Economic Decision Making Exam Review
Course Introduction
Economic Decision Making explores the processes by which individuals, businesses, and governments make choices in the face of scarcity and uncertainty. The course delves into the principles of microeconomics and behavioral economics to analyze how incentives, information, risk, and market conditions influence economic choices. Students will learn to apply economic models and decision-making frameworks to real-world scenarios, evaluate trade-offs, and critically assess the outcomes of various decisions. Emphasis is placed on understanding the psychological, social, and institutional factors that drive decision-making across different economic environments.
Recommended Textbook
Managerial Economics 3rd Edition by Froeb
Available Study Resources on Quizplus
21 Chapters
795 Verified Questions
795 Flashcards
Source URL: https://quizplus.com/study-set/1748
Page 2
Chapter 2: The One Lessor of Business
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/34837
Sample Questions
Q1) The difference between the maximum price the consumer is willing to pay and the price the consumer actually pays for a product is referred to as:
A)market surplus
B)market shortage
C)buyer surplus
D)seller surplus.
Answer: C
Q2) If you are willing to purchase a house for $500,000 and you purchase the house for $500,000 ,this transaction will generate:
A)There is no surplus created
B)$0 worth of seller surplus and unknown amount of buyer surplus
C)$0 worth of buyer surplus and unknown amount of seller surplus
D)Not information provided
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 3: Benefits, Costs, and Decisions
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/34838
Sample Questions
Q1) James used $200,000 from his savings account that paid an annual interest of 10% to purchase a hardware store.After one year,James sold the business for 300,000.An Economist calculated his profit to be:
A)$300,000
B)$100,000
C)$80,000
D)$20,000
Answer: C
Q2) A manager invests $400,000 in a technology to reduce overall costs of production.The company managed to reduce their cost per unit from $2 to $1.85.This affects
A)Economic profits
B)Accounting profits
C)Both a and b
D)None of the above
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 4: Extent How Muchdecisions
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/34839
Sample Questions
Q1) A firm currently has 5 workers each paid $15 per hour.If it decides to hire a 6th worker,the hourly wage increases to $18 for all workers.The 6th worker is expected to contribute to around $40 worth of output.Based on this information,the firm should
A)Hire the 6th worker since MR>MC
B)Not hire the 6th worker since MR>MC
C)Not hire the workers since MR<MC
D)Need more information
Q2) If the firm hires 5 workers,the average cost equals
A)$10
B)$1000
C)$80
D)Need more information
Q3) Managers undertake an investment only if
A)Marginal benefits of the investment are greater than zero
B)Marginal costs of the investment are less than marginal benefits of the investment
C)Marginal benefits are greater than marginal costs
D)Investment decisions do not depend on marginal analysis
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 5: Investment Decisions: Look Ahead and Reason
Back
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/34840
Sample Questions
Q1) A business produces 5,000 units per month.Costs include: $12,000 on raw materials,$20,000 on operators and $14,000 on sales people.Other costs of running the factory were $50,000 for rent and $30,000 on other fixed overheads.In order to break even the selling price per unit will have to be:
A)$25.20
B)$29.60
C)$20.30
D)$28
Q2) The break-even quantity is A)1250
B)625
C)416.67
D)500
Q3) Which of the following is classified as a sunk cost?
A)Cost of the next best alternative
B)Additional cost of producing an additional unit
C)Research costs to determine the implementation of a technology
D)Total cost of producing a product
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 6: Simple Pricing
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/34841
Sample Questions
Q1) Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.What is Jim's own price elasticity of demand?
