Economics for Managers
Question Bank
Course Introduction
Economics for Managers provides an essential foundation in economic principles and tools relevant to managerial decision-making. The course covers topics such as supply and demand, market structures, resource allocation, pricing strategies, and the impact of government policies on markets. Through real-world examples and case studies, students learn how to analyze and interpret economic data, forecast market trends, and apply economic reasoning to solve business problems. This course equips future managers with the analytical skills necessary to make informed strategic decisions in dynamic and competitive environments.
Recommended Textbook Economics for Managers 3rd Edition by Paul G. Farnham
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16 Chapters
1464 Verified Questions
1464 Flashcards
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Page 2
Chapter 1: Managers and Economics
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Sample Questions
Q1) If a country's national government wants to stimulate spending in the economy, it should:
A)decrease taxes and increase government spending.
B)increase taxes and decrease government spending.
C)increase taxes and government spending.
D)decrease taxes and government spending.
Answer: A
Q2) "Gross Investment spending" refers exclusively to purchases of plant and equipment by businesses and net changes in business inventories.
A)True
B)False
Answer: False
Q3) All else constant, the choice of whether to use a labor-intensive production process or a capital-intensive one is depends on:
A)the absolute prices of capital and labor.
B)the relative prices of capital labor.
C)the type of market in which the firm operates.
D)whether the economy is growing or shrinking.
Answer: B
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Page 3
Chapter 2: Demand, Supply, and Equilibrium Prices
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Sample Questions
Q1) All else constant, an increase in the price of a good will cause the quantity supplied to increase.
A)True
B)False
Answer: True
Q2) The market demand for a good is determined by horizontally summing the demand curves of individual consumers.
A)True
B)False
Answer: True
Q3) All else constant, as more firms substitute alternative materials, e.g., plastic, for copper, the market price of copper would be expected to:
A)increase.
B)stay the same.
C)decrease.
D)cannot be determined with the information given.
Answer: C
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Page 4
Chapter 3: Demand Elasticities
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Sample Questions
Q1) Assume a consumer purchases two goods: X and Y.All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease.
A)True
B)False
Answer: True
Q2) The price elasticity of demand for pleasure travel (-1.9)and business travel (-0.8)suggests that air travel for pleasure is a luxury and air travel for business is a necessity.
A)True
B)False
Answer: True
Q3) Assuming the inverse demand function for good Z can be written as P = 90 - 3Q, when P = 20, the point price elasticity of demand is equal to (approximately):
A)-0.22.
B)-0.29. C)-0.67.
D)-4.5.
Answer: B
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Page 5
Chapter 4: Techniques for Understanding Consumer Demand and Behavior
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Sample Questions
Q1) The estimated regression equation is Y = 10 + 2.5X, if X =0 than the predicted value of Y is equal to:
A)12.5
B)10
C)2)5
D)7)5
Q2) Refer to Scenario 2.What are the units of measurement for the standard error of the estimate?
Q3) In a multiple regression problem involving two independent variables, if b is computed to be +2.0, it means that:
A)the relationship between X and Y is significant.
B)the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X , holding X constant.
C)the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X , without regard to X .
D)the estimated average value of Y is 2 when X equals zero.
Q4) Refer to Scenario 2.If the age of a house increases by 1 year given that the square feet is held constant, what is the impact on the house's market value?
Page 6
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Chapter 5: Production and Cost Analysis in the Short Run
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Sample Questions
Q1) For a typical short-run production function, so long as marginal product is increasing, average product will be increasing as well.
A)True
B)False
Q2) Because it is a machine, a personal computer should be treated as a fixed input in the typical firm's short-run production function.
A)True
B)False
Q3) Economic theory provides insights into the range of possibilities for cost relationships.Studies such as those by Blinder et al.provide insights into where, within that range, many firms operate.Thus, there is no real conflict between theory and reality, as some people might try to claim.
A)True
B)False
Q4) The marginal product of a variable input is calculated as:
A)the change in total product divided by the change in output.
B)total product divided by the change in the variable input.
C)the change in total product divided by the change in the variable input.
D)total product divided by the total quantity of the variable input.
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Chapter 6: Production and Cost Analysis in the Long Run
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Sample Questions
Q1) The fact that a firm is using a capital-intensive method of production means that input substitution is not possible.
