1. This afternoon, you deposited \$1,000 into a retirement savings account. The account will compound
interest at 6 percent annually. You will not withdraw any principal or interest until you retire in forty
years. Which one of the following statements is correct?
A. The interest you earn six years from now will equal the interest you earn ten years from now.
B. The interest amount you earn will double in value every year.
C. The total amount of interest you will earn will equal \$1,000 × .06 × 40.
D. The present value of this investment is equal to \$1,000.
E. The future value of this amount is equal to \$1,000 × (1 + 40).06.

2. Travis invested \$9,250 in an account that pays 6 percent simple interest. How much more could he
have earned over a 7-year period if the interest had compounded annually?
A. \$741.41
B. \$773.58
C. \$802.16
D. \$833.33
E. \$858.09

3. Consider a firm with a contract to sell an asset 3 years from now for \$90,000. The asset costs \$71,000
to produce today. At what rate will the firm just break even on this contract?
A. 7.87 percent
B. 8.01 percent
C. 8.23 percent
D. 8.57 percent
E. 8.90 percent

4. What is the present value of \$150,000 to be received 8 years from today if the discount rate is 11
percent?
A. \$65,088.97
B. \$71,147.07
C. \$74,141.41
D. \$79,806.18
E. \$83,291.06
5. Penn Station is saving money to build a new loading platform. Two years ago, they set aside \$24,000
for this purpose. Today, that account is worth \$28,399. What rate of interest is Penn Station earning on
this investment?
A. 6.39 percent
B. 7.47 percent
C. 8.78 percent
D. 9.23 percent
E. 9.67 percent
6. You expect to receive \$9,000 at graduation in 2 years. You plan on investing this money at 10 percent
until you have \$60,000. How many years will it be until this occurs?
A. 18.78 years
B. 19.96 years
C. 21.90 years
D. 23.08 years
E. 25.00 years
7. You just signed a consulting contract that will pay you \$35,000, \$52,000, and \$80,000 annually at the
end of the next three years, respectively. What is the present value of these cash flows given a 10.5
percent discount rate?
A. \$133,554
B. \$142,307
C. \$148,880
D. \$151,131
E. \$156,910
8. Wicker Imports established a trust fund that provides \$90,000 in scholarships each year for needy
students. The trust fund earns a fixed 6 percent rate of return. How much money did the firm contribute to
the fund assuming that only the interest income is distributed?
A. \$1,150,000
B. \$1,200,000
C. \$1,333,333
D. \$1,500,000
E. \$1,600,000
9. What is the effective annual rate if a bank charges you 9.50 percent compounded quarterly?
A. 9.62 percent
B. 9.68 percent
C. 9.72 percent
D. 9.84 percent
E. 9.91 percent
10. Western Bank offers you a \$21,000, 6-year term loan at 8 percent annual interest. What is the amount
A. \$4,228.50
B. \$4,542.62
C. \$4,666.67
D. \$4,901.18
E. \$5,311.07

These are really easy questions, if you know how to use a business calculator or Excel financial functions, I prefer the latter. If you don’t know how to use either of these, I suggest you learn. I will give you the answers for two of your questions.