A)1)29
B)1
C)0)25
D)0)78
Q2) In 2011,Netflix raised prices on its DVDs and internet streaming plan.The Reed Hastings,CEO of Netflix,believes
A)Netflix is an industry leader thereby making the demand curve inelastic
B)Netflix is an industry leader thereby making the demand curve elastic
C)People are willing to pay more for the good
D)There are many substitutes to Netflix's products
Q3) Total revenue falls as the price of a good decreases if the price elasticity of demand is
A)Elastic
B)Inelastic
C)Unitary elastic
D)Perfectly inelastic
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 7: Economies of Scale and Scope
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/34842
Sample Questions
Q1) If average product is decreasing,then marginal product
A)Must be increasing
B)Must be greater than average product
C)Must be less than average product
D)None of the above
Q2) The marginal product curve is a mirror image of
A)The average cost curve
B)The average fixed cost curve
C)The total cost curve
D)The marginal cost curve
Q3) Average costs curves later rise
A)Due to declining average fixed costs
B)Due to rising average fixed costs
C)Due to declining marginal costs
D)Due to rising marginal costs
Q4) As long as marginal cost is decreasing,marginal product is
A)less than average product.
B)greater than average product.
C)equal to average output.
D)equal to total product.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 8: Understanding Markets and Industry Changes
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/34843
Sample Questions
Q1) Based on the answer above,the price for laptops _____________ and the quantity supplied for laptops ____________.
A)Increase;increase
B)Increase;decrease
C)Decrease;increase
D)Decrease,decrease
Q2) In the 1990s,many people had rising incomes.At the same time,there was a rise in cost of wood.Holding other factors constant,the demand for houses_________ and the supply for houses_________.
A)Increase,increase
B)Increase,decrease
C)Decrease,increase
D)Decrease,decrease
Q3) You love bananas.Due to a bad crop harvest,supply of bananas dropped in half.The price for bananas is expected to double in the near future.As a result,
A)your demand for banana will increase when the price doubles
B)your demand for banana increases today.
C)your demand for peanut butter decreases today
D)it does not affect your demand as you love bananas
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 9: Market Structure and Long-Run Equilibrium
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/34844
Sample Questions
Q1) A firm sees its marginal revenue increase by $20 and marginal cost increase by $15 when it produces its 1000th product.This implies
A)the production of the 1000th unit of output increases the firm's profit by $5.
B)The firm is past its profit maximizing output
C)We cannot say much on the profitability of the firm
D)Producing the 1000th item will in fact decrease the overall firm's profits.
Q2) The owner of an Oakley store has a more__________ demand curve and the owner of a chicken farm has a more__________ demand curve.
A)inelastic;inelastic
B)elastic;inelastic
C)inelastic;elastic
D)elastic;elastic
Q3) A sudden decrease in the market demand in a competitive industry leads to
A)Losses in the short-run and average profits in the long-run
B)Above average profits in the short-run and average profits in the long-run
C)New firms being attracted to the industry
D)Demand creating supply
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 10: Strategy: the Quest to Keep Profit From Eroding
Available Study Resources on Quizplus for this Chatper
26 Verified Questions
26 Flashcards
Source URL: https://quizplus.com/quiz/34846
Sample Questions
Q1) Firms maintain their completive edge by
A)Providing a good at lower costs than their rivals
B)Providing a superior product at the same cost as your rival
C)Being innovative
D)All the above
Q2) To stay one step ahead of the forces of competition,a firm can adopt one of these strategies except
A)Cost reduction
B)Product differentiation
C)Advertising
D)Reduction in the intensity of competition
Q3) All of the following are example of entry barriers,except
A)Government protection through patents or licensing requirements
B)Strong brands
C)Low capital requirements for entry
D)Lower costs driven by economies of scale
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 11: Foreign Exchange, trade, and Bubbles
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/34847
Sample Questions
Q1) Currency devaluations help suppliers because they make exports ________ expensive in the _____________ currency.
