Deck 1: Introduction

Question 1

As a result of historically high gasoline prices in 2008,traffic volume in the United States (measured in terms of billions of miles driven per month)declined significantly.These changes were caused by a of gasoline and .

A) surplus; a decrease in the quantity demanded of gasoline
B) surplus; a decrease in the demand for gasoline
C) shortage; a decrease in the quantity demanded of gasoline
D) shortage; a decrease in the demand for gasoline
E) shortage; an increase in the demand for gasoline

Answer 1

C

Question 2

The price of computers has fallen,while the quantity purchased has remained constant.This implies that the demand for computers has:

A) decreased, while the supply of computers has increased.
B) increased.
C) decreased, while the supply of computers has decreased.
D) increased, while the supply of computers has increased.
E) become more volatile.

Answer 2

A

Question 3

Which of the following would a manager NOT use to create market inefficiencies?

A) Establishing a brand name.
B) Sophisticated pricing strategies.
C) Diversification efforts.
D) Output decisions.
E) Building market entry barriers.

Answer 3

A

Question 4

J.D.Power,the big management consulting firm,extols the reliability of Dell computers; this causes the:

A) demand for Dell computers to increase.
B) supply of Dell computers to increase.
C) quantity supplied of Dell computers to increase.
D) quantity supplied of Dell computers to decrease.
E) demand and supply of Dell computers to remain unchanged.

Question 5

ConAgra has introduced a lean mixture of cereal and ground beef that is indistinguishable from ground beef but has about the same amount of fat as chicken.As a result,the:

A) demand for chicken increases.
B) demand for ground beef decreases.
C) demand for chicken decreases.
D) demand for cereal decreases.
E) supply of chicken increases.

Question 6

Managers make decisions that contribute to the profitability of a firm by:

A) exploiting market efficiencies.
B) taking on risks.
C) engaging in illegal behavior.
D) maximizing sales.
E) manipulating the share price of the firm's stock.

Question 7

The market demand curve shows the quantity of a good or service that:

A) households would sell at various prices.
B) households would buy at various outputs.
C) firms would sell at various prices.
D) firms would buy at various prices.
E) households would buy at various prices.

Question 8

The economic theory of the firm assumes that the primary objective of a firm's owner or owners is to:

A) behave in a socially conscientious manner.
B) maximize the firm's profit.
C) maximize the firm's total sales.
D) maximize the value of the firm.
E) All of these are primary objectives.

Question 9

Managers may make decisions that are not consistent with the goals of stockholders.This is referred to as the problem.

A) principal-agent
B) economic disincentive
C) incentive-compromise
D) efficiency-inefficiency
E) equilibrium

Question 10

What is the relationship between economic and accounting profit?

A) Economic profit is equal to accounting profit.
B) Economic profit is greater than accounting profit.
C) Economic profit is less than accounting profit.
D) Economic profit may be equal to or less than accounting profit.
E) Economic profit may be equal to or greater than accounting profit.

Question 11

The principal-agent problem refers to:

A) the threat from foreign competition.
B) the need to manage inventory more effectively.
C) double-entry bookkeeping.
D) the potential costs of separation of ownership and control.
E) the time value of money.

Question 12

Economic profits may result from:

A) innovation.
B) risk taking.
C) exploiting market inefficiencies.
D) all of the above.
E) a and b

Question 13

Managerial economics draws upon all of the following EXCEPT:

A) finance.
B) microeconomics.
C) accounting.
D) marketing.
E) sociology.

Question 14

Owner-supplied labor is a cost that is usually:

A) included in both accounting costs and economic costs.
B) included in accounting costs but not in economic costs.
C) included in economic costs but not in accounting costs.
D) not included in either accounting costs or economic costs.
E) ignored because it is impossible to place a value on it.

Question 15

In managerial economics,managers are assumed to maximize:

A) current profits.
B) their take-home pay.
C) their employees' welfare.
D) the value of their firm.
E) social welfare.

Question 16

Managerial economics uses to help managers solve problems.

A) formal models
B) prescribed behavior
C) quantitative methods
D) microeconomic theory
E) all of the above

Question 17

In the following figure,there will be an excess supply at any price:

A) above P^b.
B) below P^b.
C) other than P^b.
D) below P^a.
E) above P^c.

Question 18

The difference between accounting and economic profit is:

A) caused by confusion over tax laws.
B) the value of owned resources in their next best alternative use.
C) the result of superior training received by accountants.
D) proportionately very small for owner-managed firms.
E) a decreasing function of interest rates.

Question 19

Managers may choose to pursue goals other than maximization of a firm's value.This is referred to as the problem.

A) slacker-shirking
B) neuropathy
C) generation X
D) principal-agent
E) none of the above

Question 20

The market supply curve shows the quantity of a good or service that ,holding other possible influences constant.

A) households would sell at various prices
B) households would buy at various outputs
C) firms would sell at various prices
D) firms would buy at various prices
E) households would buy at various prices

Question 21

In the following figure,there will be an excess demand at any price:

A) below P^a.
B) below P^b.
C) other than P^b.
D) above P^b.
E) above P^c.

Question 22

Which of the following would be likely to reduce the demand for residential housing?

A) High prices for residential housing units.
B) High mortgage interest rates.
C) High prices for lumber and other construction materials.
D) Low unemployment rates.
E) Low prices for residential housing units.

Question 23

California imposes strict new regulations on the blending of gasoline that increase production costs.As a result,the:

A) demand for gasoline will increase.
B) demand for gasoline will decrease.
C) supply of gasoline will increase.
D) supply of gasoline will decrease.
E) demand for and supply of gasoline will not change.

Question 24

In the accompanying figure,the equilibrium price and quantity are:

A) P^a and Q^a.
B) P^b and Q^b.
C) P^c and Q^c.
D) P^a and Q^c.
E) P^c and Q^a.