Question 1

Management decision problems typically involve objectives and constraints.

Accepted Answer

A) True 
 B)False  True

Question 2

Before Sarah quit her job as a carpenter, she was earning $35,000 per year. She rented a building for $12,000 per year and opened a cabinet shop. She spends $148,000 per year for labor, materials, utilities, and advertising.
(i) How much revenue will the business have to earn in order to break even in terms of business profit?
(ii) How much revenue will the business have to earn in order to break even in economic terms?
(iii) Suppose that Sarah buys the building. Now how much will the business have to earn in order to break even in economic terms?

Accepted Answer

(i) Accounting cost = 12,000 + 148,000 = $160,000
(ii) Economic cost = 35,000 + 12,000 + 148,000 = $195,000
(iii) Economic cost remains the same. Accounting cost falls by $12,000.

Question 3

The functional areas of business administration are largely irrelevant to the study of managerial economics.

Accepted Answer

A) True 
 B)False  False

Question 4

A theoretical model attempts to identify every possible determinant of an event.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  $1.31 
B)  $1.21 
C)  $1.10 
D)  $1.00 
A)  $1.31 
B)  $1.21 
C)  $1.10 
D)  $1.00

Question 6

The concept of the circular flow of economic activity illustrates the point that all economic activities are interdependent.

Accepted Answer

A) True 
 B)False

Question 7

The value of a firm under constrained optimization is generally below what it would be under unconstrained optimization.

Accepted Answer

A) True 
 B)False

Question 8

Firms typically provide employees with a list of all possible forms of unethical behavior.

Accepted Answer

A) True 
 B)False

Question 9

Profit is a constraint on the operation of a firm.

Accepted Answer

A) True 
 B)False

Question 10

The theory of the firm holds that the primary goal of a firm is to maximize the discounted present value of the positive difference between the firm's total revenue and the firm's total cost or to minimize the present value of the negative difference between the firm's total revenue and total cost.

Accepted Answer

A) True 
 B)False

Question 11

Most of the goods and services in the United States are produced by government and the rest are produced by firms and not-for-profit organizations.

Accepted Answer

A) True 
 B)False

Question 12

Before Sam quit his job as a hairdresser, he was earning $34,000 per year. He rented an office for $18,000 per year and opened a framing shop. He spends $88,000 per year for labor, materials, utilities, and advertising.
(i) How much revenue will the business have to earn in order to break even in terms of business profit?
(ii) How much revenue will the business have to earn in order to break even in economic terms?
(iii) Suppose that Sam buys the building. How will this influence the amount that the business will have to earn in order to break even in economic terms? In accounting terms?

Accepted Answer

(i) Accounting cost = 18,000 + 88,000 =

Question 13

The Internet has had very little impact on the way that business is conducted.

Accepted Answer

A) True 
 B)False

Question 14

At a price of $299.95, the manufacturer of a portable gas?powered generator is willing to produce 19,000 units per quarter. At a price of $349.95, it is likely that the manufacturer will be willing to produce

Accepted Answer

A)  more than 19,000 units per quarter. 
B)  19,000 units per quarter. 
C)  less than 19,000 units per quarter. 
D)  It is impossible to predict the effect of a higher price on the number of units of a product that a firm will be willing to produce. 
A)  more than 19,000 units per quarter. 
B)  19,000 units per quarter. 
C)  less than 19,000 units per quarter. 
D)  It is impossible to predict the effect of a higher price on the number of units of a product that a firm will be willing to produce.

Question 15

The costs of negotiating and enforcing contracts are transaction costs.

Accepted Answer

A) True 
 B)False

Question 16

An increase in the demand for a good will cause

Accepted Answer

A)  an increase in equilibrium price and quantity. 
B)  a decrease in equilibrium price and quantity. 
C)  an increase in equilibrium price and a decrease in equilibrium quantity. 
D)  a decrease in equilibrium price and an increase in equilibrium quantity. 
A)  an increase in equilibrium price and quantity. 
B)  a decrease in equilibrium price and quantity. 
C)  an increase in equilibrium price and a decrease in equilibrium quantity. 
D)  a decrease in equilibrium price and an increase in equilibrium quantity.

Question 17

The economic term for the costs associated with negotiating and enforcing a contract is

Accepted Answer

A)  opportunity costs. 
B)  real costs. 
C)  functional costs. 
D)  transaction costs. 
A)  opportunity costs. 
B)  real costs. 
C)  functional costs. 
D)  transaction costs.

Question 18

Transaction cost refer to the price paid for a good or service.

Accepted Answer

A) True 
 B)False

Question 19

The function of a firm is to purchase resources and then to transform them into goods and services and offer them for sale.

Accepted Answer

A) True 
 B)False

Question 20

marginal benefit of pollution is equal to the marginal cost of pollution.

Accepted Answer

A) True 
 B)False

Management decision problems typically involve objectives and constraints.

The functional areas of business administration are largely irrelevant to the study of managerial economics.

A theoretical model attempts to identify every possible determinant of an event.

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

The concept of the circular flow of economic activity illustrates the point that all economic activities are interdependent.

The value of a firm under constrained optimization is generally below what it would be under unconstrained optimization.

Firms typically provide employees with a list of all possible forms of unethical behavior.

Profit is a constraint on the operation of a firm.

The theory of the firm holds that the primary goal of a firm is to maximize the discounted present value of the positive difference between the firm's total revenue and the firm's total cost or to minimize the present value of the negative difference between the firm's total revenue and total cost.

Most of the goods and services in the United States are produced by government and the rest are produced by firms and not-for-profit organizations.

The Internet has had very little impact on the way that business is conducted.

At a price of $299.95, the manufacturer of a portable gas?powered generator is willing to produce 19,000 units per quarter. At a price of $349.95, it is likely that the manufacturer will be willing to produce

The costs of negotiating and enforcing contracts are transaction costs.

An increase in the demand for a good will cause

The economic term for the costs associated with negotiating and enforcing a contract is

Transaction cost refer to the price paid for a good or service.

The function of a firm is to purchase resources and then to transform them into goods and services and offer them for sale.

marginal benefit of pollution is equal to the marginal cost of pollution.

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

Exam 1: The Nature and Scope of Managerial Economics, Optimization Techniques and New Management Tools

Management decision problems typically involve objectives and constraints.

The functional areas of business administration are largely irrelevant to the study of managerial economics.

A theoretical model attempts to identify every possible determinant of an event.

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

The concept of the circular flow of economic activity illustrates the point that all economic activities are interdependent.

The value of a firm under constrained optimization is generally below what it would be under unconstrained optimization.

Firms typically provide employees with a list of all possible forms of unethical behavior.

Profit is a constraint on the operation of a firm.

The theory of the firm holds that the primary goal of a firm is to maximize the discounted present value of the positive difference between the firm's total revenue and the firm's total cost or to minimize the present value of the negative difference between the firm's total revenue and total cost.

Most of the goods and services in the United States are produced by government and the rest are produced by firms and not-for-profit organizations.

The Internet has had very little impact on the way that business is conducted.

At a price of $299.95, the manufacturer of a portable gas?powered generator is willing to produce 19,000 units per quarter. At a price of $349.95, it is likely that the manufacturer will be willing to produce

The costs of negotiating and enforcing contracts are transaction costs.

An increase in the demand for a good will cause

The economic term for the costs associated with negotiating and enforcing a contract is

Transaction cost refer to the price paid for a good or service.

The function of a firm is to purchase resources and then to transform them into goods and services and offer them for sale.

marginal benefit of pollution is equal to the marginal cost of pollution.

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Cost Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters