Question 1

Managerial economics seeks to accomplish all of these goals EXCEPT:

Accepted Answer

A)  identify the alternatives 
B)  select the choice that accomplishes the objective most efficiently 
C)  take into account the opportunities 
D)  take into account the likely actions & reactions of rival decision makers 
E)  all of the above 
A)  identify the alternatives 
B)  select the choice that accomplishes the objective most efficiently 
C)  take into account the opportunities 
D)  take into account the likely actions & reactions of rival decision makers 
E)  all of the above C

Question 2

Which of the following will increase (V0),the shareholder wealth maximization model of the firm: V0·(shares outstanding)= Σ∞t=1 (π t )/ (1+ke)t  + Real Option Value.

Accepted Answer

A)  Decrease the required rate of return (ke). 
B)  Decrease the stream of profits (πt). 
C)  Decrease the number of periods from ∞ to 10 periods. 
D)  Decrease the real option value. 
E)  All of the above. 
A)  Decrease the required rate of return (ke). 
B)  Decrease the stream of profits (πt). 
C)  Decrease the number of periods from ∞ to 10 periods. 
D)  Decrease the real option value. 
E)  All of the above. A

Question 3

The moral hazard in team production arises from

Accepted Answer

A)  poorly designed team membership 
B)  lack of proper assignment of individual tasks 
C)  disorganization in groups 
D)  a conflict between tactically best interest and one's duty 
E)  insufficient experience 
A)  poorly designed team membership 
B)  lack of proper assignment of individual tasks 
C)  disorganization in groups 
D)  a conflict between tactically best interest and one's duty 
E)  insufficient experience D

Question 4

The common factors that give rise to all principal-agent problems include the

Accepted Answer

A)  unobservability of some manager-agent action 
B)  presence of random disturbances in team production 
C)  the greater number of agents relative to the number of principals 
D)  a and b only 
E)  none of the above 
A)  unobservability of some manager-agent action 
B)  presence of random disturbances in team production 
C)  the greater number of agents relative to the number of principals 
D)  a and b only 
E)  none of the above

Question 5

Which of the following types of firms should expect a higher rate of return?

Accepted Answer

A)  ​an auto dealership 
B)  ​a biotech pharmaceutical firm 
C)  ​a manufacturer of screws and bolts 
D)  ​a paper products firm 
E)  ​all of the above 
A)  ​an auto dealership 
B)  ​a biotech pharmaceutical firm 
C)  ​a manufacturer of screws and bolts 
D)  ​a paper products firm 
E)  ​all of the above

Question 6

Economic profit is defined as the difference between revenue and ____.

Accepted Answer

A)  explicit cost 
B)  total economic cost 
C)  implicit cost 
D)  shareholder wealth 
E)  none of the above 
A)  explicit cost 
B)  total economic cost 
C)  implicit cost 
D)  shareholder wealth 
E)  none of the above

Question 7

​Managers should concentrate on maximizing shareholder value alone if which of the following conditions are met?

Accepted Answer

A)  ​complete markets 
B)  ​no significant asymmetric information 
C)  ​known recontracting costs 
D)  ​all of the above 
E)  ​none of the above 
A)  ​complete markets 
B)  ​no significant asymmetric information 
C)  ​known recontracting costs 
D)  ​all of the above 
E)  ​none of the above

Question 8

If one defines incremental cost as the change in total cost resulting from a decision,and incremental revenue as the change in total revenue resulting from a decision,any business decision is profitable if:

Accepted Answer

A)  it increases revenue more than costs or reduces costs more than revenue 
B)  it decreases some costs more than it increases others (assuming revenues remain constant) 
C)  it increases some revenues more than it decreases others (assuming costs remain constant) 
D)  all of the above 
E)  b and c only 
A)  it increases revenue more than costs or reduces costs more than revenue 
B)  it decreases some costs more than it increases others (assuming revenues remain constant) 
C)  it increases some revenues more than it decreases others (assuming costs remain constant) 
D)  all of the above 
E)  b and c only

Question 9

The form of economics most relevant to managerial decision-making within the firm is:

Accepted Answer

A)  macroeconomics 
B)  welfare economics 
C)  free-enterprise economics 
D)  microeconomics 
E)  none of the above 
A)  macroeconomics 
B)  welfare economics 
C)  free-enterprise economics 
D)  microeconomics 
E)  none of the above

