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Unformatted text preview: BUSA 6160 Sample Exam Spring 2010 Rather than limiting the sample exam to just a few questions I’ve decided to expose you to as many different types of questions as possible. In studying for the mid-term, work through these questions. If you don’t understand an answer please contact me. P.Szmedra Chapter 1 1. Which of the following is an implicit cost to a firm that produces a good or service? A. labor costs. B. costs of operating production machinery. C. foregone profits of producing a different good or service. D. costs of renting or buying land for a production site. 2. If the interest rate is five percent, the present value of $200 received at the end of five years is: A. $121.34. B. $156.71. C. $176.41. D. $132.62. 3. A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is seven percent, what is the net present value of purchasing the tractor? A. $6,764. B. $9,362. C. $18,362. D. none of the statements associated with this question are correct. 4. Suppose total benefits and total costs are given by B(Y) = 100Y - 8Y 2 and C(Y) = 10Y 2 . What level of Y will yield the maximum net benefits? A. 75/36. B. 75/18. C. 50/18. D. 100/36. 5. Negotiations between the buyer and seller of a new house is an example of: A. consumer-consumer rivalry. B. consumer-producer rivalry. C. producer-producer rivalry. D. monopoly. 6. When MB = 300 - 12Y and TC = 12Y + 108, the optimal level of Y is: A. 25. B. 4.5. C. 8. D. 24. 1 7. Suppose the growth rate of the firm's profit is 5%, the interest rate is 6%, and the current profits of the firm are 80 million dollars. What is the value of the firm? A. $89.2 million. B. $1,413.3 million. C. $8,480 million. D. none of the statements associated with this question are correct. 8. You are the manager of a Fortune 500 hotel chain and must decide where to locate a new hotel. Based on tax considerations, your accounting department suggests that Atlantic City is the best choice, followed closely by Las Vegas. In particular, your current year tax savings from locating in Atlantic City are $4 million but only $3 million in Las Vegas. Your marketing department, on the other hand, has provided you with sales estimates that suggest that the present value of the gross (of taxes) operating profits from locating in Atlantic City are only $10 million but are $14 million for Las Vegas. It will cost $14 million to build the hotel in either location. Ignoring all other considerations, where should you build the hotel? What are your firm's economic profits if you locate the hotel in Atlantic City?...
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- Spring '11