Managerial Economics Exam Solutions
Course Introduction
Managerial Economics explores the application of economic theories, concepts, and methodologies to solve practical problems faced by managers in various organizations. The course covers key topics such as demand and supply analysis, production and cost theory, market structures, pricing strategies, and decision-making under uncertainty. By integrating microeconomic principles with real-world business scenarios, students learn how to make informed managerial decisions that enhance efficiency and profitability, while also considering the effects of government policies, competition, and global economic trends on business operations.
Recommended Textbook
Principles of microeconomics v 3.0 by Rittenberg
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19 Chapters
3749 Verified Questions
3749 Flashcards
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Page 2
Chapter 1: Economics: The Study of Choice
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) The opportunity cost of something is:
A) greater during periods of rising prices.
B) equal to the money cost.
C) less during periods of falling prices.
D) what is given up to acquire it.
Answer: D
Q2) Individuals will usually make choices to minimize the value of some objective.
A)True
B)False
Answer: False
Q3) The problem of determining what goods and services society should produce:
A) exists because we can produce more than we need or want.
B) exists because there are not enough resources to provide all the goods and services that people want to purchase.
C) would not exist if all goods and services were scarce.
D) would not exist if government owned all of the resources.
Answer: B
Q4) Distinguish between microeconomics and macroeconomics. Answer: not answered
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Chapter 2: Confronting Scarcity: Choices in Production
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198 Flashcards
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Sample Questions
Q1) The basic economic differences among nations throughout history concerning institutions, philosophy, and ideology mainly focus on:
A) unemployment and inflation.
B) the ownership of factors of production and how they are coordinated in economic activity.
C) the relative shares of agriculture, industry, and service sectors.
D) the opportunity for social mobility.
Answer: B
Q2) The factors of production are:
A) money, labor, natural resources, and capital.
B) technology, human capital, and natural resources.
C) money, capital, and natural resources.
D) labor, capital, and natural resources.
Answer: D
Q3) Society can operate on the production possibilities curve only if it has achieved efficiency.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Demand and Supply
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251 Flashcards
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Sample Questions
Q1) (Exhibit: Supply and Demand Schedules for a Good) If there were a decrease in supply by 100 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.
A) $2.00; 100
B) $3.00; 140
C) $3.50; 175
D) $4.00; 160
Answer: D
Q2) A decrease in the price of milk (and ingredient of ice cream) will result in a(n):
A) shift of the supply curve of ice cream to the left.
B) shift of the supply curve of ice cream to the right.
C) lower price of ice cream, and thus an increase in the demand for ice cream.
D) increase in the demand for ice cream and a decrease in the supply of milk.
Answer: B
Q3) A decrease in the price of a good will result in a decrease in supply.
A)True
B)False
Answer: False
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Chapter 4: Applications of Supply and Demand
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113 Flashcards
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Sample Questions
Q1) (Exhibit: Third-Party Payers) Based on the exhibit, and assuming there are no third-party payers:
A) the equilibrium quantity is 3 million physician office visits per week.
B) the equilibrium quantity is 2 million physician office visits per week.
C) the total amount spent on physician office visits at the equilibrium price is $180 million.
D) the equilibrium quantity is 1 million physician office visits per week.
Q2) Discuss the arguments in favor of and against the U.S.government's financial support of corn-based ethanol.
Q3) (Exhibit: Third-Party Payers) Based on the exhibit, and assuming there are no third-party payers:
A) the total amount spent on health services is $80 million per week.
B) the equilibrium price and quantity are $60 and 3 million per week, respectively.
C) At a price of $20, there would be a surplus.
D) At a price of $60, there would be a shortage.
Q4) What are the basic provisions of the Affordable Health Care Act of 2010?
Q5) Health care is an inferior good.
A)True
B)False
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Chapter 5: Elasticity: a Measure of Response
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255 Verified Questions
255 Flashcards
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Sample Questions
Q1) The concept of price elasticity shows the relationship between a quantity response and a percentage change in price.
A)True
B)False
Q2) (Exhibit: Demand and Price Elasticity 2) Going from point B to C, the demand curve is:
A) price inelastic.
B) unit price elastic.
C) price elastic.
D) both price elastic and price inelastic.
Q3) (Exhibit: Demand for Shirts) The price elasticity of demand for the segment FG is:
A) 0.
B) 0.09.
C) -0.5.
D) greater than 1 (absolute value).
Q4) Based on the determinants of the price elasticity of demand, discuss the relative price elasticity of demand for sugar, carrots, agricultural output in general, ballpoint pens, Rolex watches, and porterhouse steaks.
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Chapter 6: Markets, Maximizers, and Efficiency
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239 Verified Questions
239 Flashcards
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Sample Questions
Q1) (Exhibit: Marginal Benefits and Marginal Costs) In the exhibit, more time spent studying economics adds points to economics scores but subtracts points from accounting scores.The marginal benefit of studying economics when the student is at 2 hours is _______ points and the marginal cost is _______ points.
A) 40; 0
B) 30; 10
C) 20; 20
D) 10; 30
Q2) (Exhibit: Markets and Efficiency) A producer will produce additional apples:
A) as long as marginal benefit is less than marginal cost.
