Deck 1: Managerial Economics and Decision Making

Question 1

A _ _ is typically run on a day- to- day basis by professional managers.

A)proprietorship
B)limited liability company
C)partnership
D)corporation

Answer 1

D

Question 2

In a , employees are motivated to become an owner.

A)partnership
B)limited liability company
C)corporation
D)proprietorship

Answer 2

A

Question 3

Which type of firm is subject to double- taxation?

A)corporation
B)partnership
C)limited liability company
D)proprietorship

Answer 3

A

Question 4

All of the following are true for a proprietorship except which one?

A)It is easy to organize.
B)Profits are taxed only once.
C)The government requires that it is registered.
D)It exists only for the life of the owner.

Question 5

A profits are taxed twice.

A)limited liability company
B)proprietorship
C)partnership
D)corporation

Question 6

Which of the following is an example of a corporation?

A)Cooper and Cooper, LLC
B)the United States Post Office
C)a taxi driver
D)Coca- Cola

Question 7

The government requires that each of the following types of firms register the firm except which one?

A)proprietorship
B)limited liability company
C)corporation
D)partnership

Question 8

Which of the following is an example of a proprietorship?

A)Luxe Windows, LLC
B)a freelance photographer
C)the American Heart Association
D)FedEx

Question 9

The simplest form of a business organization is a _.

A)corporation
B)proprietorship
C)limited liability company
D)partnership

Question 10

Which of the following is an example of a proprietorship?

A)the owner of a local nail salon
B)the United States Post Office
C)Hunter Construction, LLC
D)the American Cancer Society

Question 11

Which of the following is an example of a proprietorship?

A)Coca- Cola
B)a taxi driver
C)the American Cancer Society
D)the United States Post Office

Question 12

A only exists for the life of the owner, while a has perpetual life.

A)corporation; proprietorship
B)partnership; limited liability company
C)proprietorship; limited liability company
D)proprietorship; corporation

Question 13

A small law firm that is NOT registered as a limited liability company is likely to be a or a .

A)corporation; LLC
B)partnership; corporation
C)proprietorship; corporation
D)proprietorship; partnership

Question 14

All of the following are true for a partnership except which one?

A)The government requires that it is registered.
B)The owners have limited liability.
C)Profits are taxed only once.
D)It is owned by two or more people.

Question 15

Owners of a and a both have limited liability.

A)corporation; proprietorship
B)limited liability company; corporation
C)proprietorship; partnership
D)partnership; limited liability company

Question 16

A _ _ is typically overseen by a board of directors.

A)limited liability company
B)proprietorship
C)corporation
D)partnership

Question 17

All of the following are true for a corporation except which one?

A)It has perpetual life.
B)Profits are taxed only once.
C)It has legal requirements in addition to registration.
D)The owners have limited liability.

Question 18

All of the following are true for a limited liability company except which one?

A)The government requires that it is registered.
B)Profits are taxed only once.
C)The owners have limited liability.
D)It exists for the lifetime of the owner.

Question 19

Which of the following is an example of a limited liability company?

A)a taxi driver
B)Cooper and Cooper, LLC
C)the United States Post Office
D)the owner of a local dry cleaner

Question 20

All of the following are true for a partnership except which one?

A)The owners have unlimited liability.
B)It is owned by two or more people.
C)Profits are taxed twice.
D)The government requires that it is registered.

Question 21

Non- profit firms are the only type of firm that does not convert inputs into outputs that can be sold or distributed.

Question 22

Regardless of their organizational structure, all firms convert inputs into outputs that can sell or distribute.

Question 23

Weed Masters provides an annual lawn care service to its customers. Weed Masters has 350 customers and charges $750 per annual lawn service. The company offers a 4 percent discount if customers pay in full at the start of the season. If every customer pays in full at the start of the season, Weed Masters' total revenue is .

A)$15,500
B)$262,500
C)$252,000
D)$10,500

Question 24

Weed Masters provides an annual lawn care service to its customers. Weed Masters has 225 customers and charges $800 per annual lawn service. The company offers a 5 percent discount if customers pay in full at the start of the season. If every customer pays in full at the start of the season, Weed Masters' total revenue is .

A)$12,000
B)$180,000
C)$9,000
D)$171,000

Question 25

Weed Masters provides an annual lawn care service to its customers. Weed Masters has 400 customers and charges $1,000 per annual lawn service. The company offers an 8 percent discount if customers pay in full at the start of the season. If every customer pays in full at the start of the season, Weed Masters' total revenue is .