Question 10

To reduce Agency problems,executive compensation should be designed to

Accepted Answer

A)  be paid baased on quarterly sales 
B)  create incentives so that managers act like owners of the firm 
C)  ​avoid making the executives own shares in the company 
D)  ​be an increasing function of the firm's expenses 
E)  ​all of the above 
A)  be paid baased on quarterly sales 
B)  create incentives so that managers act like owners of the firm 
C)  ​avoid making the executives own shares in the company 
D)  ​be an increasing function of the firm's expenses 
E)  ​all of the above

Question 11

Shirking of one's duties is often encountered in team production settings because

Accepted Answer

A)  few individuals are well-intentioned 
B)  teamwork is recognized as less significant than individual performance 
C)  teammates face a dilemma posed by a dominant strategy to shirk 
D)  reputation effects dominate in long-term teams 
E)  teamwork can be less than the sum of the individual parts 
A)  few individuals are well-intentioned 
B)  teamwork is recognized as less significant than individual performance 
C)  teammates face a dilemma posed by a dominant strategy to shirk 
D)  reputation effects dominate in long-term teams 
E)  teamwork can be less than the sum of the individual parts

Question 12

Possible goals of Not-For-Profit (NFP)enterprises include all of the following EXCEPT:

Accepted Answer

A)  maximize total costs 
B)  maximize output,subject to a breakeven constraint 
C)  maximize the happiness of the administrators of the NFP enterprise 
D)  maximize the utility of the contributors 
E)  a and c 
A)  maximize total costs 
B)  maximize output,subject to a breakeven constraint 
C)  maximize the happiness of the administrators of the NFP enterprise 
D)  maximize the utility of the contributors 
E)  a and c

Question 13

Which of the following statements concerning the shareholder wealth maximization model is (are)true?

Accepted Answer

A)  The timing of future profits is explicitly considered. 
B)  The model provides a conceptual basis for evaluating differential levels of risk. 
C)  The model is only valid for dividend-paying firms. 
D)  a and b 
E)  a,b,and c 
A)  The timing of future profits is explicitly considered. 
B)  The model provides a conceptual basis for evaluating differential levels of risk. 
C)  The model is only valid for dividend-paying firms. 
D)  a and b 
E)  a,b,and c

Question 14

Which of the following (if any)is not a factor affecting the profit performance of firms:

Accepted Answer

A)  differential risk 
B)  innovation 
C)  managerial skills 
D)  existence of monopoly power 
E)  all of the above are factors 
A)  differential risk 
B)  innovation 
C)  managerial skills 
D)  existence of monopoly power 
E)  all of the above are factors

Question 15

In the shareholder wealth maximization model,the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.

Accepted Answer

A)  profits (cash flows) 
B)  revenues 
C)  outlays 
D)  costs 
E)  investments 
A)  profits (cash flows) 
B)  revenues 
C)  outlays 
D)  costs 
E)  investments

Question 16

The primary objective of a for-profit firm is to ___________.

Accepted Answer

A)  maximize agency costs 
B)  minimize average cost 
C)  maximize total revenue 
D)  set output where total revenue equals total cost 
E)  maximize shareholder value 
A)  maximize agency costs 
B)  minimize average cost 
C)  maximize total revenue 
D)  set output where total revenue equals total cost 
E)  maximize shareholder value

Question 17

The Saturn Corporation (once a division of GM)was permanently closed in 2009.What went wrong with Saturn?

Accepted Answer

A)  Saturn's cars sold at prices higher than rivals Honda or Toyota,so they could not sell many cars. 
B)  Saturn sold cars below the prices of Honda or Toyota,earning a low 3% rate of return. 
C)  Saturn found that young buyers of Saturn automobiles were very loyal to Saturn and GM. 
D)  Saturn implemented a change management view that helped make first time Saturn purchasers trade up to Buick or Cadillac. 
E)  all of the above 
A)  Saturn's cars sold at prices higher than rivals Honda or Toyota,so they could not sell many cars. 
B)  Saturn sold cars below the prices of Honda or Toyota,earning a low 3% rate of return. 
C)  Saturn found that young buyers of Saturn automobiles were very loyal to Saturn and GM. 
D)  Saturn implemented a change management view that helped make first time Saturn purchasers trade up to Buick or Cadillac. 
E)  all of the above

Question 18

The flat-screen plasma TVs are selling extremely well.The originators of this technology are earning higher profits.What theory of profit best reflects the performance of the plasma screen makers?

