CHAPTER 5PRODUCTION POLICY
MULTIPLE CHOICE
1. The production function Q = 0.25X0.5Y exhibits:
a. constant returns to scale.
b. increasing returns to scale.
c. increasing and then diminishing returns to scale.
d. diminishing returns to scale.
ANS: B
2. The
CHAPTER 17CAPITAL BUDGETING
MULTIPLE CHOICE 1. Holding all else equal, the profitability index will fall following an increase in the: a. cost of capital. b. benefit-cost ratio. c. IRR. d. NPV. ANS: A 2. The discount rate that equates present value of cas
CHAPTER 16RISK ANALYSIS
MULTIPLE CHOICE 1. Economic risk is a situation where: a. only outcome possibilities are not known. b. only outcome probabilities are not known. c. neither outcome possibilities nor outcome probabilities are known. d. none of these
CHAPTER 15PRICING PRACTICES
MULTIPLE CHOICE 1. The competitive market pricing rule-of-thumb for profit maximization is to set: a. MR = MC b. MR = MC/[1 + (1/ P)] c. P = MC/[1 + (1/ P)] d. MC = MR/[1 + (1/ P)] ANS: A 2. A 50% markup on cost is equivalent t
CHAPTER 14GAME THEORY AND COMPETITIVE STRATEGY
MULTIPLE CHOICE 1. In a game: a. there can be no more than two players. b. agents strive to maximize their expected utility c. payoffs are wholly determined by each player's own course of action d. decision m
CHAPTER 13MONOPOLISTIC COMPETITION AND OLIGOPOLY
MULTIPLE CHOICE 1. For a firm in monopolistically competitive market equilibrium: a. MC AC b. MR AR c. MR = MC d. P AC ANS: C 2. In oligopoly equilibrium: a. MC = AC b. MC > AC c. MR = MC d. MC > AC ANS: C
CHAPTER 12MONOPOLY AND MONOPSONY
MULTIPLE CHOICE 1. In long-run equilibrium, monopoly prices are set a level where: a. price exceeds marginal revenue. b. industry demand equals industry supply. c. industry demand is less than industry supply. d. price exc
CHAPTER 11PERFORMANCE AND STRATEGY IN COMPETITIVE MARKETS
MULTIPLE CHOICE 1. In competitive market equilibrium, social welfare is measured by: a. the difference of net benefits derived by consumers and producers. b. the sum of net benefits derived by cons
CHAPTER 10COMPETITIVE MARKETS
MULTIPLE CHOICE 1. If P = $8 and MC = $5 + 0. 2Q, the competitive firm's profit-maximizing level of output is: a. 5 b. 0.2 c. 8 d. 15 ANS: D 2. In the long run, firms will offer supply at the point where P = MR = MC if: a. MC
CHAPTER 9LINEAR PROGRAMMING
MULTIPLE CHOICE 1. 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
CHAPTER 8COST ANALYSIS AND ESTIMATION
MULTIPLE CHOICE 1. The foregone value associated with the current rather than next-best use of a given asset is called: a. current cost. b. replacement cost. c. historical cost. d. opportunity cost. ANS: D 2. Sunk cos
CHAPTER 6FORECASTING
MULTIPLE CHOICE 1. A 5% growth trend with annual compounding: a. is a direct estimate of the continuous rate of growth. b. will result in lower final-period sales than would a 5% growth trend with continuous compounding. c. will resul
CHAPTER 5DEMAND ANALYSIS AND ESTIMATION
MULTIPLE CHOICE 1. Point elasticity measures elasticity: a. over a given range of a function. b. at a spot on a function. c. over a given range along a function. d. before non-price effects. ANS: B 2. Arc elasticity
CHAPTER 4DEMAND AND SUPPLY
MULTIPLE CHOICE 1. If demand increases while supply decreases for a particular good: a. its equilibrium price will increase while the quantity of the good produced and sold could increase, decrease, or remain constant. b. the qu
CHAPTER 3STATISTICAL ANALYSIS OF ECONOMIC RELATIONS
MULTIPLE CHOICE 1. Generally speaking, population parameters are not known and must be estimated by the sample: a. mean. b. mode. c. median. d. statistics. ANS: D 2. A multiple regression model involves
CHAPTER 2BASIC ECONOMIC RELATIONS
MULTIPLE CHOICE 1. An equation is: a. an analytical expressions of functional relationships. b. a visual representation of data. c. a table of electronically stored data. d. a list of economic data. ANS: A 2. Inflection i
CHAPTER 1INTRODUCTION
MULTIPLE CHOICE 1. The primary virtue of managerial economics lies in its: a. logic. b. usefulness. c. consistency. d. mathematical rigor. ANS: B 2. Managerial economics cannot be used to identify: a. how macroeconomic forces affect
CHAPTER 18GOVERNMENT IN THE MARKET ECONOMY
MULTIPLE CHOICE 1. Water pollution is a familiar type of: a. private good. b. positive externality. c. social benefit. d. negative externality. ANS: D 2. At the socially efficient price-output level: a. external
Chapter 17 CAPITAL BUDGETING QUESTIONS AND ANSWERS Q17.1 The decision to start your own firm and go into business can be thought of as a capital budgeting decision. You only go ahead if projected returns look attractive on a personal and financial basis.