A)$375,000
B)$368,000
C)$323,000
D)$400,000

Question 26

If you want to establish and run your own business, but are very concerned about your liability should anything go wrong, which of the following would be the best kind of firm for you?

A)partnership
B)corporation
C)limited liability company
D)proprietorship

Question 27

In a corporation, board members .

A)typically run the corporation on a day- to- day basis
B)face unlimited liability
C)oversee the actions of managers
D)only have their firm's profits taxed once

Question 28

If a corporation fails, the shareholders are responsible for repaying all of the debt.

Question 29

is an example of an implicit cost.

A)A salary paid to an employee
B)The wear and tear on a firm's machinery
C)A firm's electric bill
D)The cost to transport a firm's goods

Question 30

Which of the following can affect a firm's total revenue?

A)implicit costs
B)opportunity costs
C)allowances
D)explicit costs

Question 31

Which type of firm is legally required to setup a double- entry booking system to record its business transactions?

A)corporation
B)proprietorship
C)limited liability company
D)partnership

Question 32

All of the following can affect a firm's total revenue except which one?

A)allowances
B)discounts
C)accounting costs
D)returns

Question 33

The dividend a corporation pays per share is determined by the corporations board of directors.

Question 34

Which type of firm is legally required file an annual report to their state government?

A)limited liability company
B)corporation
C)proprietorship
D)partnership

Question 35

All of the following can affect a firm's total revenue except which one?

A)opportunity costs
B)discounts
C)rebates
D)returns

Question 36

Which type of firm pays dividends?

A)proprietorship
B)partnership
C)corporation
D)limited liability company

Question 37

If Big Brothers Hot Dog stand sold 500 hot dogs at a price $2 per hot dog, the total revenue is

A)$2
B)$1,000
C)$500
D)$5,000

Question 38

A partnership can be owned by just one person.

Question 39

A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800. What is the opportunity cost of holding the 6,000 pieces of hardware in inventory?

A)$5,000
B)$4,000
C)$2,800
D)$3,000

Question 40

Total revenue is equal to

A)price x quantity
B)price x cost
C)quantity x profit
D)price x profit

Question 41

Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of A?

A)$62,500
B)$250,000
C)$312,500
D)$31,250

Question 42

A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200 vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the opportunity cost of holding the 200 vases in inventory?

A)$600
B)$200
C)$300
D)$1,200

Question 43

Managers should use straight- line depreciation when making decisions.

Question 44

Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of use, the market value of the dump truck falls to $70,000. If the highest one- year return available is 10 percent, what is the one- year return from selling the dump truck?

A)$70,000
B)$60,000
C)$7,000
D)$10,000

Question 45

Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits)per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits)a year. Which of the following represents the explicit opportunity cost of your time?

A)$75,000
B)$50,000
C)$100,000
D)$125,000

Question 46

Effective profit- maximizing managers work hard to minimize sunk costs.

Question 47

Opportunity cost is a better measure of the true costs faced by firms than accounting costs.

Question 48

Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of use, the market value of the dump truck falls to $70,000. What is the economic depreciation of the dump truck?

A)$70,000
B)$87,500
C)$12,500
D)$30,000

Question 49

Competition from profit- maximizing firms will drive firms that are not maximizing profits out of business.

Question 50

Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of B?

A)$100,000
B)$31,250
C)$85,000
D)$75,000

Question 51

Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits)per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits)a year. Which of the following represents the implicit opportunity cost of your time?

A)$125,000
B)$50,000
C)$75,000
D)$100,000

Question 52

A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200 vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the sunk cost of purchasing the vases?

A)$300
B)$200
C)$600
D)$1,200

Question 53

Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. The value of E is greater than the value of F.

Question 54

Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of C?

A)$75,000
B)$100,000
C)$31,250
D)$85,000

Question 55

To start up a two person partnership law firm, the partners each invest $125,000 of their own funds. If the partners could have earned 5 percent return on these funds in another endeavor, what is their competitive return?

A)$12,500
B)$6,250
C)$118,750
D)$237,500

Question 56

A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800. What is the sunk cost of purchasing the cabinet hardware?

A)$4,000
B)$5,000
C)$3,000
D)$2,800

Question 57

Both accounting cost and opportunity costs include explicit and implicit costs.

Question 58

Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of $125,000 (including all benefits)per year. After much consideration, you turn down the offer to start your own accounting firm. You pay yourself $75,000 (including all benefits)a year. Which of the following represents the opportunity cost of your time?

A)$75,000
B)$50,000
C)$100,000
D)$125,000

Question 59

Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
Refer to the table above. What is the value of D?

