Decision Making in Business Exam Preparation Guide
Course Introduction
Decision Making in Business explores the theories, methodologies, and tools used to make effective business decisions in complex and dynamic environments. The course covers both quantitative and qualitative approaches to decision-making, including risk analysis, cost-benefit evaluation, data-driven techniques, and behavioral aspects. Students will analyze real-world business scenarios, consider ethical implications, and examine the roles of individual and group decision processes. By integrating case studies and practical exercises, the course equips students with the critical thinking and problem-solving skills necessary to make informed and strategic decisions in various organizational contexts.
Recommended Textbook
Managerial Economics and Business Strategy 9th Edition by Michael Baye
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14 Chapters
2024 Verified Questions
2024 Flashcards
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Chapter 1: The Fundamentals of Managerial Economics
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Which of the following is NOT a source of rivalry in economic transactions?
A) Consumer producer rivalry
B) Producer producer rivalry
C) Government producer rivalry
D) All of the statements associated with this question are correct.
Answer: C
Q2) The higher the interest rate,the greater the:
A) present value.
B) net present value.
C) Both A and B are correct.
D) Neither A nor B is correct.
Answer: D
Q3) The lower the interest rate:
A) the greater the present value of a future amount.
B) the smaller the present value of a future amount.
C) the greater the level of inflation.
D) None of the statements associated with this question are correct.
Answer: A
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3
Chapter 2: Market Forces: Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Which of the following is probably NOT a normal good?
A) Designer dresses
B) Lobster
C) Macaroni and cheese
D) Expensive automobiles
Answer: C
Q2) Suppose the market demand for good X is given by Q<sub>X</sub><sup>d</sup> = 20 2P<sub>X</sub>.If the equilibrium price of X is $5 per unit,then consumers' expenditure on X is:
A) $5.
B) $25.
C) $50.
D) This cannot be determined from the information contained in the question.
Answer: C
Q3) An inferior good is a good:
A) that has low quality.
B) that consumers purchase less of when their incomes are higher.
C) that consumers purchase more when their incomes are higher.
D) of high quality.
Answer: B
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Chapter 3: Quantitative Demand Analysis
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) When marginal revenue is positive,demand is:
A) elastic.
B) inelastic.
C) unit elastic.
D) There is not sufficient information to classify the elasticity of demand.
Answer: A
Q2) Which of the following is a correct statement about the own price elasticity of demand?
A) Demand tends to be more inelastic in the short term than in the long term.
B) Demand tends to be more elastic as more substitutes are available.
C) Demand tends to be more inelastic for goods that comprise a smaller share of a consumer's budget.
D) All of the statements are correct.
Answer: D
Q3) The demand curve for a good is horizontal when it is:
A) a perfectly inelastic good.
B) a unitary elastic good.
C) a perfectly elastic good.
D) an inferior good.
Answer: C
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Chapter 4: The Theory of Individual Behavior
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Draw the opportunity set of a consumer with an income of $200 who faces prices of P<sub>x</sub> = 5 and P<sub>y</sub> = 10.What is the market rate of substitution between the two goods?
Q2) Suppose earnings are given by E = $50 + $20(24 L),where E is earnings and L is the hours of leisure.What is the price to the worker of consuming an additional hour of leisure?
A) $30
B) $26
C) $24
D) $20
Q3) A decrease in the price of good Y will have what effect on the budget line on a normal X-Y graph?
A) Increase the vertical intercept
B) Decrease the horizontal intercept
C) Parallel outward shift of the line
D) Parallel inward shift of the line
Q4) Clothing stores frequently run "sales" where they discount clothing prices by as much as 25 percent.What impact,if any,would you expect these "sales" to have on a store that specializes in selling shoes produced by Rockport?
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Chapter 5: The Production Process and Costs
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) It is profitable to hire units of labor as long as the value of marginal product:
A) is less than wage.
B) exceeds average product.
C) equals price.
D) exceeds wage.
