Economics for Managers
Final Exam
Course Introduction
Economics for Managers equips students with the tools and frameworks of microeconomics and macroeconomics essential for effective decision-making in a managerial context. The course explores key concepts such as supply and demand analysis, market structures, pricing strategies, cost-benefit analysis, and the impact of government policies on business operations. By integrating economic theory with real-world business scenarios, students learn to analyze market dynamics, forecast economic trends, evaluate competitive pressures, and optimize organizational performance. The course emphasizes practical applications to help future managers develop data-driven strategies and make informed decisions in an ever-changing economic environment.
Recommended Textbook
Microeconomics Principles Applications and Tools 9th Edition by Arthur OSullivan
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Page 2
Chapter 1: Introduction: What Is Economics
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Sample Questions
Q1) Because resources are limited,
A) only the very wealthy can get everything they want.
B) firms will be forced out of business.
C) the availability of goods will be limited but the availability of services will not.
D) people must make choices.
Answer: D
Q2) Which of the following is a question that needs to be answered with normative economic reasoning?
A) If a college offers free parking for students, will more students drive to campus?
B) If a college provided more financial aid assistance, would more students benefit?
C) If a college increases tuition, would class size decline?
D) Should a college reduce tuition to stimulate enrollment?
Answer: D
Q3) Microeconomics is the study of aggregate behavior in the economy.
A)True
B)False
Answer: False
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Chapter 2: The Key Principles of Economics
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Sample Questions
Q1) The opportunity cost of going to a particular college is not the same for everyone.
A)True
B)False
Answer: True
Q2) Using figures from the Application,the opportunity cost of running your business
A) should only include the opportunity cost of the invested capital.
B) should include your invested capital.
C) should not include the invested capital.
D) should only include the opportunity cost of your time.
Answer: C
Q3) According to the Application,the opportunity cost of your time should be ________ the opportunity cost of your invested funds.
A) added to B) subtracted from C) multiplied with D) divided by
Answer: A
Q4) By making acquisitions,resources are used that could have been used to ________.
Answer: acquire something else
Page 4
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Chapter 3: Exchange and Markets
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Sample Questions
Q1) Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that
A) Willy has a comparative advantage in producing apples but not carrots.
B) Willy has a comparative advantage in producing carrots but not apples.
C) Willy has a comparative advantage in producing both goods.
D) Willy does not have a comparative advantage in producing either good.
Answer: B
Q2) Among the roles of the government in a market economy is to A) enforce property rights.
B) own the means of production.
C) determine what is produced.
D) all of the above
Answer: A
Q3) If Tom can produce 20 multiple choice questions or 30 true/false questions in an hour,and Mary can produce 15 multiple choice questions or 15 true/false questions in an hour,then Mary has a comparative advantage in writing true/false questions.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Demand,supply,and Market Equilibrium
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Sample Questions
Q1) Hops are used to produce beer.If the price of hops decreases,
A) the demand for beer increases.
B) the demand for beer decreases.
C) the supply of beer increases.
D) the supply of beer decreases.
Q2) According to the Application,we can infer that if the government stops intervening in the market,then the
A) prices will drop.
B) prices will rise.
C) supply will decrease.
D) demand will increase.
Q3) According to the Application,which determinant of demand is responsible for the increase in the demand for pecans?
A) preferences
B) income
C) price of substitutes
D) price of complements
Q4) Suppose that the price of apples decreases and the quantity of apples in the market decreases.Suggest two reasons why this might have happened.
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Chapter 5: Elasticity: a Measure of Responsiveness
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Sample Questions
Q1) The price elasticity of demand for gasoline is 0.5 and the price elasticity of supply for gasoline is 1.5.If the demand for gasoline falls by 10%,what will happen to the price of gasoline?
Q2) Comment on the following statement: "Elasticity is constant along a straight-line demand curve."
Q3) Good X and good Y are substitutes if the
A) income elasticity of each is negative.
B) income elasticity of each is positive.
C) cross-price elasticity is negative.
D) cross-price elasticity is positive.
Q4) When the price of a car is $25,000,car sales are 10,000 per month.When the price of a car increases to $29,000,car sales fall to 8,000 per month.Using the initial-value method,the demand for cars is A) elastic.
B) inelastic.
C) unit elastic.
D) It is not possible to say based on the data given.
Q5) What does the price elasticity of supply measure? How is it calculated?
Q6) Is demand more elastic in the short run or the long run? Why?
Page 7
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Chapter 6: Market Efficiency and Government Intervention
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Sample Questions
Q1) If the government sets a minimum price above the equilibrium price for soybeans,which of the following statements will be correct?
A) There will be an efficient level of output produced.
B) There will be excess supply.
C) There will be excess demand.
D) all of the above
Q2) At the free market equilibrium,the efficient level of output is produced because A) government regulates the output level that must be produced.
B) firms are maximizing profit.