A)Less;domestic
B)Less;foreign
C)More;domestic
D)More;foreign
Q2) Holding other things constant,decreases in the price level in the US will
A)Cause the dollar to gain value
B)Cause the dollar to lose value
C)Does not affect the dollar value
D)None of the above
Q3) If US consumers want to buy Chinese goods,they will
A)buy Yuans to sell US Dollars
B)Sell Yuans to buy US Dollars
C)Demand Yuan
D)Both a and c
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 12: More Realistic and Complex Pricing
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/34848
Sample Questions
Q1) After firm A producing one good acquired another firm B producing another good,it lowered the prices for the bundle of goods.One can conclude that the goods were
A)substitutes
B)complements
C)not related
D)None of the above
Q2) Cannibalization is:
A)Reducing the sales of own firm
B)Improving quality over a rival's product
C)Reducing costs
D)Increasing one's output to reduce sales of another firm
Q3) Firm's should lower the price of their goods
A)If the demand for the product is elastic
B)If it acquires a firm selling a complement good
C)If it acquires a firm selling a substitute good
D)Both a and b
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Direct Price Discrimination Indirect Price
Discrimination
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/34845
Sample Questions
Q1) Requirements tie-in-sale is
A)Where customers have to purchase all their products from one store in variable proportions
B)Where customer can mix and match products from different stores
C)Where two or more products are sold together in fixed proportions
D)Where you get discounts for buying in large quantities
Q2) All these are motivations for tie-in-sales except,
A)Efficiency
B)Assure quality
C)Provide secret price discounts
D)All the above
Q3) Economists criticize Robinson-Patman acts because
A)Economists are profit maximizers
B)Economists promote unemployment
C)Economists are against discounting of goods
D)Economists feel the act protects competitors rather than the process of competition
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 15: Strategic Games
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/34849
Sample Questions
Q1) Based on the answer of question 4,the payoffs for both stores will be
A)Megastore $95 and Superstore $80
B)Megastore $305 and Superstore $55
C)Megastore $65 and Superstore $285
D)Megastore $165 and Superstore $115
Q2) According to Prisoners'' Dilemma
A)Both parties do not confess
B)It is difficult to maintain cooperation among prisoners
C)Both a and b
D)None of the above
Q3) The implication of the prisoners' dilemma for a long-run strategy is for firms to
A)Do nothing
B)Differentiate your product that competitors cannot imitate
C)Figure a way to lower their costs
D)Both b and c
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 16: Bargaining
Available Study Resources on Quizplus for this Chatper
22 Verified Questions
22 Flashcards
Source URL: https://quizplus.com/quiz/34850
Sample Questions
Q1) To improve your own bargaining position
A)have low valued outside options
B)increase the value of outside options
C)do not alter the value of your outside options
D)increase the value of your opponent's outside options
Q2) Which of the following will improve your supplier contracting bargaining position
A)Your supplier merges with an alternative supplier
B)You redesign your component requirements to be more flexible across different potential suppliers
C)You redesign your component requirements so that your preferred supplier is more integral to product success
D)Your supplier's chief competitor has exited the market
Q3) When buying a car from a commission salesman you improve your bargaining position by
A)shopping for last year's model when the new model year cars are arriving
B)shopping when the showroom is full of customers
C)shopping when the car lot has few cars left unsold
D)shopping toward the beginning of the month
To view all questions and flashcards with answers, click on the resource link above.
16
Chapter 17: Making Decisions With Uncertainty
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/34851
Sample Questions
Q1) You want to run a difference-in-difference experiment with a price increase for the bacon cheeseburger item on your menu.If you are worried about the "representativeness" with your control group,a poor comparison menu item would be
A)soft drink sales
B)the bacon burger without cheese
C)the bacon-lettuce-and-tomato sandwich
D)the regular cheeseburger
Q2) Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:
A)$4
B)$5
C)$6
D)$7
Q3) Four possibilities have probabilities 0.4,0.2,0.2 and 0.2 and values $40,$30,$20,and $10 respectively.The expected value is:
A)$22
B)$24
C)$26
D)$28
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 18: Auctions
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/34852
Sample Questions
Q1) If the bidders at a first-price auction have true values of $78,$72,$66,and $65,the item will sell for
A)$78
B)just under $78
C)$72
D)just over $72
Q2) In common value auctions
A)Every bidder know the value of the object being sold
B)Each bidder makes the same estimate of the value of the good
C)Bidders do not know the estimates of the others
D)The true value of the item differs across bidders
Q3) If the bidders at a first-price auction have true values of $8,$7,$6,and $5,the item will sell for
