing product 1
The multiproduct-cost function exhibits cost complementarity if an increase in the output of

product 2 decreases the marginal cost of producing product 1.
The multiproduct-cost function exhibits cost complementarity when the marginal cost of
producing one output is reduced when the output of another product is decreased
The multiproduct-cost function exhibits cost complementarity if an decrease in the output of

product 2 decreases the total cost of producing product 1
13. Assume that the production function of a firm is the following: Q=2K + 4L,
where Q denotes quantity, K denotes capital and L denotes labor. In this case
which is the only one correct statement?
In this case there is a perfect linear relationship between the inputs, and the inputs are perfect
complements.
In this case there is a non-linear relationship between the inputs, and the inputs are perfect
subsitutes.
In this case the labor is twice as productive as capital, and the inputs are perfect substitutes.
In this case the labor is twice as productive as capital, and the inputs are complements.
14. Which is the only one false statement?

Judgmental forecasting methods incorporate intuitive judgment, opinions and subjective
probability estimates.
The present value (PV) of an amount received in the future is the amount that would have to
be invested today at the prevailing interest rate to generate the given present value.
The higher the interest rate, the higher the opportunity cost of waiting to receive a future
amount and thus the lower the present value of future amount.
If the net present value of a project is positive, then the project is profitable because the net
present value of the earnings from the project exceeds the current cost of the project.

Depreciation is a method of reallocating the cost of intangible asset over its useful life span.
Firms depreciate short-term assets (for example machines, vehicles, buildings) for both
accounting and tax purposes.
Generally, the cost is allocated, as depreciation expense, among the periods in which the asset
is expected to be used.
Depreciation expense generally begins when the asset is purchased.
TRUE-OR-FALSE QUESTIONS
Is the following statement true or false? In the straight-line method the firm
estimates the residual value of the asset at the end of the period during which it
will be used.
True
False
Is the following statement true or false? If the net present value of a project is
positive, then the project is profitable because the net present value of the
earnings from the project exceeds the current cost of the project.
True
False
Is the following statement true or false? Judgmental forecasting is used in cases

where there is not lack of historical data or during completely new and unique
market conditions.
True
False
Is the following statement true or false? A good whose demand increases when
consumer income rise is called a normal goods.
True
False
Is the following statement true or false? The indicator of price sensitivity of buyer
is the income elasticity of demand.
True
False

Sample Midterm Test: Business Economics

Uploaded by

Copyright:

Available Formats

Sample Midterm Test: Business Economics

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sample Midterm Test: Business Economics

Uploaded by

Copyright:

Available Formats

SAMPLE MID-TERM EXAM

1.Choose the only one false statement!

2.Choose the only one false statement!

Diversification is by far the riskiest strategic option of the Ansoff Matrix.

3. Choose the only one false statement!

Rivalry will be more intense when barriers to exit are low.

4.Choose the only one correct statement!

The gasoline and car are complements

The gasoline and car are unrelated goods

The gasoline and car are homogeneous goods

7. Which is the only one correct statement?

Rivalry is low when the industry is growing slowly

8. Which is the only one correct statement?

An industry is unattractive if bargaining power of buyers is strong

An industry is unattractive if there are a few substitute goods

9. What are the elements of the „Five Forces Framework”?

Because of the ability to give more importance to what happened recently

Because it is much easier to use than the exponential smoothing method

The fixed cost is 20 and the average cost is 20/Q+10

12. Which is the only one false statement?

The multiproduct-cost function exhibits cost complementarity if an increase in the output of

The multiproduct-cost function exhibits cost complementarity if an decrease in the output of

14. Which is the only one false statement?

15. Which is the only one correct statement?

Depreciation expense generally begins when the asset is purchased.

Is the following statement true or false? Judgmental forecasting is used in cases

You might also like