ECO 550 Midterm Part 2 / ECO 550 Midterm Part 2

ECO 550 Midterm Part 2 / ECO 550 Midterm Part 2

Question 1

Time-series forecasting models:


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.


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?


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:


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


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:


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 ____.


marginal cost

variable cost

marginal rate of technical substitution

total cost

Question 17

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


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:


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:


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:


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:


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






Question 25

An example of a time series data set is one for which the:


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.

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