Exam 1: The Nature and Scope of Managerial Economics

Due to globalization, recessions spread across countries much easier.

What is opportunity cost also known as?

Value of the firm is given by

The value of inputs owned and used by a firm is

Implicit costs refer to the value of inputs owned and used by a firm.

The risk and uncertainty of terrorism and cyber-attacks effectively impose a "tariff" on businesses as spending on security and insurance must be increased.

What is the present value of $1.21 received at the end of two years if the interest rate is 10 percent and compounding is annual?

What is the present value of $500 due in two years if the discount rate is (i)2 percent, (ii)5 percent, (iii)10 percent and (iv) 20 percent?

By tying a manager's compensation to the performance of the firm relative to that of its competitors, corporate stockholders and directors create incentives that tend to resolve the

What constraints do firms usually face?

Which of the following areas of economic theory is the single most important element of managerial economics?

Fred earns $50,000 business profit per year by selling donuts. He pays $12,000 per year in rent to his Uncle George for the building in which his business is located. If his Uncle George gives him the building, then Fred's

Businesses have responded to incentives for ethical behavior by doing all of the following except

Firms are satisficing organizations because of uncertainty and a lack of adequate data.

A firm is expected to invest $100,000 and $200,000 in one and two years from now, respectively. The $400,000 return only comes after three years after which the firm is dissolved. If the discount rate is 10 percent, what is the value of this firm?

John is looking to start a car dealership. If the initial investment is $500,000 and the expected profits are $25,000 per year indefinitely, is it worthwhile if the discount rate is 5 percent? What range of discount rates makes the business worthwhile and what range does of discount rates does not?

Management decision problems are not encountered by government agencies or nonprofit organizations.

Firms exist because they facilitate the efficient organization of factors of production.

Fred is considering the purchase of a lease that will allow him to operate a restaurant at the local airport for a period of five years. The lease will cost $33,522. Fred anticipates annual profits of $10,000. At what discount rate will Fred be indifferent between purchasing and not purchasing the lease; that is, what is the implied annual rate of return on the cost of the lease?

Businesses have responded to the incentive for ethical behavior by