Q2) Suppose the production function is given by Q = 3K + 4L.What is the marginal product of capital when 10 units of capital and 10 units of labor are employed?
A) 3
B) 4
C) 11
D) 45
Q3) Firm managers should use inputs at levels where the:
A) Marginal benefit equals marginal cost.
B) Price equals marginal product.
C) Value marginal product of labor equals wage.
D) Marginal benefit equals marginal cost and value marginal product of labor equals wage.
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Chapter 6: The Organization of the Firm
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157 Flashcards
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Sample Questions
Q1) The disadvantage of vertical integration is that:
A) relationship-specific exchange may cause hold-up.
B) long-term contracts may be inflexible.
C) the principal-agent problem causes shirking.
D) firms no longer specialize in what they do best.
Q2) Which of the following mergers is an example of vertical integration?
A) Bethlehem Steel purchases U.S. Steel.
B) IBM purchases a California computer chip company.
C) AT&T purchases MCI.
D) GM purchases Ford.
Q3) Sydney Roofers Incorporated recently purchased 100 pounds of standard roofing nails from Lowes,a nationwide hardware and building supplies store.This transaction most likely involves:
A) spot exchange.
B) vertical integration.
C) contract.
D) contract or vertical integration.
Q4) In general,automobile manufacturers produce their own engines but purchase tires from independent suppliers.Why?
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Chapter 7: The Nature of Industry
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Suppose that there are two industries,A and B. There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively. There are four firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry B is:
A) 0.9.
B) 1.0.
C) 0.8.
D) 0.7.
Q2) Suppose the market for good X has a four-firm concentration ratio of 0.70.Having worked for the four largest firms in the industry,you know the sales for these four firms are given by $2,000,000,$2,250,000,$2,500,000,and $2,750,000.Based on this information,we know that sales for the remaining firms in the industry are:
A) $9,433,320.
B) $6,875,000.
C) $5,505,000.
D) $4,071,430.
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Page 9
Chapter 8: Managing in Competitive, Monopolistic, and
Monopolistically Competitive Markets
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) You are the manager of a firm that sells its product in a competitive market at a price of $50.Your firm's cost function is C = 40 + 5Q<sup>2</sup>.Your firm's maximum profits are:
A) 125.
B) 250.
C) 100.
D) 85.
Q2) The number of efficient plants compatible with domestic consumption of the refrigerator industry in Sweden is 0.7.Which of the following implications is (are)correct?
A) In the absence of imports, the refrigerator industry in Sweden is monopolistic.
B) The refrigerator industry in Sweden is perfectly competitive.
C) The refrigerator industry in Sweden is monopolistically competitive.
D) None of the preceding answers is correct.
Q3) Would you expect an industry to be monopolistically competitive if consumers did not value variety in the market?
Q4) If a monopolist has an own price demand elasticity of .8,is it maximizing profits?
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Page 10
Chapter 9: Basic Oligopoly Models
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Sample Questions
Q1) Orion and Zeda are the only producers of a unique product that is sold in a market where the inverse demand curve is P = 200 - 2Q.The firms produce identical products and have identical cost functions given by C(Q<sub>i</sub>)= 4Q<sub>i</sub>.The managers of each firm must decide on their outputs on Monday morning and then bring products to market by noon.
a.What is each firm's marginal revenue?
Marginal cost?
b.Equate each firm's marginal revenue to marginal cost.
c.Use your result in part (b)to solve for each firm's reaction function.
d.Use your results in part (c)to solve for the Cournot equilibrium levels of output for each firm.
Q2) Profits are higher as isoprofit curves move closer to the:
A) monopoly output, Q<sup>M</sup>.
B) Cournot output, Q<sup>Cournot</sup>.
C) Bertrand output, Q<sup>Bertrand</sup>.
D) peak of each isoprofit curve.
Q3) When MCI announced a price discount plan designed to induce small firms to use its services,the price of its stock immediately declined.Why do you think the stock market reacted negatively to MCI's plan to attract new customers?