A)$5,000
B)$6,666.67
C)$5,666.67
D)$4,250

Question 60

Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of use, the market value of the dump truck falls to $70,000. What is the straight- line depreciation of the dump truck?

A)$30,000
B)$12,500
C)$70,000
D)$87,500

Question 61

At the 30th unit of action, the marginal benefit is equal to $50 and the marginal cost is equal to $40. Which of the following is true?

A)The 30th unit of action should not be undertaken.
B)The 30th unit of action minimizes total costs.
C)The 30th unit of action should be undertaken.
D)The 30th unit of action maximizes total gains (total profits).

Question 62

Refer to the figure above. At the 20th unit of action, which of the following is true?

A)Marginal benefit exceeds marginal cost.
B)Marginal cost exceeds marginal benefit.
C)Total gains are maximized.
D)Total losses are minimized.

Question 63

If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, a decrease in the marginal cost that causes a downward shift of the curve will the profit- maximizing number of units undertaken.

A)increase
B)reduce by exactly half
C)decrease
D)not change

Question 64

Refer to the figure above. At the 30th unit of action, which of the following is true?

A)Marginal cost exceeds marginal benefit.
B)Marginal benefit exceeds marginal cost.
C)Total losses are minimized.
D)Total gains are maximized.

Question 65

Refer to the figure above. At the 50th unit of action, which of the following is true?

A)Marginal benefit exceeds marginal cost.
B)Marginal cost exceeds marginal benefit.
C)Total gains are maximized.
D)Total losses are minimized.

Question 66

Refer to the figure above. Undertaking the 20th unit of action, yields a surplus of benefit of .

A)$20
B)$50
C)$60
D)$30

Question 67

To maximize total profit, managers want to produce the quantity in which marginal cost marginal benefit.

A)exceeds
B)maximizes
C)is equal to
D)minimizes

Question 68

Refer to the figure above. An increase in the marginal cost that causes an upward shift of the curve will cause the profit- maximizing number of units undertaken to _.

A)equal 50
B)equal 40
C)decrease
D)increase

Question 69

If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, an increase in the marginal cost that causes an upward shift of the curve will the profit- maximizing number of units undertaken.

A)not change
B)increase
C)exactly double
D)decrease

Question 70

Refer to the figure above. At the 50th unit of action, which of the following is true?

A)Total losses are minimized.
B)Marginal cost exceeds marginal benefit.
C)Total gains are maximized.
D)Marginal benefit exceeds marginal cost.

Question 71

Refer to the figure above. At the 70th unit of action, which of the following is true?

A)Marginal benefit exceeds marginal cost.
B)Total losses are minimized.
C)Marginal cost exceeds marginal benefit.
D)Total gains are maximized.

Question 72

Refer to the figure above. Which unit of action maximizes total gains (total profits)?

A)20
B)40
C)30
D)10

Question 73

Refer to the figure above. At the 20th unit of action, which of the following is true?

A)Total losses are minimized.
B)Marginal benefit exceeds marginal cost.
C)Total gains are maximized.
D)Marginal cost exceeds marginal benefit.

Question 74

Refer to the figure above. At the 10th unit of action, which of the following is true?

A)Marginal cost exceeds marginal benefit.
B)Marginal benefit exceeds marginal cost.
C)Total losses are minimized.
D)Total gains are maximized.

Question 75

Refer to the figure above. At the 40th unit of action, which of the following is true?

A)Total gains are maximized.
B)Marginal benefit exceeds marginal cost.
C)Total losses are minimized.
D)Marginal cost exceeds marginal benefit.

Question 76

Refer to the figure above. Undertaking the 30th unit of action, yields a surplus of benefit of .

A)$0
B)$30
C)$20
D)$10

Question 77

At the 50th unit of action, the marginal benefit is equal to $20 and the marginal cost is equal to $25. Which of the following is true?

A)The 50th unit of action should not be undertaken.
B)The 50th unit of action should be undertaken.
C)The 50th unit of action minimizes total costs.
D)The 50th unit of action maximizes total gains (total profits).

Question 78

To maximize total profit, managers want to produce the quantity in which marginal benefit marginal cost.

A)exceeds
B)is equal to
C)maximizes
D)minimizes

Question 79

If the marginal _ _ of an action exceeds its marginal _ then the action _ be performed.

A)cost; benefit; should
B)benefit; cost; should not
C)benefit; cost; should
D)none of the above

Question 80

Refer to the figure above. Undertaking the 10th unit of action, yields a surplus of benefit of .

A)$60
B)$80
C)$40
D)$20