Exam 1: The Fundamentals of Managerial Economics

What is the level of net benefits when 20 units are produced? No. Units Produced Total Revenue Total Costs 0 0 0 10 120 40 20 200 100 30 270 170 40 310 260 50 330 370

A bond pays $100 at the end of each year for five years,plus an additional $1,000 when the bond matures at the end of five years.What is the most you would be willing to pay for this bond if your opportunity cost of funds is 6 percent?

AMS recently instituted an in-house recycling program.The benefits of this program include not only the benefits to the environment of recycling but also the goodwill generated by AMS's leadership in this area.The costs of recycling include all of the energy,labor,and space required to do the recycling.Suppose these benefits and costs are given by B(Q)= 100Q - 2Q² and C(Q)= 2Q.(Note that MB = 100 - 4Q,and MC = 2.) a.What level of Q maximizes the total benefits of recycling? b.What level of Q minimizes the total costs of recycling? c.What level of Q maximizes the net benefits of recycling? d.What level of recycling is optimal? Why?

The primary inducement for new firms to enter an industry is:

Suppose total benefits and total costs are given by B(Y)= 600Y − 12Y² and C(Y)= 20Y².What is the maximum level of total benefits?

Which of the following is the incorrect statement?

Suppose total benefits and total costs are given by B(Y)= 220Y − 15Y² and C(Y)= 10Y.What level of Y will yield the maximum net benefits?

A firm will maximize the present value of future profits by maximizing current profits when the:

Basic principles that comprise good management include:

To maximize profits,a firm should continue to increase production of a good until:

In the Wealth of Nations,Adam Smith argues that:

What is the level of net benefits when four units are produced? No. Units Produced Total Revenue Total Costs 0 0 0 1 100 50 2 180 110 3 250 180 4 290 270 5 310 380

In 1995 a $50 million major renovation project of the 19-year-old Seattle Kingdome was completed nearly $18 million over the initial budget.Several million dollars in other expenses were incurred during the renovation phase,including payments to the Seattle Seahawks football team and the Mariners baseball team for revenue they lost by not being able to play in the Kingdome.If you were on the city council,what information would you have needed to determine whether the renovation project was a sound investment?

Suppose B(Q)= 5Q − Q² and C(Q)= 1 + Q².Then,net benefits are ______ when Q equals __________ units since the second-order condition is ______________.

The difference between marginal benefits and marginal costs is the:

What is the marginal net benefit associated with producing five units of the control variable,Q (identify point F in the table)? Control Variable Total Benefits Total Costs Net Benefits Marginal Benefit Marginal Cost Marginal Net Benefit Q B(Q) C(Q) N(Q) (Q) (Q) MNB(Q) 0 0 0 0 -- -- -- 1 900 100 800 900 100 800 2 1,700 300 C 800 200 600 3 2,400 600 1,800 700 E 400 4 A 1,000 2,000 600 400 200 5 3,500 1,500 2,000 500 500 F 6 3,900 2,100 1,800 D 600 -200 7 4,200 2,800 1,400 300 700 -400 8 4,400 B 800 200 800 -600 9 4,500 4,500 0 100 900 -800 10 4,500 5,500 -1,000 0 1,000 -1000

Suppose the growth rate of the firm's profit is 4 percent,the interest rate is 5 percent,and the current profits of the firm are $75 million.What is the value of the firm?

Consumer−consumer rivalry:

The additional benefits that arise by using an additional unit of the managerial control variable is defined as the:

The Taxpayer Relief Act of 1997 created the Roth IRA,which permits qualifying individuals to make after-tax retirement contributions of up to $2,000 annually.Contributions to a Roth IRA are not tax-deductible,but no taxes are paid on earnings generated from a Roth IRA.In contrast,contributions made to traditional IRAs are tax-deductible,but individuals will pay taxes on all future distributions.In short,investors using the Roth IRA make contributions that have already been taxed and have earnings that grow tax-free,while those using the traditional IRAs defer taxes until funds are withdrawn.Consider an individual who is five years away from retirement and will need to withdraw all her retirement funds at that time.She has $2,000 in pretax income to allocate each year to a retirement plan,faces a fixed tax rate of 15 percent now as well as at retirement,and anticipates a stable 8 percent return on her investments.She can set up a Roth IRA for a one-time,up-front fee of $10,or she can set up a traditional IRA for free.Which option should she choose?