Business Administration
Exam Materials
Course Introduction
Business Administration is a comprehensive course designed to provide students with a foundational understanding of the principles and practices that drive successful organizations. Through an exploration of topics such as management, marketing, finance, human resources, and operations, students gain insights into the strategic and day-to-day decision-making processes that impact businesses of all sizes. Emphasis is placed on the development of problem-solving, leadership, and analytical skills, preparing students to effectively navigate and adapt to the dynamic business environment. The course also addresses ethical considerations and the global context of modern business, equipping learners for a wide range of administrative and managerial roles.
Recommended Textbook
Economics for Managers Global Edition 3rd Edition by Paul G. Farnham
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Chapter 1: Managers and Economics
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Sample Questions
Q1) One way for the federal government to increase the amount of spending in the domestic economy would be to decrease personal and business taxes.
A)True
B)False
Answer: True
Q2) Which of the following is not included in gross private domestic investment spending?
A)Household spending on residential construction.
B)Spending on business inventories.
C)Household spending on durable goods.
D)Business spending on plant and equipment.
Answer: C
Q3) Firms are considered to be price searchers,as opposed to price takers,in all of the following market types except:
A)perfect competition.
B)monopolistic competition.
C)oligopoly.
D)monopoly.
Answer: A
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Page 3
Chapter 2: Demand, supply, and Equilibrium Prices
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Sample Questions
Q1) Distinguish between "a change in demand" and "a change in quantity demanded." What are the causes of each type of change and how do we illustrate them graphically?
Answer: A "change in demand" refers to a shift of the entire demand curve.It is caused by a change in a determinant of demand other than the price of the good in question.A change in quantity demanded refers to a movement along the demand curve for a good.It is caused by a change in the price of the good in question.
Q2) A decrease in the incomes of people who buy canoes would cause the demand for canoes to decrease.
A)True
B)False
Answer: True
Q3) Rent controls have the effect of keeping prices under control and maintaining an adequate supply of affordable housing for lower income people.
A)True
B)False
Answer: False
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4
Chapter 3: Demand Elasticities
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Sample Questions
Q1) At a price of $5,consumers buy 200 units of good X.When the price falls to $4,quantity demanded increases to 250 units.We can conclude that over this range,demand is:
A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly inelastic.
Answer: B
Q2) The last time the U.S.Post Office raised its prices for mail service critics of the rate increase argued that the Post Office's revenues would actually decline as a result of the price increase.It can be concluded that:
A)both groups believe demand is elastic, but for different reasons.
B)both groups believe demand is inelastic, but for different reasons.
C)the Post Office believes demand for mail service is elastic; opponents of the price increase believe demand is inelastic.
D)the Post Office believes demand for mail service is inelastic; opponents of the price increase believe demand is elastic.
Answer: D
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Chapter 4: Techniques for Understanding Consumer Demand and Behavior
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Sample Questions
Q1) The F-statistic is an alternative measure of goodness-of-fit of an estimated regression equation and defined as the:
A)variation not explained by the regression equation relative to the variation explained.
B)variation explained by the regression equation to the variation not explained.
C)variation explained.
D)variation not explained.
Q2) The ratio of the regression coefficient to its standard error is called:
A)t-statistic.
B)F-statistic.
C)partial F-statistic.
D)coefficient of determination.
Q3) Which of the following approaches to understanding and predicting consumer behavior provides the most insight into how consumers can be expected to respond in an actual market setting?
A)Test marketing.
B)Conjoint analysis.
C)Analysis of historical data.
D)Expert opinion.
Q4) Why are estimated models of demand and consumer behavior useful to managers?
Page 6
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Chapter 5: Production and Cost Analysis in the Short Run
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Sample Questions
Q1) From the manager's perspective:
A)it is important to treat implicit costs as explicit in order to make sound strategic decisions.
B)implicit costs are simply a theoretical construct and should be ignored in the decision-making process.
C)only explicit costs matter because accounting profit is based on explicit costs.
D)there is no difference between implicit and explicit costs. As such, treating implicit costs as explicit would result in double counting and an overstatement of total costs.
Q2) Marginal product equals 0 when:
A)average product equals zero.
B)total product equals average product.
C)average product reached its minimum value.
D)total product reaches its maximum value.
Q3) All else constant,if the use of historic costs understates the opportunity costs associated with using a particular piece of capital,accounting profit will be understated.
A)True
B)False
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7
Chapter 6: Production and Cost Analysis in the Long Run
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Sample Questions
Q1) The slope of the isocost line:
A)changes as the combination of labor and capital is altered by the firm.
