Econ 315 Midterm Exam Questions With Guaranteed Pass Solutions Edition.

1. present value calculation: key formula: - Answer PV = FV/(1+i)n 2. value of a perpetuity: key formula: - Answer PVperpetuity = CF/i 3. value of a firm (before and after dividend) - Answer Before: PVfirm = π0(1 + i)/(i - g) After: PVfirm = π0(1 + i)/(i - g) - π 4. (3) influences on present value - Answer 1. time (longer time = lower PV) 2. profit (higher profit = higher PV) 3. interest (higher interest = lower PV) 5. influences on demand - Answer 1. Change in income (normal good=increase, inferior good=decrease) 2. Change in price of substitute(higher substitute price=increase) Price of complement (higher complement price=decrease) 3. Change in consumer taste/preference (positive change=increase) 4. Change in # of Consumers (more=increase) 5. Change in Expected Price (Higher later=increase) 6. Change in Expected Income (Higher income=increase) 6. influences on supply - Answer 1. Change in Input Costs (lower cost = increase) 2. Change in Tech/Gov't/cost of doing business (better tech/productivity = increase) (less gov't regulation = increase)