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Page 11
Chapter 10: Game Theory: Inside Oligopoly
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) The following provides information for a one-shot game. \(\begin{array}{l}
\quad\quad\quad\quad\quad\quad\text { Firm B}\\
\text { Firm A}
\begin{array}{|l|l|l|}
\hline &\text { Low Price } & \text { High Price }\\
\hline & & \\
\text { Low Price } & (2,2) & (10,-8)\\
\hline & & \\
\text { High Price } & (-8,10) & (15,15)\\
\hline
\end{array}\end{array}\) What are the Nash equilibrium strategies for this game?
A) (low price, low price)
B) (high price, high price)
C) (low price, low price) and (high price, high price)
D) None of the preceding answers is correct.
Q2) Game theory is especially useful for analysis in the following markets:
A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly
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Page 12
Chapter 11: Pricing Strategies for Firms With Market Power
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/181125
Sample Questions
Q1) Consider a monopoly facing a demand structure where the price elasticity of demand is 1.25.The optimal markup factor is:
A) 5 times marginal revenue.
B) 0.2 times marginal revenue.
C) 5 times marginal cost.
D) 0.2 times marginal cost.
Q2) Which of the following pricing policies does NOT extract the entire consumer surplus from the market?
A) First-degree price discrimination
B) Peak load pricing
C) Two-part pricing
D) Block pricing
Q3) One of the conditions under which price discrimination is profitable is:
A) ability to identify consumer types.
B) inability to resell the good.
C) differences in demand elasticities.
D) All of the statements associated with this question are correct.
Q4) A monopolist is profit maximizing where the elasticity of demand is -2 and price is $4.What is the monopolist's marginal cost?
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Chapter 12: The Economics of Information
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147 Flashcards
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Sample Questions
Q1) You are the bidder in an independent private values auction.Each bidder perceives that valuations are evenly distributed between $0 and $1,000.Your own valuation of the item is $900.Determine your optimal bidding strategy in a first-price,sealed-bid auction with:
a.Two bidders.
b.Three bidders.
c.20 bidders.
Q2) Many tout that the Internet has lowered consumers' search costs.If this is true,ceteris parabis,the consumer reservation price should:
A) be higher.
B) be lower.
C) remain the same.
D) There is insufficient information to determine the impact of lower search costs on reservation prices.
Q3) Explain why a used car that is only six months old and has been driven only 5,000 miles typically sells for 20 percent less than a new car with the same options.
Q4) Will consumers spend more time searching when stores are located in a mall or when they are spread all over town?
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Page 14
Chapter 13: Advanced Topics in Business Strategy
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that,inadvertently,lowers firm 1's marginal cost:
A) firm 1's reaction function will shift up.
B) firm 2's reaction function will shift up.
C) firm 2's reaction function will shift down.
D) firm 1's reaction function will shift down.
Q2) Which of the following is NOT an example of a network?
A) Airlines
B) Trucking
C) Telecommunications
D) None of the statements are correct.
Q3) Consider a two-way network with 1,000 users.Adding one additional user to such a network benefits all users by adding:
A) 999 potential connections to the network.
B) 1,000 potential connections to the network.
C) 2,000 potential connections to the network.
D) 999,000 potential connections to the network.
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15
Chapter 14: A Managers Guide to Government in the Marketplace
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Consider the monopoly in the figure below with price regulated at $20 per unit.The deadweight loss under the regulated price is:
A) $150.
B) $1,350.
C) $2,300.
D) There is insufficient information to compute the deadweight loss at the regulated price.
Q2) The unregulated monopoly in the figure below will earn profit of:
A) $16.
B) $8.
C) $4.
D) $0.
Q3) What is the immediate result of applying the Clean Air Act to a previously nonregulated industry?
A) Price decreases and production is reduced.
B) Price increases and production is reduced.
C) Price decreases and production is enlarged.
D) Price increases and production is enlarged.
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