Accepted Answer

A)  risk-bearing theory of profit 
B)  dynamic equilibrium theory of profit 
C)  innovation theory of profit 
D)  managerial efficiency theory of profit 
E)  stochastic optimization theory of profit 
A)  risk-bearing theory of profit 
B)  dynamic equilibrium theory of profit 
C)  innovation theory of profit 
D)  managerial efficiency theory of profit 
E)  stochastic optimization theory of profit

Question 19

Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth.These include:

Accepted Answer

A)  cash bonuses based on length of service with the firm 
B)  bonuses for resisting hostile takeovers 
C)  requiring officers to own stock in the company 
D)  large corporate staffs 
E)  a,b,and c only 
A)  cash bonuses based on length of service with the firm 
B)  bonuses for resisting hostile takeovers 
C)  requiring officers to own stock in the company 
D)  large corporate staffs 
E)  a,b,and c only

Managerial economics seeks to accomplish all of these goals EXCEPT:

Which of the following will increase (V₀),the shareholder wealth maximization model of the firm: V₀·(shares outstanding)= Σ^∞_t=1 (π _t )/ (1+k_e)^t + Real Option Value.

The moral hazard in team production arises from

The common factors that give rise to all principal-agent problems include the

Which of the following types of firms should expect a higher rate of return?

Economic profit is defined as the difference between revenue and ____.

Managers should concentrate on maximizing shareholder value alone if which of the following conditions are met?

If one defines incremental cost as the change in total cost resulting from a decision,and incremental revenue as the change in total revenue resulting from a decision,any business decision is profitable if:

The form of economics most relevant to managerial decision-making within the firm is:

To reduce Agency problems,executive compensation should be designed to

Shirking of one's duties is often encountered in team production settings because

Possible goals of Not-For-Profit (NFP)enterprises include all of the following EXCEPT:

Which of the following statements concerning the shareholder wealth maximization model is (are)true?

Which of the following (if any)is not a factor affecting the profit performance of firms:

In the shareholder wealth maximization model,the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.

The primary objective of a for-profit firm is to ___________.

The Saturn Corporation (once a division of GM)was permanently closed in 2009.What went wrong with Saturn?

The flat-screen plasma TVs are selling extremely well.The originators of this technology are earning higher profits.What theory of profit best reflects the performance of the plasma screen makers?

Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth.These include:

Fundamental Economic Concepts

Demand Analysis

Estimating Demand

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Cost Analysis

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

Exam 1: Introduction and Goals of the Firm

Managerial economics seeks to accomplish all of these goals EXCEPT:

Which of the following will increase (V0),the shareholder wealth maximization model of the firm: V0·(shares outstanding)= Σ∞t=1 (π t )/ (1+ke)t + Real Option Value.

The moral hazard in team production arises from

The common factors that give rise to all principal-agent problems include the

Which of the following types of firms should expect a higher rate of return?

Economic profit is defined as the difference between revenue and ____.

​Managers should concentrate on maximizing shareholder value alone if which of the following conditions are met?

If one defines incremental cost as the change in total cost resulting from a decision,and incremental revenue as the change in total revenue resulting from a decision,any business decision is profitable if:

The form of economics most relevant to managerial decision-making within the firm is:

To reduce Agency problems,executive compensation should be designed to

Shirking of one's duties is often encountered in team production settings because

Possible goals of Not-For-Profit (NFP)enterprises include all of the following EXCEPT:

Which of the following statements concerning the shareholder wealth maximization model is (are)true?

Which of the following (if any)is not a factor affecting the profit performance of firms:

In the shareholder wealth maximization model,the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.

The primary objective of a for-profit firm is to ___________.

The Saturn Corporation (once a division of GM)was permanently closed in 2009.What went wrong with Saturn?

The flat-screen plasma TVs are selling extremely well.The originators of this technology are earning higher profits.What theory of profit best reflects the performance of the plasma screen makers?

Various executive compensation plans have been employed to motivate managers to make decisions that maximize shareholder wealth.These include:

Fundamental Economic Concepts

Demand Analysis

Estimating Demand

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Cost Analysis

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

Which of the following will increase (V₀),the shareholder wealth maximization model of the firm: V₀·(shares outstanding)= Σ^∞_t=1 (π _t )/ (1+k_e)^t + Real Option Value.

Managers should concentrate on maximizing shareholder value alone if which of the following conditions are met?