A)True
B)False
Q2) Which of the following is most likely to create diseconomies of scale?
A)concentration of production in a small number of very large plants.
B)the use of automation devices.
C)technological advance.
D)division of labor.
Q3) Which of the following statements about production isoquants is correct?
A)They show all the combinations of two inputs that result in the same level of output.
B)They are usually concave to the origin.
C)They show all the combinations of two inputs that yield the same cost of production.
D)They represent lower levels of output the farther they are from the origin.
Q4) Explain how labor resistance and political and legislative influences reduce the ability of firms to minimize their costs of production.What do the two have in common in this regard?
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8
Chapter 7: Market Structure: Perfect Competition
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Sample Questions
Q1) The term "industry concentration":
A)refers to the degree of product differentiation in an industry.
B)is a measure of how many firms produce the total output of an industry.
C)refers to how capital or labor intensive a particular industry is.
D)is a measure of how many customers purchase the total output of an industry.
Q2) Consumers don't care which supplier they buy from in a perfectly competitive market because:
A)the outputs of the firms in a perfectly competitive market are all the same.
B)the consumers have no choice regarding who they buy from.
C)price is always low enough that the choice of supplier doesn't matter.
D)all of the above.
Q3) Assume the production technology changes for a good that is currently produced in a perfectly competitive market.In particular, the new technology is such that the marginal costs of production for a single firm decline over the entire range of the demand curve for the good in question.How would this affect the number of firms that operate in this market? Explain.
Q4) Summarize the characteristics of a perfectly competitive market.
Q5) Explain why a firm maximizes its profits by producing the level of output at which marginal revenue equals marginal costs.
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Chapter 8: Market Structure: Monopoly and Monopolistic Competition
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Sample Questions
Q1) Describe the basic characteristics of the monopoly model and explain how these characteristics affect the ability of a monopolist to earn positive economic profits, both in the short run and over time.
Q2) All of the following are possible characteristics of a monopoly except:
A)there is a single firm.
B)the firm is a price taker.
C)the firm produces a unique product.
D)the existence of some advertising.
Q3) Assume that for a particular firm's output price = $80, marginal cost = $30, average total cost = $25.Based on this information, the firm's Lerner Index is equal to:
A)0)313.
B)0)375.
C)0)6.
D)0)625.
Q4) If the cross-price elasticity of demand between two products is positive, we can conclude that the two products are substitutes.
A)True
B)False
Page 10
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Chapter 9: Market Structure: Oligopoly
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Sample Questions
Q1) A firm could gain from cheating on a cartel agreement by doing all of the following except:
A)raising its price above the agreed level.
B)lowering its price below the agreed level.
C)selling more than its agreed quota.
D)increasing production.
Q2) It has been observed that whenever one imported beer distributor raises its price, other imported beer distributors quickly raise their price as well.Such behavior is characteristic of:
A)the barometric-firm model of price leadership.
B)explicit collusion.
C)price leadership.
D)the kinked-demand curve model of oligopoly.
Q3) From the airlines' perspective, amenities competition is preferable to price competition because revenues are not adversely affected and it is easier to determine the strategies of one's competitors.
A)True
B)False
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11
Chapter 10: Pricing Strategies for the Firm
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Sample Questions
Q1) Certain hotels offer promotional strategies in which kids under 12 eat free at the hotel's restaurant.This is an example of second-degree price discrimination.
A)True
B)False
Q2) 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?
Q3) Which of the following would not be categorized as a form of third-degree price discrimination?
A)Group pricing.
B)Promotional pricing.
C)Versioning.
D)Personalized pricing.
Q4) Because it is more extensive, first-degree price discrimination is more profitable for the firm than is third-degree price discrimination.
A)True
B)False
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Chapter 11: Measuring Macroeconomic Activity
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Sample Questions
Q1) Refer to Table 11.1.What is the value of personal consumption expenditures?
A)$3,000.
B)$1,000.
C)$4,350.
D)$2,350.
Q2) Changes in the natural rate of unemployment are related to changes in the composition of the labor force and to the changes in the productivity of the economy over time.
A)True
B)False
Q3) Distinguish between real and nominal GDP.Which one is a better measure of the business cycle?
Q4) If one is interested in comparing the economic well-being of citizens across countries which of the following measures would be the most useful: nominal GDP, real GDP, or real GDP per capita? Explain.
