What method of inventory valuation should be used for economic decision-making problems?
a. book value
b. original cost
c. current replacement cost
d. cost or market, whichever is lower
e. historical cost
The cost function is:
a. a means for expressing output as a function of cost
b. a schedule or mathematical relationship showing the total cost of producing various quantities of output
c. similar to a profit and loss statement
d. incapable in being developed from statistical regression analysis
17. In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?
the identification problem
Autocorrelation
multicollinearity
heteroscedasticity
agency problems
The net present value of an investment represents
an index of the desirability of the investment
the expected contribution of that investment to the goal of shareholder wealth maximization
the rate of return expected from the investment
the rate of return on equity
The North America Free Trade Association (NAFTA)
encompasses less than 15% of world trade
includes the two largest trading partners of the U.S.
exceeds the EU's share of world trade
all of the above
none of the above
In a recession, the trade balance often improves because
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
An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
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
The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
increase exports
reduce the competitive pressure on prices
lower the value of the currency
increase foreign aid
increase the speculative demand for the currency
In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will
raise the value of the currency
lower the nominal interest rate
increase the volume of trading in the foreign exchange market
lower the trade-weighted exchange rate
increase consumer inflation.