Chapter 1 - Managerial Economics
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1.
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The concept of “The Time value of Money” refers to: 8
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  A dollar has the same value now as in the future
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A dollar in the past had less value than now
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A dollar now is worth more than a dollar to be received later
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A dollar value is constant in time
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2.
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Value maximization is broader than profit maximization because it considers 8
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Wealth or market price
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Total revenues.
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Total costs.
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Real-world constraints.
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3.
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_____________________________ is not one of profit-making motives for companies 6
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Rewarding investors for risk
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Control of competition
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Research and development of new products and services
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Rewarding employees
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4.
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The role of a firm is to 12
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Allocate limited resources to meet its goals
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Limit competition
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Increase employment for the economy
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Minimize taxes
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5.
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Marginal analysis suggests that business decisions should be taken when 6
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Marginal revenues are less than marginal cost
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Marginal revenues exceed marginal costs
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Income is in decline
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Production is at full capacity
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74.
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The Federal Trade Commission enforces antitrust laws by 223
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Imposing fines on corporations up to $1 million.
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Sentencing individuals up to three years imprisonment.
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Awarding triple damages.
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Issuing cease and desist orders.
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75.
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The Sherman Act specifically prohibits 220
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Mergers that reduce competition.
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Monopolizing.
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Asset acquisitions that reduce competition.
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Price discrimination
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Chapter 2 - Optimization Techniques
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6.
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The second derivative is the measure of the rate of change of the first derivative. T F 20
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7.
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Optimization is not 19
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Maximization or minimization of a specific objective.
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Simulation.
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Minimization of costs.
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Maximization of profit.
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8.
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The derivative dy/dx measures 161
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Y axis.
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X axis.
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Perimeter of a function.
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Slope of a function.
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Chapter 3 - Market Forces
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9.
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Demand analysis is not useful in 32
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Value pricing.
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Forecasting sales.
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Setting prices.
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Estimation of demand function.
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10.
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Price elasticity can be used to answer 38
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How great a price reduction is necessary to increase sales 20%.
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What is the % demand of a product.
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What is the % supply of a product.
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What is the elasticity of the market.
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11.
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A shift in the supply of a product is brought about by a change in any factor other than the price of the product. T F 45
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12.
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Movement along a demand curve is indicated by the quantity effect of a change in 33
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Advertising.
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Price of other goods.
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Income.
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Price.
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13.
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A shift in demand is not caused by 33
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An increase in price.
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Consumer tastes.
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A decrease in advertising.
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Income.
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14.
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The demand curve for automobiles will shift to the right if 33
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The price of automobiles decreases.
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Interest rates increase.
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Advertising expenditures increase.
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The price of steel decreases.
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15.
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The demand for peanut butter is linear and defined by the function P = $5 - $0.05Q. When quantity is increased from Q1 = 40 to Q2 = 60, the arc price elasticity of demand for peanut butter is 37
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16.
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Two products are complements if 42
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The price elasticity of demand for each good is greater than zero.
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The cross-price elasticity of demand is less than zero.
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The cross-price elasticity of demand equals zero.
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The cross-price elasticity of demand is greater than zero.
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17.
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When the point price elasticity of demand equals -2 and the marginal cost per unit is $5, the optimal price is 45
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2
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5
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10
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Impossible to determine without further information.
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18.
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All of the following are complementary goods except 42
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Margarine and butter.
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Cameras and rolls of film.
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VCRs and video cassettes.
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Razors and razor blades.
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19.
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An improvement in technology that in turn leads to improved worker productivity would most likely result in 45
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A shift to the right in the supply curve and a lowering of the price of the output.
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A shift to the left in the supply curve and a lowering of the price of the output.
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An increase in the price of the output if demand is unchanged.
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Wage increases.
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20.
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If the price elasticity of demand for a normal good is estimated to be 2.5, a 4% reduction in its price causes 37
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Total revenue to fall by 5%.
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Total revenue to fall by 12.5%.
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Quantity demanded to rise by 10%.
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Quantity demanded to decrease by 5%.
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21.
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In any competitive market, an equal increase in both demand and supply can be expected to always 46
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Increase both price and market-clearing quantity.
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Decrease both price and market-clearing quantity.
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Increase market-clearing quantity.
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Increase price.
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Chapter 4 - Quantitative Demand Analysis
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22.
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Demand estimation in a controlled environment is possible with 55
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Field studies.
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Regression analysis.
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Market experiments.
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Consumer surveys.
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23.
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A method for predicting buyer response to hypothetical changes in product quality is provided by: 55
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Field studies.
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Regression analysis.
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Market experiments.
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Consumer surveys.
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24.
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A sample of market data taken at a point in time is a 55
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Cross-section.
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Statistical series.
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Time series.
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Population.
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25.