Q5) Many financial analysts use GDP as a measure of the economy's performance.However, GDP has several shortcomings in terms of measuring economic well-being.State at least three such shortcomings and explain how each affects the validity of GDP as a measure of economic well-being.
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Chapter 12: Spending by Individuals, Firms, and
Governments on Real Goods and Services
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Sample Questions
Q1) Decreases in autonomous spending have a contractionary effect and make ________ levels of real income consistent with a given interest rate.
A)lower
B)higher
C)constant
D)none of the above.
Q2) Autonomous aggregate expenditures increases by $100 million, the marginal propensity to consume is 0.60, marginal propensity to invest is 0.20, and the marginal propensity to import is 0.10.Calculate the change in income.
Q3) Stock market wealth decreases.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.
Q4) The slope of the linear consumption function represents induced consumption expenditures.
A)True
B)False
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Chapter 13: The Role of Money in the Macro Economy
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Sample Questions
Q1) Institutions that accept deposits from individuals and organizations, against which depositors can write checks on demand for their market transactions and that use these deposits to make loans are called:
A)depository institutions.
B)financial market institutions.
C)insurance companies.
D)none of the above.
Q2) The barter system requires the double coincidence of wants to be fulfilled.
A)True
B)False
Q3) How many Federal Reserve District Banks are there?
A)5
B)7
C)12
D)1
Q4) In the money market, an excess demand for money is equivalent to an excess demand for bonds.
A)True
B)False
Q5) Why is the money multiplier smaller than the simple deposit multiplier?
Page 15
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Chapter 14: The Aggregate Model of the Macro Economy
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Sample Questions
Q1) A decrease in government expenditure would shift the:
A)aggregate demand curve rightward.
B)aggregate demand curve leftward.
C)aggregate supply curve rightward.
D)aggregate supply curve leftward.
Q2) Contractionary monetary policy will shift the AD curve rightward.
A)True
B)False
Q3) Unemployment compensation is an example of:
A)non-discretionary expenditures.
B)discretionary expenditures.
C)taxes.
D)none of the above.
Q4) An open market purchase, a decrease in the discount rate, and a decrease in the reserve requirement would shift the aggregate demand curve rightward.
A)True
B)False
Q5) A decrease in personal taxes would shift the aggregate demand curve rightward. A)True
B)False
16
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Chapter 15: International and Balance of Payments Issues in the Macro Economy
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Sample Questions
Q1) Domestic currency appreciation will:
A)help domestic firms that export and hurt domestic firms that import.
B)hurt domestic firms that import.
C)hurt domestic firms that export and help domestic firms that import.
D)help domestic firms that export.
Q2) An increase in the supply of dollars on the foreign exchange market, all else equal, will result in:
A)appreciation of the U.S. dollar and depreciation of the foreign currency.
B)appreciation of the U.S. dollar and appreciation of the foreign currency.
C)depreciation of the U.S. dollar and depreciation of the foreign currency.
D)depreciation of the U.S. dollar and appreciation of the foreign currency.
Q3) An index of the weighted exchange value of the U.S.dollar versus the currencies of a broad group of major U.S.trading partners is called the trade-weighted dollar.
A)True
B)False
Q4) What did the European Central Bank (ECB)do to bolster the value of the euro in September 2000?
Q5) What is the difference between a sterilized and non-sterilized central bank intervention in the foreign exchange market?
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Chapter 16: Combining Micro and Macro Analysis for Managerial Decision Making
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Sample Questions
Q1) To counter parents' concerns about fast foods and childhood obesity, McDonalds considered:
A)a variety of menu items such as milk shakes and candy.
B)a variety of menu items such as apple slices, fruit juices, peanut butter and jelly sandwiches, and carrot sticks.
C)not changing the menu.
D)all of the above.
Q2) As McDonald's expanded globally, it was able to achieve:
A)economies of scope.
B)economies of scale.
C)diseconomies of scale.
D)none of the above.
Q3) Changing consumer taste and preferences, lawsuits, and competitive pressures adversely affect McDonald's sales.
A)True
B)False
Q4) Give some examples of oligopolistic behavior among the major fast food companies.
Q6) How did McDonalds address the obesity issue in China? Page 18
Q5) How did McDonalds address the drive-through innovation in China?
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Page 19