A)$8
B)$7
C)just over $7
D)just under $7
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 19: The Problem of Adverse Selection
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/34853
Sample Questions
Q1) Someone who values a lottery at less than the expected value is
A)a risk lover
B)risk neutral
C)risk averse
D)one who tends to play lots of lotteries
Q2) Most people buy insurance because they
A)are risk lovers
B)enjoy the gamble
C)are risk neutral
D)want to avoid gambles
Q3) Which is NOT an example of signaling high quality in a social setting
A)wearing a business suit on a job interview
B)leaving a big tip for the waiter after a dinner date
C)offering a cheap engagement ring to your bride
D)Visiting the beauty salon before a big date
Q4) Someone who values a lottery at more than the expected value is
A)a risk lover
B)risk neutral
C)risk averse
D)one who tends to play lots of lotteries
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 20: The Problem of Moral Hazard
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/34854
Sample Questions
Q1) An example of moral hazard is
A)workers shirking when the boss is not looking
B)health care insured dieting and exercising
C)drivers of safer cars turning their phones off before driving
D)borrowers investing their loan proceeds exactly as the bank requires
Q2) An example of moral hazard is
A)people drive as carefully in icy conditions with antilock brakes as without B)people drive as safely with more airbags as without C)football players 'spear' with their heads when tackling more often with safer helmets
D)people read the medicine warnings as carefully when self-medicating versus with a doctor's prescription
Q3) An example of moral hazard is
A)workers working diligently even though the boss is not looking
B)health care insured dieting and exercising
C)drivers of safer cars turning their phones off before driving
D)borrowers investing their loan proceeds differently than the bank requires
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: Getting Employees to Work in the Firms Best
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/34855
Sample Questions
Q1) As a result of moving more decision making from the center toward the periphery of the organization,typically
A)the flow of information to the decision maker that is relevant to the decision should be enhanced
B)the flow of information from the decision maker that is relevant to the decision should be enhanced
C)the incentives to make good decisions should be strengthened
D)the procedures for the flow of information that is relevant to the decision can be relaxed
Q2) The components of a well-run incentive compensation scheme include all of the following EXCEPT
A)evaluating the identified performance measures
B)avoiding rewards for outcomes that are not included in the performance measures
C)rewarding workers who for meet performance measures
D)displaying the wealth disparities between the executives and the line workers
To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: Getting Divisions to Work in the Firms Best Interest
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/34856
Sample Questions
Q1) An example of organizational architecture based on production of intermediate products is when divisions are defined as
A)R&D,Engineering,Production,Marketing,Sales
B)Component 1 Plant,Component 2 Plant,Component 3 Plant,Final Assembly
C)Store 1,Store 2,Store 3,Region A,Region B,Sales Division
D)Business Customers,Educational Customers,Household Customers
Q2) Which is a possible solution to a divisional conflict regarding a decision
A)change the division that has the authority to make the decision
B)change the information flow so that the decision maker is better informed
C)change the evaluation and reward scheme governing the decision maker
D)all of the above
Q3) Once a division manager sees that production goal for a time period is likely to be met
A)he has an incentive to increase the pace of production
B)he has an incentive to decrease the pace of production
C)he does not have an incentive to change the pace of production
D)he has an incentive to produce other products
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 23: Managing Vertical Relationships
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/34857
Sample Questions
Q1) The conditions in which vertical relationships can enhance a firm's ability to price discriminate include
A) the manufacturer's product is of value to just one type of customer
B) the costs of arbitraging the price differences across markets is small
C) the manufacturer acquires the distributer in the higher priced market
D) competition provide little ability for the manufacturer has to price above marginal cost
Q2) Vertical relationships can increase profits through
A) providing a mechanism for firms from evading regulation
B) creating a double-markup problem
C) making the incentives of manufacturers and retailers unaligned
D) preventing price discrimination
Q3) A characteristic of outsourcing is
A) completely unrelated to vertical integration
B) likely to be profitable exactly when vertical integration is profitable
C) it prevents a firm from focusing on its core competencies
D) can allow for the exploitation of differing degrees of economies of scale at different points in the supply chain
To view all questions and flashcards with answers, click on the resource link above.