KEY953F - BUSINESS 702 MANAGERIAL ECONOMICS THIRD EXAM KEY...

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BUSINESS 702 THIRD EXAM KEY FALL 1995 MANAGERIAL ECONOMICS MULTIPLE CHOICE QUESTIONS (30 points) 1. A 50% markup on cost is equivalent to a markup on price of: A. 25%. > B. 33%. C. 50%. D. 100%. 2. A 50% markup on price is equivalent to a markup on cost of: A. 25%. B. 33%. C. 50%. > D. 100%. 3. When e P = -2, the optimal markup on cost is: > A. 100%. B. 67% C. 50%. D. 33%. 4. When e P = -1, the optimal markup on price is: > A. 100%. B. 67% C. 50%. D. 33%. 5. Consumers' surplus represents: A. total revenues. B. total revenues less total costs. C. the excess of revenues above and beyond the cost of output to producers. > D. the value of output to consumers above and beyond the amount paid to producers. 6. An example of failure by market structure is given by: > A. inferior product quality. B. air pollution. C. false advertising. D. utility price regulation. 7. A body of law that provides a means for victims of accidents and injury to receive just compensation is called: > A. the tort system. B. antitrust law. C. regulatory policy. D. the criminal justice system. 8. Holding supply conditions constant, the costs of regulation fall wholly on producers when: > A. e P = 4 . B. e P $ 1. C. e P = 1. D. e P = 0. 9. Holding supply conditions constant, the costs of regulation fall wholly on consumers when: A. e P = 4 . B. e P $ 1. C. e P = 1. > D. e P = 0. 10. The economic cost of a tax is paid at the point of: > A. tax burden.
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2 B. tax collection. C. tax incidence. D. tax assessment. 11. Uncertainty is present when: > A. outcomes are unknown. B. all possibilities are unknown. C. all probabilities are unknown. D. all of the above. 12. The amount of a bet is irrational when it: > A. exceeds the maximum possible payoff. B. is less than the maximum possible payoff. C. exceeds the expected return. D. is less than the expected return. 13. When the dispersion of possible returns is irrelevant, the decision maker is said to be: A. risk averse. > B. risk neutral. C. risk seeking. D. none of these. 14. A risk seeking decision maker displays: > A. increasing marginal utility of income. B. increasing utility of income. C. constant marginal utility of income. D. decreasing marginal utility of income. 15. When E(R) = $100,000, only a risk-seeking investor would make a certain sum investment in an amount: > A. greater than $100,000. B. greater than or equal to $100,000. C. of $100,000. D. less than $100,000. PROBLEMS (70 points) 16. (See P12.5, 10 points) Optimal Markup on Cost. The Bristol, Inc. is an elegant dining establishment that features French cuisine at dinner six nights per week, and brunch on weekends. In an effort to boost traffic from shoppers during the Christmas season, the Bristol offered Saturday customers $2 off its $8 regular price for brunch. The promotion proved successful, with brunch sales rising from 250 to 750 units per day. A.
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KEY953F - BUSINESS 702 MANAGERIAL ECONOMICS THIRD EXAM KEY...

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