C) willingness to pay is the same for all consumers.
D) total surplus is maximized.
Q3) Figure 6.7 shows the supply and demand curves for human kidneys.If the government allowed the market to seek equilibrium,then
A) 50 kidneys are donated.
B) 30 kidneys are donated.
C) 20 kidneys are donated.
D) 0 kidneys are donated.
Q4) Figure 6.5 shows the market for bananas.Shade in the area of consumer surplus.Use the information provided to calculate consumer surplus.
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Chapter 7: Consumer Choice: Utility Theory and Insights
From Neuroscience
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Sample Questions
Q1) When the price of a good changes,the substitution effect and the income effect A) work in the same direction.
B) work in opposite directions. C) cause the demand curve to slope upward. D) are irrelevant.
Q2) Suppose that Carolyn's current level of consumption,MU /P = 18 and MU /P = 10.Carolyn can increase her utility by increasing her consumption of good Y and reducing her consumption of good X.
A)True
B)False
Q3) At Hillary's current level of consumption,MU /P = 18 and MU /P = 15.Hillary can increase her utility by increasing her consumption of good X and reducing her consumption of good Y.
A)True
B)False
Q4) Recent work in neuroscience shows that different regions of the brain are involved in the valuation of the benefits and costs of possible actions.
A)True
B)False
9
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Chapter 8: Production Technology and Cost
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Sample Questions
Q1) If a firm is operating in the long run,the firm has flexibility in
A) altering all inputs.
B) building a new production facility.
C) modifying an existing facility.
D) all of the above
Q2) If a firm's production process exhibits economies of scale for all levels of output,then the firm's long-run average cost curve will be
A) horizontal.
B) positively sloped.
C) negatively sloped.
D) U-shaped.
Q3) Mario has a company that produces plastic freezer bags.His company objective is to maximize
A) his company's revenues.
B) his company's total out-of-pocket costs.
C) his company's opportunity costs of each factor of production.
D) his company's economic profits, the difference between total revenue and total cost.
Q4) Complete Table 8.7.
Q5) How do economies of scale affect the shape of the long-run average cost curve?
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Chapter 9: Perfect Competition
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Sample Questions
Q1) In 1992,Hurricane Andrew caused the price of ice in Florida to increase in the long run.
A)True
B)False
Q2) When price is sufficient to cover average variable cost,firms suffering short-run losses should shut down.
A)True
B)False
Q3) Draw a graph of a perfectly competitive firm's short-run marginal cost,average variable cost,and average total cost curves.On this graph,identify the firm's short-run supply curve.Explain why this is the firm's short-run supply curve.
Q4) Suppose that Carol is the owner of a candle factory.What will happen if the price of the candles being sold drops below the shut-down price?
A) Carol's total revenue will be equal to total fixed costs.
B) Carol's total revenue will exceed total variable costs.
C) Carol's total revenue will be less than total variable costs.
D) Carol's total revenue will be maximized.
Q5) Why would a firm be willing to operate at a loss?
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Page 11
Chapter 10: Monopoly and Price Discrimination
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Sample Questions
Q1) Suppose the widget industry is perfectly competitive and faces constant returns to scale.A monopoly purchases all widget producers in the market.List three ways in which the market outcome under monopoly will differ from the market outcome under perfect competition.
Q2) Refer to Figure 10.8.If the paper books industry is competitive,the market price will be ________ and the market output will be ________ units.
A) $25; 600
B) $10; 400
C) $20; 800
D) $15; 600
Q3) Assume that Pura Water,a local monopoly water utility company,is currently selling 10,000 gallons per hour at a price of $0.10 per gallon.If Pura Water wants to sell 1,000 gallons more,it will have to lower the price to $0.09 per gallon.The marginal revenue of the 10,001 is approximately A) -$999.91.
B) -$99.91. C) $9.91. D) $99.91.
Q4) What is price discrimination?
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Chapter 11: Market Entry and Monopolistic Competition
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Sample Questions
Q1) Why does a firm in monopolistic competition face a downward-sloping demand curve?
Q2) If producers differentiate themselves by location,consumers can reduce their travel costs.
A)True
B)False
Q3) In the short run,a firm in monopolistic competition operates much like a A) monopolist.
B) firm in perfect competition.
C) price taker.
D) all of the above
Q4) Monopolistic competition is NOT characterized by A) slightly different products.
B) many sellers.
C) firms with no control over price.
D) the absence of barriers to entry.
Q5) In a monopolistically competitive market,price will be equal to minimum average total cost in the long run.
A)True
B)False
Page 13
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Chapter 12: Oligopoly and Strategic Behavior
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Sample Questions
Q1) If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product,
A) it will likely increase its price.
B) it will likely lead to a monopoly, as other firms exit the market.
C) it will increase the level of competition in the market.
D) none of the above
Q2) Recall the Application.A study of the retail tire market suggests that prices are generally ________ in markets where firms offer low-price guarantees.
