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BUSINESS 802 FIRST EXAM KEY FALL 1993 MANAGERIAL ECONOMICS MULTIPLE CHOICE QUESTIONS (30 pts, 1pt each) 1. Unfriendly takeovers have the greatest potential to enhance the market price of companies whose managers: A. maximize long-run profits. B. maximize short-run profits. C. maximize the value of the firm. > D. satisfice. 2. Value maximization theory fails to address the problem of: > A. self-serving management. B. risk. C. uncertainty. D. sluggish growth. 3. Constrained optimization techniques are not designed to deal with the problem of: A. limited availability of essential inputs, > B. self-serving management. C. contractual requirements. D. scarce investment funds. 4. Managerial economics cannot be used to identify: A. microeconomic consequences of managerial behavior. B. how macroeconomic forces affect the organization. > C. goals of the organization. D. ways to efficiently achieve the organization's goals. 5. Managerial economics cannot be used to show how the imposition of auto import quotas: A. reduces the availability of substitutes for domestically produced cars. B. raises auto prices. C. creates the possibility of monopoly profits. > D. is good public policy. 6. Government regulation is important because government: > A. uses scarce resources. B. regulation reduces public-sector employment. C. produces most of society's services output. D. produces most of society's material output. 7. The share of revenues paid to suppliers does not depend upon: A. relative productivity. B. resource scarcity. C. input market competition. > D. output market competition. 8. Direct regulation of business has the potential to yield economic benefits to society when: A. diseconomies of scale exist. B. barriers to entry are absent. > C. there are no good substitutes for a product. D. many firms serve a given market.
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2 9. Monopoly exploitation is reduced by regulation that: A. restricts output. > B. enhances product-market competition. C. increases the bargaining power of workers. D. increases the bargaining power of employers. 10. In a free market economy, the optimal quality of goods and services is determined by: > A. customers. B. workers. C. firms. D. government. 11. If profit is to rise as output expands, then marginal profit must be: A. rising. B. falling. C. constant. > D. positive. 12. The optimal output decision: A. minimizes the average cost of production. B. minimizes the marginal cost of production. C. minimizes production costs. > D. is most consistent with managerial objectives. 13. Holding all else equal, the value of the firm falls with a decrease in: > A. total revenue. B. interest rates. C. average investment-project life. D. uncertainty. 14. Marginal cost is: A. the change in cost following a managerial decision. B.
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