1) D
10) B

15. The monopolist’s decision to limit output to xA rather than xB is based on the point:
(a) A
(b) B
(c) C
(d) Any point along the demand curve D
16. The redistribution of consumer surplus to monopolist economic profit is illustrated by the area:
(a) pA AC pC
(b) pB BC pC
(c) pA AB pB
(d) There is no redistribution of consumer surplus to economic profit, only to deadweight loss.
Questions 17. – 19. refer to the monopolistically competitive firm depicted in the graph below:
17. This monopolistic competitor maximizes profit by:
(a) Equating marginal revenue and marginal cost at point A
(b) Equating marginal revenue and marginal cost at point B
(c) Equating marginal revenue and marginal cost at point C
(d) Equating marginal revenue and marginal cost at point D
18. The profit-maximizing price and the price resulting in allocative efficiency are, respectively:
(a) (pA and pB)
(b) (pB and pC)
(c) (pA and pC)
(d) Any price along the demand curve d.
19. The triangular area ADC is the deadweight loss associated with monopolistic competition, but from
society’s perspective it may be offset by the benefit of:
(a) Zero economic profit
(b) Minimum average cost pricing in equilibrium
(c) Price being equal to marginal cost
(d) Product differentiation
x
p
pA
pC
xA xB
pB
A B
C
d
MR
D
Suppose Matson and Horizon Lines are the only ocean surface container carriers between the West Coast
of the U.S. mainland and Hawaii: a shipping duopoly. Their payoff matrix, depicting profits in millions
of dollars, based on their choice of vessels, as shown below. By restricting output through the use of
smaller vessels, the carriers could profitably raise prices, but each has an incentive to steal market share
from the other by deploying larger vessels, even while it reduces prices paid by consumers.
Large Small
Large M = \$25 M = \$25
Horizon H = \$25 H = \$40
Small M = \$40 M = \$35
H = \$20 H = \$35
Matson
20. If the two carriers were allowed to collude, total profits in the industry would be:
(a) \$70 million
(b) \$65 million
(c) \$60 million
(d) \$50 million
21. If each carrier gets only one chance to choose vessel size (because ships are so expensive), and is
unaware of its rival’s choice, then total profits in the industry would be:
(a) \$70 million
(b) \$65 million
(c) \$60 million
(d) \$50 million
22. Unaware of its rival’s strategy, each carrier:
(a) Will encourage other shippers to enter the market to undermine its rival
(b) Will have little incentive to use technology to increase logistical productivity
(c) Will seek to gain profitability at the expense of its rival by deploying larger vessels
(d) Will let its vessels depreciate since upgrading its fleet simply lowers prices
23. All of the following are reasons oligopoly is more accepted than in the past, except:
(a) Anticompetitive behavior can be held at bay with credible entry threats
(b) Oligopoly firms have strong track records for beneficial research and development expenditure
(c) Advertising outlays often are meant to shift consumer preferences rather than inform consumers
(d) Economic governance within large organizations can be an efficient alternative to markets
24. Comparing competition to oligopoly to monopoly, one finds that:
(a) Monopoly produces higher output than oligopoly and, in turn, competition
(b) Price is higher than marginal cost in competition than in oligopoly and, in turn, in monopoly
(c) Self-interest drives oligopoly firms’ prices and outputs towards competitive outcomes
(d) Competition has a tendency to limit productive capacity
25. Defining anticompetitive behavior in oligopoly industry is not always straightforward, because:
(a) It is unclear if collusion between two firms in a duopoly is essentially joint monopoly
(b) Price-fixing is difficult to establish when colluders have left written and video records
(d) Bundling apps on devices, predatory pricing, and technical innovation can benefit consumers
Econ 130

Do your own homework, this isn’t the place to go when you’re feeling too lazy to look things up

## Are Illegal Aliens and their supporters turning California into an Epic Failure of a State?

Moody’s is about to drop any bonds issued by the state of California into the “Junk” category, and it would be the state with the lowest credit, dropping it below Louisiana and Mississippi:

Credit-rating firms blew their reputations in the last few years by giving top grades to mortgage-backed bonds that later crashed and burned.
Given that backdrop, the firms aren’t about to give cash-strapped California the benefit of the doubt.

So today, we have more drama than usual in Moody’s Investors Service’s warning that it may cut California’s bond grade, already the lowest of the 50 states.
If the budget mess isn’t fixed to its satisfaction, Moody’s said, the state could face a “multi-notch downgrade” in its rating, which currently is “A2″ from Moody’s for nearly \$60 billion in general obligation bonds.

Illegal Aliens cost California 10 billion dollars a year to be a sanctuary state, and that comes out to 1,183 dollars per “legal” family.
Illegal alien children make up 15 percent of the student enrollment.
Another \$1.4 billion of the taxpayers’ money goes toward providing health care to illegal aliens and their families, the same amount that is spent incarcerating illegal aliens criminals.

Yet still, California just doesn’t get it. They have a fetish for this illegal immigration phenomenom which is more prevalent in their state then any other. Now, they are going to spend millions in additional taxpayer dollars that don’t exist to provide id cards for illegal aliens so they can access welfare and health services from the state:

http://www.mercurynews.com/breakingnews/ci_12509285

Question: Why doesn’t California “get it”?

Poor illegal alien defending fools:

Because the do not want to look at the facts. They would rather believe the sob stories, most are either illegal, related to illegals, married to illegals etc…