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The identification problem in demand estimation refers to 56
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The problem of identifying the correct prices and quantities for a product.
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The problem of identifying the best estimation procedure.
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The problem of identifying a demand function when both supply and demand are changing as a function of price.
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The problem of selecting driving forces.
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Chapter 5 - Business Forecasting
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26.
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Time-series methods 78
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Are based on opinion.
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Use historical data as the basis for projection.
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Combine economic theory with mathematical and statistical tools to analyze economic relations.
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Use interindustry linkages to show how changes in the demand for one industry's output will affect all sectors of the economy.
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27.
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Econometric forecasting methods 87
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Always remain the same from period to period.
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Employs statistically based models where relationships among economic variables are expressed in mathematical equations
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Can estimate the direction, but not the magnitude, of change for forecasted variables.
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Can estimate the magnitude, but not the direction, of change for forecasted variables.
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28.
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Which of the following is not a lagging economic indicator? 86
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Unemployment rate
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Bank interest rates.
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Commercial and industrial loans outstanding.
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Change in credit for business and consumer borrowing.
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29.
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Barometric methods that employ leading economic indicators 87
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Always correctly indicate changes in economic variables.
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Often provide relatively consistent lead times.
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Provide little information about the magnitude of the forecast variable.
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Usually forecast directional changes with 95 percent accuracy.
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30.
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Which of the following is not a qualitative forecasting method? 77
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Expert opinions.
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Delphi method.
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Consumer surveys.
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Exponential smoothing
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31.
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Input-output forecasting techniques are identified by which of the following? 88
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They are based on the assumption that future events will follow past patterns of economic behavior.
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They generate data primarily from the opinion(s) of one or more people.
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They make use of interindustry linkages to forecast how changes in demand will affect output by various industries.
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They incorporate economic theory with quantitative techniques to analyze and forecast movements of some economic or business variables of interest.
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32.
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Which of the following is not true regarding the Theil U statistic? 89
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U=0 is a perfect forecast.
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The larger the value of U, the more accurate are the forecasts.
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U=1 would be a case of all incorrect forecasts.
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If U is greater than or equal to 1, the predictive ability of the model is lower than a naive no-change extrapolation.
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Chapter 6 - Theory Of Production
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33.
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A production function 98
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Relates input prices to the level of production.
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Relates production to the level of output.
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Is an engineering relation that defines the maximum amount of output that can be produced with a given set of inputs.
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Is a descriptive statement that relates outputs to sales levels.
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34.
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The marginal rate of technical substitution is: 102
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The slope of an isocost curve.
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The slope of the marginal revenue product curve.
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The marginal product of either input.
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The rate that measures the reduction in one input per unit increase in the other that is just sufficient to maintain a constant level of output.
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35.
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If the output elasticity equals 0.75, returns to scale are 110
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Diminishing.
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Constant.
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Increasing.
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Cannot be determined without further information.
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36.
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The average product 100
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Is the total amount of output divided by the amount of the input used to produce a given amount of output.
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Is the change in the quantity of output resulting from a one unit change in the quantity of input used.
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Is the total product multiplied by the variable input.
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Is the total product divided by the marginal product.
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37.
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A production process uses two inputs, w and r. The cost-minimization input principle is given by which expression? 107
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MPw/w = MPr/r
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MRPw/w = MRPr/r
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w/r = -MPw/MPr
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MRPw/ MRPr =-r/w
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38.
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An isoprofit curve reflects the various combinations of products that a firm can sell to earn a given level of profit. T F 129
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39.
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An example of a perfect substitution is 112
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Oil and vinegar.
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Honey and brown sugar.
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Tar and feathers.
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Pears and eggs.
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40.
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An expansion path is a graphical device used to illustrate the amount of capital and labor a firm will use to 107
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Increase its overhead.
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Average its outputs.
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Expand its operation.
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Accelerate its product life.
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41.
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According to the law of diminishing returns, over some range of output 109
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Every production function exhibits diminishing returns to scale.
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Total product will decrease as the quantity of variable input employed increases.
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Percentage increase in output is less than percentage increase in inputs
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Marginal revenue will decrease as the quantity of output increases.
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Chapter 7 - Multiple Product Planning And Linear Programming
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42.
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Linear programming assumes 116
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Monopolistic competition.
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Falling input prices.
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Increasing returns to each factor input.
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Linear objective and constraint functions.
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43.
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An objective function 116
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Expresses the goal of a linear programming problem.
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Is a function formulated without predisposition or bias.
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Describes any functional relation to be analyzed.
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Defines the boundary of the feasible space.
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44.
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A negative value for a given slack variable implies 118
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Excess capacity.
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No excess capacity.
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Use of more resources than are available.
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Full capacity.
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45.
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Applications of Linear Programming (LP) do not include 117
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Scheduling jobs to machines.
