ch01 - File: Ch01; CHAPTER 1: Introduction to Economic...

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File: Ch01; CHAPTER 1: Introduction to Economic Decision Making Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 Introduction 2 Seven Examples of Managerial Decisions 3 Six Steps to Decision Making 4 Private and Public Decisions MULTIPLE CHOICE 1. A sensible decision should incorporate a a) List of alternative courses of action. b) Complete prediction of the future. c) Statement of goals and objectives. d) Summary list of pros and cons. e) Answers a and c are both correct. ANSWER: e. SECTION: 1 2. Managerial economics can best be defined as the a) Economic analysis of internal management functions. b) Study of economic incentives in organizations and markets. c) Impact of global economic factors on business. d) Analysis of major management decisions using economic tools. e) None of the above answers is correct. ANSWER: d SECTION: 2 3. Is profit maximization an unambiguous guide to decision making in the private sector? a) Yes. This is clear and results in sound decisions. b) Yes, although profit is of no concern at all to non-profit agencies. c) No, because of risk and uncertainty about future events. d) No, because managers may disagree as to the best means of maximizing profits. e) No, top management’s real financial incentives are usually at odds with profit maximization. ANSWER: c SECTION: 3 4. Are models helpful in predicting the outcomes of decisions? 1-1
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Introduction to Economic Decision Making a) No, models are too theoretical to be applicable in real world decisions. b) No, because there is too much uncertainty to ever forecast outcomes accurately. c) Yes, even though they simplify the analysis and omit some features of the problem. d) Yes, models can describe situations in complete detail. e) Yes, but large-scale models tend to be prohibitively expensive. ANSWER: c SECTION: 3 5. The two main kinds of models are a) Short run and long run. b) Deterministic and probabilistic. c) Theoretical and pragmatic. d) Simple and complex. e) Mathematical and graphical. ANSWER: b SECTION: 3 6. Sensitivity analysis can best be defined as a) Being sensitive to the impact of the firm’s decisions on other variables. b) Analyzing tradeoffs among multiple objectives. c) Measuring results against objectives. d) Examining the reliability of key data used to make a decision. e) Examining how a decision would change if key economic facts were changed. ANSWER: e SECTION: 3 7. According to the theory of the firm, what is management's ultimate objective? a) Short-term profit, even if this sacrifices long-term profit. b) Maximizing the value of the firm. c) Long-term profit, even if this sacrifices short-term profit. d)
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This note was uploaded on 03/11/2012 for the course ECON 333 taught by Professor Barkley during the Fall '08 term at CSU Fullerton.

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ch01 - File: Ch01; CHAPTER 1: Introduction to Economic...

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