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BUSINESS 702
SECOND EXAM KEY
FALL 1995
MANAGERIAL ECONOMICS
MULTIPLE CHOICE QUESTIONS (50 pts, 2pt each)
1.
A new production function results following:
A.
a new wage agreement following collective bargaining.
B.
a surge in product demand.
C.
a decrease in the availability of needed inputs.
>
D.
the successful completion of a training program that enhances worker productivity.
2.
The relation between output and the variation in all inputs taken together is the:
A.
factor productivity of a production system.
B.
law of diminishing returns.
>
C.
returns to scale characteristic of a production system.
D.
returns to factor characteristic of a production system.
3.
An irrational employment policy is indicated when the marginal product of X is:
>
A.
negative.
B.
positive.
C.
decreasing.
D.
increasing.
4.
When P
X
= $60, MP
X
= 5 and MP
Y
= 2, relative employment levels are optimal provided:
A.
P
Y
= 16.7¢.
>
B.
P
Y
= $24.
C.
P
Y
= $60.
D.
P
Y
= $150.
5.
When P
X
= $100, MP
X
= 10 and MR
Q
= $5, the marginal revenue product of X equals:
A.
$100.
>
B.
$50.
C.
$10.
D.
$5.
6.
The foregone value associated with the current rather than nextbest use of a given asset is called:
A.
current cost.
B.
replacement cost.
C.
historical cost.
>
D.
opportunity cost.
7.
Unlike the marginal cost concept, the incremental cost concept:
A.
does not focus on individual managerial decisions.
B.
is not relevant for optimal output determination.
C.
embodies sunk costs.
>
D.
can involve multiple units of output.
8.
In the long run, the:
A.
availability of at least one input is fixed.
B.
firm's operating decisions are typically constrained by prior capital expenditures.
C.
availability of all but one input is fixed.
>
D.
firm has complete flexibility with respect to input use.
9.
When e
C
< 1:
A.
decreasing returns to all factors are implied.
>
B.
increasing returns to scale are implied.
C.
decreasing returns to scale are implied.
D.
constant returns to scale are implied.
10.
Learning involves:
A.
movements along a single LRAC curve.
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B.
movements along a single SRAC curve.
C.
shifts in SRAC curves over time.
>
D.
shifts in LRAC curves over time.
11.
When an LP objective function is to maximize profits:
>
A.
resource constraints must be of the
#
variety.
B.
resource constraints must be of the
$
variety.
C.
all input costs must be variable.
D.
the total revenue function must not be linear.
12.
If X > 0 in the primal solution:
>
A.
the marginal value of inputs just equals the marginal value of output in X production.
B.
the marginal value of inputs exceeds the marginal value of output in X production.
C.
L
X
> 0 in the dual solution.
D.
L
X
< 0 in the dual solution.
13.
When the primal LP problem is to maximize revenue subject to various input constraints, the shadow prices of inputs in the dual constraints:
>
A.
equal the marginal revenue product of each input.
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 Spring '11
 smith
 Economics

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