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Cost estimation.
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Scheduling flights.
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Gasoline blending.
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Chapter 8 - Cost: Theory And Analysis
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46.
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Relevant costs for managerial decisions are 148
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Future costs.
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Current costs.
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Historical costs.
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Sunk costs.
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47.
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Examples of the learning curve applications do not include 153
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Inventory planning.
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Setting incentive wage rates.
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Meeting social responsibilities.
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Pricing new products.
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48.
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_________________________ looks at the effects on profits of changes in such factors as variable costs, fixed costs, selling prices, volume, and mix of products sold. 154
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Operating leverage.
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Economies of scale
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Cost-volume-profit analysis.
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A break-even chart.
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49.
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The difference between ATC and AVC is always equal to 139
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50.
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Costs that vary with a decision is called 147
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Sunk costs.
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Implicit costs.
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Incremental costs.
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Explicit costs.
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51.
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Costs that involve no cash payment are called 146
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Explicit costs.
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Relevant costs.
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Historical costs.
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Implicit costs.
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52.
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Types of functions that have been most commonly employed in fitting statistical cost functions are 145
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Cobb-Douglas
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Linear
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Trigonometric
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Parametric
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Chapter 9 - Pricing And Profit Strategy
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53.
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In a perfectly competitive market 163
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Each seller can affect the market price by changing output.
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Sellers and buyers have perfect information.
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Entry and exit are difficult.
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Sellers produce similar, but not identical products.
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54.
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In the long run, firms will exit a perfectly competitive industry if 164
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Excess profits equal zero.
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Excess profits exceed zero.
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Excess profits are less than zero.
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Total profit equals zero.
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55.
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In a monopolistically competitive industry, firms 165
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Are price takers.
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Offer products that are not perfect substitutes.
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Make decisions in light of expected reactions from other firms.
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Set price equal to marginal cost.
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56.
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A market characterized by interdependence among sellers is 165
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Monopoly.
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Perfect competition.
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Oligopoly.
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Monopolistic competition.
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57.
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Forms of market structure do not include 163
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Perfect competition.
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Oligopoly.
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Monopoly.
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Hierarchy.
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58.
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Two measures describing industry characteristics are 171
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Rothschild and Lerner.
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Nash and Harsanyi.
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Maxine and Waters.
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Block and Miller
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59.
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The ___________________ measures how much of the total output in an industry is manufactured by the largest firms in that industry. 170
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Horizontal merger ratio.
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Concentration ratio. .
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Herfindahl-Hirshman Index.
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Department of Justice Index.
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Chapter 10 - Risk In Project Analysis
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60.
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Two common pricing policies are market skimming and penetrating. T F 182
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61.
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The most popular pricing approach is 174
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Cost discount.
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Marginal cost.
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Cost-based pricing.
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Discount based pricing.
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62.
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An example of peak-load pricing is 180
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Private club.
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Health club.
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Utility companies.
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Night club.
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63.
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The optimal markup on price will fall following an increase in: 175
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Price.
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Cost.
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Revenue.
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The price elasticity of demand.
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64.
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If marginal cost is $20 and the price elasticity of demand is -5, the optimal price is: 175
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Chapter 11 - Long -Term Investment Decisions (Capital Budgeting)
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65.
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Firms should finance a project if its 190
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Net present value is positive.
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Expected cash flow is positive.
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Net cash flow is positive.
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Internal rate of return is positive.
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66.
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How would you define the cost of capital? 194
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Difference between expenses and income.
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Maximum value between expenses and income.
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Minimum return necessary to maintain its value and growth goal.
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Difference between capital assets and liabilities.
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67.
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How is the post-audit determined 194
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Compare the actual cost and benefits with estimated costs and benefit.
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Compare the pre-audit with the post-audit.
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Compare the net profit with the industry standard.
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Compare growth and profit margin.
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Chapter 12 - Risk in Project Analysis
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68.
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Risk analysis is the process of analyzing unforeseen events. T F 202
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69.
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Excessive risk avoidance is consistent with: 204
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Value maximization.
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Utility maximization.
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Growth maximization.
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The adaptive theory of the firm.
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70.
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An “expected value” is defined as: 202
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Median.
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Mode.
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Mathematical average.
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Weighted average using probabilities as weights.
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71.
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A “decision tree” is 210
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A multi-branched graph.
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A graphical method of showing possible outcomes.
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A statistical method.
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A method to recognize risk.
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Chapter 13 - A Manager's Guide to Government in the Market Place
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72.
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Government regulation is sometimes justified on the basis of its ability to correct various market imperfections or failures which lead to inefficiency and waste. T F 219
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73.
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The Federal Trade Commission Act addresses 221
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Conspiracies in restraint of trade.
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False advertising.
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Monopolies.
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Asset acquisitions that reduce competition.
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