Chapter 1: Introduction MULTIPLE MULTIPLE CHOICE
1. Managerial Managerial economics economics uses a. formal mo models b. prescribed behavior c. quan quanti tita tati tive ve meth method odss d. micro microec econ onom omic ic theo theory ry e. all all of of th the abo above ve ANS: E MS': MS': !act !actua uall
D !:
to help managers managers solve problems. problems.
Easy
"E!: #
$%&: ntroduction
#. Managerial Managerial econom economics ics dra(s dra(s upon upon all of the the follo(i follo(ing ng E)'E&$ E)'E&$:: a. finance. b. microeconomics. c. accounting. d. mar* ar*eting. e. sociology. gy. ANS: E MS': MS': !act !actua uall
D !:
Easy
"E!: #
$%&: ntroduction
+. $he economic theory of the firm assumes assumes that the primary ob,ective of a firm-s o(ner or o(ners o(ners is to: a. behave behave in in a socially socially consci conscient entiou iouss manner manner.. b. maimi/e the firm-s profit. c. maimi maimi/e /e the the firm-s firm-s total total sales sales.. d. maimi maimi/e /e the value value of the firm. firm. e. All of thes thesee are are prima primary ry ob,e ob,ecti ctives ves.. ANS: D MS': MS': !act !actua uall
D !:
Easy
"E!: +
$%&: $he $heory of the !irm
0. n manageri managerial al economi economics cs managers managers are assume assumed d to maimi/ maimi/e: e: a. curr curren entt prof profit its. s. b. their ta*e2home pay. pay. c. thei theirr emplo employe yees es-- (el (elfa fare re.. d. the the val value ue of thei theirr fir firm. m. e. soci social al (elfa elfarre. ANS: D MS': MS': !act !actua uall
D !:
Easy
"E!: +
$%&: $he $heory of the !irm
3. %(ner2sup %(ner2supplied plied labor is a cost that is usual usually: ly: a. included included in in both both account accounting ing costs costs and econom economic ic costs. costs. b. included in accounting accounting costs but not in in economic costs. c. included included in in economi economicc costs costs but but not in account accounting ing costs costs.. d. not includ included ed in eithe eitherr accountin accounting g costs costs or econom economic ic costs. costs. e. ignored ignored becaus becausee it is imposs impossible ible to place place a value on it. it. ANS: '
D !:
Easy
"E!: 3
$%&: &r & rofit
MS': !actual 4. 5hat is the relationship bet(een economic and accounting profit6 a. Economic profit is equal to accounting profit. b. Economic profit is greater than accounting profit. c. Economic profit is less than accounting profit. d. Economic profit may be equal to or less than accounting profit. e. Economic profit may be equal to or greater than accounting profit. ANS: D MS': !actual
D!:
Easy
"E!: 3
$%&: &rofit
7. $he difference bet(een accounting and economic profit is: a. caused by confusion over ta la(s. b. the value of o(ned resources in their net best alternative use. c. the result of superior training received by accountants. d. proportionately very small for o(ner2managed firms. e. a decreasing function of interest rates. ANS: 8 MS': !actual
D!:
Moderate
"E!: 3
$%&: &rofit
9. Managers ma*e decisions that contribute to the profitability of a firm by: a. eploiting mar*et efficiencies. b. ta*ing on ris*s. c. engaging in illegal behavior. d. maimi/ing sales. e. manipulating the share price of the firm-s stoc*. ANS: 8 MS': !actual
D!:
Moderate
"E!: 3
$%&: &rofit
"E!: 4
$%&: &rofit
. Economic profits may result from: a. innovation. b. ris* ta*ing. c. eploiting mar*et inefficiencies. d. all of the above. e. a and b ANS: D MS': !actual
D!:
Easy
1;. 5hich of the follo(ing (ould a manager N%$ use to create mar*et inefficiencies6 a. Establishing a brand name. b. Sophisticated pricing strategies. c. Diversification efforts. d. %utput decisions. e. 8uilding mar*et entry barriers. ANS: A MS': !actual
D!:
Moderate
"E!: 4
$%&: &rofit
11. Managers may ma*e decisions that are not consistent (ith the goals of stoc*holders. $his is referred to as the problem. a. principal
MS': !actual
1#. Managers may choose to pursue goals other than maimi/ation of a firm-s value. $his is referred to as the problem. a. slac*er
