Question

QUESTION 27

1. Suppose I value your business at $580,000, you value your business at $550,000, and I must pay an attorney $15,000 to complete the required transfer documents for the county government.  What is the outcome from the potential transaction?

   	A.	I buy the business from you at a price between $580,000 and $550,000
   	B.	The business is sold for $565,000
   	C.	You buy the business from me at a price between $580,000 and $550,000
   	D.	The transaction does not occur because the transaction costs exceed the value created

5 points   

QUESTION 28

1. The income elasticity of demand for life insurance is 2.3 for US consumers as a group. Which of the following statements is NOT true?

   	A.	Life insurance is a luxury good
   	B.	Life insurance purchases are expected to increase as US consumer incomes rise
   	C.	Life insurance is a necessity for most US consumers
   	D.	Most US consumers view life insurance as a normal good

5 points   

QUESTION 29

1. Opportunity costs arise due to

   	A.	lack of alternatives
   	B.	scarcity of resources
   	C.	abundance of resources
   	D.	limited wants

5 points   

QUESTION 30

1. A firm that can enjoy economies of scope has an incentive to

   	A.	focus on making one product
   	B.	shut down
   	C.	diversify its product line
   	D.	increase output of its main product as fast as possible

5 points   

QUESTION 31

1. A U-shaped average cost curve exhibits

   	A.	We do not have enough information to answer this question
   	B.	Only economies of scale
   	C.	Both economies of scale and diseconomies of scale
   	D.	Only diseconomies of scale

5 points   

QUESTION 32

1. Suppose we invest in a new stock market information service that is sold by subscription to stock market participants.  Our investment will generate a stream of income from the subscription revenues collected in future years.  What happens to the net present value (NPV) of this investment if the discount rate increases?

   	A.	We do not have enough information to answer this question
   	B.	NPV increases
   	C.	NPV is unchanged
   	D.	NPV declines

5 points   

QUESTION 33

1. Your restaurant sells 300 pizzas in the typical day, and the total costs are $3,000 per day. If your fixed costs are $1,200 per day, what is average total cost?

   	A.	$10
   	B.	$8
   	C.	$4
   	D.	$6

Answer 1

27. A. I buy the business from you at a price in between $550000 to 580000.

28. C.life insurance is necessity for most of the US consumers.

29. B. Scarcity of resources.

30. C. Diversify its productline.

31.B. only economies of scale.

32.B. NPV increases.

33.A. $10