B)is equal to the ratio of the marginal productivities at all points along the isocost line.
C)is equal to the negative of the ratio of the prices of the outputs.
D)is equal to the negative of the ratio of the prices of the inputs.
Q2) Which of the following would cause a firm's LRAC curve to shift up?
A)An increase in the amount of "learning by doing."
B)An increase in the price of labor, all else constant.
C)An increase in the amount of output produced by the firm.
D)A decrease in the amount of capital employed by the firm.
Q3) Economists describe short-run decisions as "constrained" decisions,while long-run decisions are described as "planning" decisions.Referring to a firm's short-run average cost function and long-run average cost function,explain this distinction.
Q4) Regarding the production of health care,more recent studies suggest that economies of scale exist up to a hospital size of approximately 200 beds.
A)True
B)False
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Chapter 7: Market Structure: Perfect Competition
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Sample Questions
Q1) The demand curve faced by the individual perfectly competitive firm is:
A)perfectly elastic.
B)perfectly inelastic.
C)unit elastic.
D)elastic or inelastic depending on price.
Q2) Assume that at the current market price,a perfectly competitive firm's profit-maximizing level of output yields total revenues that are just equal to total costs.Which of the following statements applies to this firm?
A)The firm should shut down right now.
B)The firm should continue to operate in the short run to minimize losses, but shut down if things don't improve over the long run.
C)The firm is earning zero economic profit and should continue to operate.
D)The firm should increase its explicit costs to reduce its tax burden.
Q3) In the case of the perfectly competitive firm:
A)marginal revenue equals the market price.
B)marginal revenue is greater than the market price.
C)marginal revenue is less than the market price.
D)marginal revenue is equal to, less than, or greater than market price depending on the level of output.
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Page 9
Chapter 8: Market Structure: Monopoly and Monopolistic Competition
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Sample Questions
Q1) The monopoly characteristic of monopolistically competitive firms ensures that such firms will earn positive economic profits over the long run.
A)True
B)False
Q2) Suppose the firms in a monopolistically competitive market are incurring economic losses.What will happen to move the market to its long-run equilibrium?
A)More close substitutes will appear in the market until economic profits are zero.
B)The firms that dropped out of the market will reenter once the level of economic losses is zero.
C)Firms will continue to exit the market until economic losses are equal to zero.
D)The demand functions of all the firms remaining in the market will become relatively more elastic.
Q3) The Sherman Act and the Clayton Act were passed into law more than 100 years ago.What characteristic of each of these laws enables them to remain applicable in today's modern economy?
Q4) Explain how network externalities act as a barrier to entry.
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Page 10
Chapter 9: Market Structure: Oligopoly
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Sample Questions
Q1) Which of the following is the best example of tacit collusion?
A)The formation of a cartel.
B)Price leadership.
C)Predatory pricing.
D)Noncooperative pricing behavior.
Q2) Which of the following is not a characteristic of an oligopolistic industry?
A)Substantial barriers to entry.
B)The output produced by the firms in the industry may be homogeneous or differentiated.
C)A small number of large firms.
D)One dominant firm and low entry barriers.
Q3) Which of the following is an example of strategic entry deterrence?
A)Marginal cost pricing.
B)Limit pricing.
C)Price leadership.
D)Mark-up pricing.
Q4) Of the various models of noncooperative oligopoly behavior discussed in the text,which one has the greatest shortcoming when it comes to explaining observed behavior in an oligopoly market
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Chapter 10: Pricing Strategies for the Firm
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Sample Questions
Q1) Assume the economy is headed into a recession.Considering this,and recognizing that firms are slow to change the prices they charge for their products,are firms more or less likely to be able to pursue an effective markup pricing strategy in their pursuit of positive economic profit? Why?
Q2) Because it is based on differences in the price elasticity of demand among different groups of consumers,third-degree price discrimination is a more profitable price discrimination strategy than is first-degree price discrimination.
A)True
B)False
Q3) As the price elasticity of demand for an item increases,so does the firm's ability to mark up the price of the item above average cost.
A)True
B)False
Q4) Many restaurants offer "early-bird specials" to dinner customers.These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time,e.g.,6 p.m.Is such a practice a form of price discrimination? If so,what type?
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Chapter 11: Measuring Macroeconomic Activity
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Sample Questions
Q1) GDP can increase from one year to the next by:
A)increases in prices while quantities of goods and services are constant.
B)increases in the quantities of goods and services produced while prices remain constant.
C)both prices and quantities of goods and services increase.
D)all of the above.
Q2) Zoran,a Croatian citizen,only works in the United States.The value added to production from his employment is:
A)included in Croatian GDP.
