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FRE 6023 Fall 2007 Midterm Exam
Polytechnic University
Professor Barry Blecherman
Tuesday 23 October 2007

This is an open-book, open-note, open-computer exam – there is no reason that I can anticipate that you’ll need a computer, but you may use one if you wish to. Please do not speak unless asking me a question and please keep your eyes focused on your own work.

Please keep your handwriting neat, and remember that I can only give full/partial credit if I understand what you’ve written. Do the problems in any order – just make sure that I can tell which problem your answer corresponds to.

This is a 2.5-hour exam. When you are finished, please put the white exam questions inside your Blue Book before turning in your exam. …show more content…

5. We learned that a firm should hire employees as long as the rule that marginal revenue product exceeds marginal cost holds. Many firms management training programs where new hires are paid well for a year or two but do not produce much value during that time. Are such firms behaving in violation of the rule? Explain your answer. 6. Give two good reasons why we should plot and study the residuals generated by a regression analysis. 7. Give an example of an economy of scale and an example of an economy of scope not found in your textbook. 8. Explain the break-even formula: QB = TFC / (P-AVC) in terms gross profit margin per sale. 9. A regression output shows that the coefficient for an independent variable has a p-value of 0.13784. Explain what this means.

10. Demand for a product has generated the following data:
|QD |P |Income |
|5 |75 |8 |
|12 |72 |5.5 |
|15 |71 |4 |
|19 |68 |2 |
|25 |64 |1.12 |
|35 |58 |0.75 |
|55 |45 |0.5 |

Regressing Q on the predictor P we see the following output:
|Regression Statistics | | |

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