A) higher
B) lower
C) the same
D) unfair
Q3) Refer to Figure 12.10.The data in the boxes are the annual profits for each company whether they choose to advertise or not.If Lil Box decides not to advertise,
A) Big Box should not advertise.
B) Big Box should advertise.
C) Lil Box will make $6 million.
D) Lil Box will make $10 million.
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Chapter 13: Controlling Market Power: Antitrust and Regulation
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Sample Questions
Q1) Describe the Sherman Antitrust Act.
Q2) Refer to Figure 13.1.If the government regulates Armstrong Cable so they can earn only zero economic profit,the price would be set at
A) $12.00.
B) $12.50.
C) $13.00.
D) $16.00.
Q3) What is a natural monopoly? How is it different from other monopolies?
Q4) If the government sets a maximum price for a natural monopolistic firm,a change in production cost will
A) increase the firm's profits.
B) decrease the firm's profits.
C) have little effect on the firm's profit.
D) prevent the firm to earn economic profit in the short run.
Q5) Which government agency was created in 1914 to enforce antitrust laws?
A) the Department of Justice
B) the Federal Reserve System
C) the Financial Regulatory Committee
D) the Federal Trade Commission
Q6) Name three industries in which the government has broken up a monopoly. Page 15
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Page 16
Chapter 14: Imperfect Information: Adverse Selection and Moral Hazard
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Sample Questions
Q1) Moral hazard occurs when individuals become more careful after purchasing insurance.
A)True
B)False
Q2) The domination of the used car market by lemons is an example of the ________ problem.
A) adverse selection
B) moral hazard
C) perfect information
D) marginal analysis
Q3) If a person drives less carefully after purchasing automobile insurance,
A) it is due to adverse selection.
B) moral hazard exists.
C) the person's insurance deductible must be large.
D) the insurance company must have perfect information.
Q4) Asymmetric information occurs if John,who is buying Kim's used Toyota Corolla,has the same amount of information as Kim.
A)True
B)False
Q5) Explain the two predictions made by the lemons model.
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Chapter 15: Public Goods and Public Choice
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Sample Questions
Q1) Public goods
A) have nonexcludable benefits.
B) are not subject to the free-rider problem.
C) are rival goods.
D) all of the above
Q2) When do we expect special-interest groups to form?
A) when the benefits are spread out over many and the costs are concentrated on a few citizens
B) when the costs of a project are spread out among all taxpayers while the benefits are concentrated among smaller segments of the population
C) when there is a great possibility that a vast number of citizens will become free-riders
D) when the choices made by the government match the preferences of the median voter
Q3) The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors.Explain why this situation leads to an inefficient outcome.
Q4) Give an example of an external benefit and explain why the outcome is inefficient.
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Chapter 16: External Costs and Environmental Policy
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Sample Questions
Q1) When the government imposes a tax on a firm that generates external costs,the tax is
A) always borne entirely by the firm.
B) always borne entirely by the consumer.
C) usually borne by both the firm and the consumer.
D) borne only by the government.
Q2) A tax on the likelihood of being in a collision will help internalize the external costs of collisions.
A)True
B)False
Q3) The social cost of production is the sum of the private cost and external cost.
A)True
B)False
Q4) If a tax is placed on the output of perfectly competitive firm that imposes external costs on society,the firm's marginal cost curve will shift ________ and the market supply curve will shift to the ________.
A) down; left
B) down; right
C) up; right
D) up; left
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Chapter 17: The Labor Market and the Distribution of Income
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Sample Questions
Q1) Wages are higher in occupations that are considered dangerous.Which of the following job features would lead to a higher pay?
A) night shift
B) mental stress
C) noisy environment
D) all of these
Q2) A reason for the increase in demand for workers with high levels of labor skills is
A) greater taxes paid on income earned.
B) increased technological advances.
C) reduced international trade from protectionism.
D) Both B and C are correct.
Q3) Since the 1980s,the proportion of income received by the poorest 20 percent of U.S.income earners has
A) almost doubled.
B) increased steadily.
C) decreased steadily.
D) held relatively steady.
Q4) What are the effects of a minimum wage that is placed above the market equilibrium wage?
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Chapter 18: International Trade and Public Policy
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Sample Questions
Q1) What does the World Trade Organization do?
Q2) Refer to Figure 18.4.With free trade,how many artichokes are produced domestically in Duckland?
A) 75
B) 65
C) 30
D) 0
Q3) A tariff is a
A) tax on an imported good.
B) tax on a domestically produced goods.
C) limit on the amount a good that can be imported.
D) voluntary reduction of exports.
Q4) List four protectionist policies.
Q5) Refer to Figure 18.3.With a tariff or quota,the equilibrium price is
A) $2.
B) $8.
C) $10.
D) $12.
Q6) Explain how an import tariff can result in an import ban.
Q7) What is dumping and why would firms engage in it?
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