B)included only in U.S. GDP.
C)included only in U.S. GNP.
D)not included in either U.S. GDP or U.S. GNP.
Q3) The purchase of a Boeing airplane by the U.S.government is considered part of government consumption expenditures and gross investment.
A)True
B)False
Q4) If nominal GDP is 100,000 and real GDP is 80,000,the GDP deflator is 115.
A)True
B)False
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Chapter 12: Spending by
Individuals, firms, and
Governments on Real Goods and Services
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Sample Questions
Q1) Distinguish between the short-run and long-run factors that affect residential investment.
Q2) Capacity utilization increases.What is the impact on aggregate expenditures and income?
A)Both increase.
B)Both decrease.
C)Aggregate expenditure increases and income decreases.
D)Aggregate expenditure decreases and income increases.
Q3) The extent to which investment spending changes with changes to income is called the:
A)marginal propensity to consume.
B)marginal propensity to save.
C)marginal propensity to import.
D)marginal propensity to invest.
Q4) Potential GDP measures the capacity of the economy in terms of the actual goods and services to be produced.
A)True
B)False
Page 14
Q5) Briefly explain how capacity utilization rates are used by forecasters.
Q6) What are the determinants of investment spending?
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Page 15
Chapter 13: The Role of Money in the Macro Economy
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Sample Questions
Q1) In the money market,an excess demand of money will:
A)increase the supply of bonds, increase bond prices, and decrease interest rates.
B)increase the supply of bonds, decrease bond prices, and decrease interest rates.
C)increase the supply of bonds, increase bonds prices, and increase interest rates.
D)increase the supply of bonds, decrease bond prices, and increase interest rates.
Q2) You are given the following information on the banking system.
Reserve requirement rr = 0.08
Currency-deposit ratio c = 0.10
Excess reserve ratio e = 0.05
Compute the simple deposit and money multipliers.
Q3) The currency deposit ratio,c,is 0.10.The reserve requirement,rr,is 0.08.The excess reserve ratio,e,is 0.05.What is the size of the money multiplier?
A)4.70
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Chapter 14: The Aggregate Model of the Macro Economy
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Sample Questions
Q1) Contractionary monetary policy should be used if:
A)aggregate demand-aggregate supply equilibrium is below potential output.
B)aggregate demand-aggregate supply equilibrium is above potential output.
C)aggregate demand-aggregate supply equilibrium is equal to potential output.
D)none of the above.
Q2) Higher prices and price increases combined with lower real output and income,resulting from a major increase in input prices in the economy is called:
A)deflation.
B)inflation.
C)stagflation.
D)none of the above.
Q3) An increase in consumer wealth would shift the aggregate demand curve rightward.
A)True
B)False
Q4) An open market purchase of government securities by the Fed would shift the aggregate demand curve leftward.
A)True
B)False
Q5) What are the reasons for a decrease in the NAIRU.
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Chapter 15: International and Balance of Payments Issues in the Macro Economy
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Sample Questions
Q1) A trade deficit means:
A)the country has positive net savings, which it lends abroad.
B)the country has negative net savings, which it lends abroad.
C)the country has positive net savings, which it borrows from abroad.
D)the country has negative net savings, which it borrows from abroad.
Q2) The action taken by a country's central bank to prevent balance of payments policies from influencing the country's domestic money supply is called a:
A)fiscal policy intervention.
B)monetary policy intervention.
C)sterilized intervention.
D)non-sterilized intervention.
Q3) In the foreign exchange market,the quantity supplied of dollars is 300 whereas the quantity demanded of dollars is 500 results in a:
A)balance of payments surplus of 200.
B)balance of payments deficit of 200.
C)balance of payments surplus of -200.
D)balance of payments deficit of -200.
Q4) What did the European Central Bank (ECB)do to bolster the value of the euro in September 2000?
Page 18
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Chapter 16: Combining Micro and Macro Analysis for Managerial Decision Making
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Sample Questions
Q1) McDonald's can offset the decline in demand by influencing the different variables that affected the demand function for their products.
A)True
B)False
Q2) The amount of cost cutting technical innovation introduced into a production process is a function of:
A)technology only.
B)technology and consumer acceptance.
C)consumer acceptance only.
D)none of the above.
Q3) McDonald's partnership with Beijing's Department of Agriculture provided:
A)McDonald's with subsidies , suppliers, and distributional channels.
B)McDonald's with just subsidies.
C)McDonald's with just distributional channels.
D)all of the above.
Q4) Changes in the macro environment affect individual firms and industries through the microeconomic factors of demand,production,cost,and profitability.
A)True
B)False
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