ECO 550 WEEK 5 Midterm Exam 1

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1. A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.


2. The level of an economic activity should be increased to the point where the ____ is zero.


3. The ____ is the ratio of ____ to the ____.


4. The standard deviation is appropriate to compare the risk between two investments only if


5. The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)


6. An closest example of a risk-free security is


7. In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.


8. The form of economics most relevant to managerial decision-making within the firm is:


9. Shirking of one’s duties is often encountered in team production settings because


10. A Real Option Value is


11. Economic profit is defined as the difference between revenue and ____.


12. The Saturn Corporation (once a division of GM) was permanently closed in 2009.  What went wrong with Saturn?


13. An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.


14. An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except


15. Which of the following would tend to make demand INELASTIC


16. When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.


17. Songwriters and composers press music companies to lower the price for music downloads because.


18. A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.

19. If demand were inelastic, then we should immediately:


20. The standard deviation of the error terms in an estimated regression equation is known as:


21. In testing whether each individual independent variables (Xs) in a multiple regression equation is statistically significant in explaining the dependent variable (Y), one uses the:


22. When two or more "independent" variables are highly correlated, then we have:


23. One commonly used test in checking for the presence of autocorrelation when working with time series data is the ____.


24. Even though insignificant explanatory variables can raise the adjusted R2 of a demand function, one    should not interpret their effects on the regression when


25. All of the following are reasons why an association relationship may not imply a causal relationship except:

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