Chapter 16 RISK ANALYSIS QUESTIONS AND ANSWERS Q16.1 Q16.1 In economic terms, what is the difference between risk and uncertainty? ANSWER Economic risk is the chance of loss because all possible outcomes and their probability of happening are unknown. Act
Chapter 15 PRICING PRACTICES QUESTIONS AND ANSWERS Q15.1 Q15.1 Express the markup on cost formula in terms of the markup on price, and use this relation to explain why a 100% markup implies a 50% markup on price. ANSWER The markup on cost, or cost plus, f
Chapter 14 GAME THEORY AND COMPETITIVE STRATEGY QUESTIONS & ANSWERS Q14.1 Q14.1 From a game theory perspective, how would you characterize the bargaining between a customer and a used car dealer? ANSWER This type of bargaining situation can be characteriz
Chapter 13 MONOPOLISTIC COMPETITION AND OLIGOPOLY QUESTIONS AND ANSWERS Q13.1 Q13.1 Describe the monopolistically competitive market structure and give some examples. ANSWER Monopolistic competition is a market structure quite similar to perfect competiti
Chapter 12 MONOPOLY AND MONOPSONY QUESTIONS AND ANSWERS Q12.1 Q12.1 Describe the monopoly market structure and provide some examples. ANSWER Monopoly is a market structure characterized by a single seller of a highly differentiated product. Because a mono
Chapter 11 PERFORMANCE AND STRATEGY IN COMPETITIVE MARKETS QUESTIONS AND ANSWERS Q11.1 Your best income-earning opportunity appears to be an offer to work for a local developer during the month of June and earn $2,000. However, before taking the job, you
Chapter 10 COMPETITIVE MARKETS QUESTIONS AND ANSWERS Q10.1 Historically, the Regional Bell Operating Companies (RBOCs) had a monopoly on the provision of local voice phone service. Regulation has now been eased to permit competition from Competitive Local
Chapter 9 Linear Programming QUESTIONS AND ANSWERS Q9.1 Q9.1 Give some illustrations of managerial decision situations in which you think the linear programming technique would be useful. ANSWER Linear programming can be used for solving any type of const
Chapter 8 COST ANALYSIS AND ESTIMATION QUESTIONS AND ANSWERS Q8.1 Q8.1 What advantages or disadvantages do you see in using current costs for tax and stockholder reporting purposes? ANSWER Theoretically, it would be preferable to use current costs for inc
Chapter 6 FORECASTING QUESTIONS AND ANSWERS Q6.1 Q6.1 Discuss some of the microeconomic and macroeconomic factors a firm must consider in its own sales and profit forecasting. ANSWER The better a company can assess future demand, the better it can plan it
Chapter 7 PRODUCTION ANALYSIS AND COMPENSATION POLICY QUESTIONS AND ANSWERS Q7.1 Q7.1 Is use of least-cost input combinations a necessary condition for profit maximization? Is it a sufficient condition? Explain. ANSWER Employment of least-cost input combi