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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    Attached: ECO 550 Midterm Part 2.docx


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