MS': !actual
1+. $he principal
MS': !actual
10. As a result of historically high gasoline prices in #;;9 traffic volume in the =nited States >measured in terms of billions of miles driven per month? declined significantly. $hese changes (ere caused by a of gasoline and . a. surplus@ a decrease in the quantity demanded of gasoline b. surplus@ a decrease in the demand for gasoline c. shortage@ a decrease in the quantity demanded of gasoline d. shortage@ a decrease in the demand for gasoline e. shortage@ an increase in the demand for gasoline ANS: ' MS': Applied
D!:
Moderate
"E!: 7
$%&: Demand and Supply
13. $he mar*et supply curve sho(s the quantity of a good or service that influences constant. a. households (ould sell at various prices b. households (ould buy at various outputs c. firms (ould sell at various prices d. firms (ould buy at various prices e. households (ould buy at various prices ANS: '
D!:
Easy
"E!: 1+
holding other possible
$%&: Demand and Supply
MS': !actual 14. $he mar*et demand curve sho(s the quantity of a good or service that: a. households (ould sell at various prices. b. households (ould buy at various outputs. c. firms (ould sell at various prices. d. firms (ould buy at various prices. e. households (ould buy at various prices. ANS: E MS': !actual
D!:
Easy
"E!: 1+
$%&: Demand and Supply
17. $he price of computers has fallen (hile the quantity purchased has remained constant. $his implies that the demand for computers has: a. decreased (hile the supply of computers has increased. b. increased. c. decreased (hile the supply of computers has decreased. d. increased (hile the supply of computers has increased. e. become more volatile. ANS: A MS': Applied
D!:
Easy
"E!: 1+
$%&: Demand and Supply
19. . D. &o(er the big management consulting firm etols the reliability of Dell computers@ this causes the: a. demand for Dell computers to increase. b. supply of Dell computers to increase. c. quantity supplied of Dell computers to increase. d. quantity supplied of Dell computers to decrease. e. demand and supply of Dell computers to remain unchanged. ANS: A MS': Applied
D!:
Easy
"E!: 1+
$%&: Demand and Supply
1. 'onAgra has introduced a lean miture of cereal and ground beef that is indistinguishable from ground beef but has about the same amount of fat as chic*en. As a result the: a. demand for chic*en increases. b. demand for ground beef decreases. c. demand for chic*en decreases. d. demand for cereal decreases. e. supply of chic*en increases. ANS: ' MS': Applied
D!:
Easy
"E!: 1+
#;. n the follo(ing figure there (ill be an ecess supply at any price:
$%&: Demand and Supply
a. b. c. d. e.
above P b. belo( P b. other than P b. belo( P a. above P c.
ANS: A MS': Applied
D!:
Easy
"E!: 13
$%&: Equilibrium &rice
#1. n the accompanying figure the equilibrium price and quantity are:
a. P a and Qa. b. P b and Qb. c. P c and Qc. d. P a and Qc. e. P c and Qa. ANS: 8 MS': Applied
D!:
Easy
"E!: 13
$%&: Equilibrium &rice
##. n the follo(ing figure there (ill be an ecess demand at any price:
a. b. c. d. e.
belo( P a. belo( P b. other than P b. above P b. above P c.
ANS: 8 MS': Applied
D!:
Easy
"E!: 13
$%&: Equilibrium &rice
#+. 'alifornia imposes strict ne( regulations on the blending of gasoline that increase production costs. As a result the: a. demand for gasoline (ill increase. b. demand for gasoline (ill decrease. c. supply of gasoline (ill increase. d. supply of gasoline (ill decrease. e. demand for and supply of gasoline (ill not change. ANS: D MS': Applied
D!:
Easy
"E!: 17
$%&: Demand and Supply
#0. 5hich of the follo(ing (ould be li*ely to reduce the demand for residential housing6 a. Bigh prices for residential housing units. b. Bigh mortgage interest rates. c. Bigh prices for lumber and other construction materials. d. Co( unemployment rates. e. Co( prices for residential housing units. ANS: 8 MS': Applied
D!:
Moderate
"E!: 17
$%&: Demand and Supply