B) as long as marginal benefit exceeds marginal cost.
C) if marginal cost is decreasing and price is the same.
D) if price does not cover costs.
Q3) If the marginal benefit received from a good is less than the marginal cost of production, then:
A) society's well-being can be improved if production increases.
B) society's well-being can be improved if production decreases.
C) society's well-being cannot be improved by changing production.
D) the market is producing too little of the good.
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Page 8
Chapter 7: The Analysis of Consumer Choice
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244 Verified Questions
244 Flashcards
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Sample Questions
Q1) (Exhibit: Consumer Equilibrium 3) Assume that you are consuming the combination of goods at point K.Given budget constraint FL, utility can:
A) be increased by consuming more of good A and less of good B.
B) be increased by consuming less of good A and more of good B.
C) be increased by consuming more of both goods.
D) not be increased.
Q2) The income effect of a normal good will not reinforce the substitution effect. A)True B)False
Q3) Marginal utility is zero at the quantity at which total utility reaches its maximum. A)True B)False
Q4) If the marginal utility from consuming a good is less than zero, total utility must be falling.
A)True B)False
Q5) The utility of a good simply indicates its usefulness. A)True B)False
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Chapter 8: Production and Cost
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227 Verified Questions
227 Flashcards
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Sample Questions
Q1) Marginal cost is the slope of the average total cost curve.
A)True
B)False
Q2) Total cost is constant because fixed cost is constant.
A)True
B)False
Q3) In the range of diminishing marginal returns total product is still increasing.
A)True
B)False
Q4) A firm that is experiencing diminishing returns in management's ability to use and disseminate information as it increases production in the long run is an example of:
A) economies of scale.
B) diseconomies of scale.
C) being too small for the relevant market.
D) not having enough managers.
Q5) If marginal cost is above average total cost, average total cost must be falling, whether marginal cost is rising or falling.
A)True
B)False
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Chapter 9: Competitive Markets for Goods and Services
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265 Flashcards
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Sample Questions
Q1) (Exhibit: The Market for Carrots) The movement from D<sub>1</sub> to D<sub>2</sub> could be a result of:
A) more firms moving in because of easy entry and profit expectations.
B) a decline in supply.
C) an increase in supply.
D) an increase in the number of buyers.
Q2) A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run:
A) marginal revenue curve.
B) marginal cost curve.
C) industry supply curve.
D) production curve.
Q3) (Exhibit: Total Revenue, Total Costs, and Economic Profit) As output exceeds approximately ________ pounds, economic profits _______ as long as _______ rise faster than _______ .
A) 8,300; fall; revenues; costs
B) 4,300; increase; revenues; costs
C) 8,300; rise; costs; revenues
D) 4,300; decrease; revenues; costs
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Page 11
Chapter 10: Monopoly
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234 Verified Questions
234 Flashcards
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Sample
Questions
Q1) In 1999, a judge declared that Microsoft was a monopolist.Assuming that it was maximizing its profits at its chosen level of output, we may conclude that the absolute value of the price elasticity of demand for its systems was:
A) less than 1.
B) equal to 1.
C) greater than 1.
D) There is insufficient information upon which to make a determination.
Q2) In perfect competition P = MC and in monopoly P > MC.
A)True
B)False
Q3) Which of the following is (are) true?
A) A profit-maximizing monopoly firm will select a price and quantity in the inelastic range of its demand curve.
B) A profit-maximizing monopoly firm will select a price and quantity in the elastic range of its demand curve.
C) Any firm will maximize profits by producing the quantity of output where MR > MC.
D) B and C are true.
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Chapter 11: The World of Imperfect Competition
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237 Flashcards
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Sample Questions
Q1) A monopolistically competitive industry shares some of the same characteristics as perfect competition, including:
A) many firms making economic profit in the long run.
B) easy entry and exit.
C) identical products.
D) both B and C.
Q2) To practice effective price discrimination, a firm must have:
A) identical tastes among buyers.
B) differences in demand elasticity among buyers.
C) identical demand elasticities among buyers.
D) two or more markets with no economic restrictions between them.
Q3) The HHI is a measure of concentration of industry.
A)True
B)False
Q4) In game theory, a strategy to respond to cheating by cheating is called a tit-for-tat strategy.
A)True
B)False
Q5) Define and explain the role of tacit and overt collusion in the operation of a cartel.
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Chapter 12: Wages and Employment in Perfect Competition
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189 Flashcards
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Sample Questions
Q1) (Exhibit: Wage Determination in Perfect Competition) Which of the following statements is true?
A) The firm's MFC of labor is equal to the price of the firm's output.
B) Total employment is equal to L , as shown in Panel (a).
C) The individual firm is a wage setter.
D) The firm will hire L units of labor, as shown in Panel (a).
Q2) Factor demand is said to be derived demand because it:
A) requires the use of other factors.
B) depends on product demand.
C) has a downward-sloping demand curve.
D) has a constant marginal factor cost.
Q3) The fact that a(n) _______ in the _______ tends to _______ wages explains efforts by some groups to reduce labor _______ .
A) increase; supply of labor; reduce; demand
B) decrease; supply of labor; increase; supply
C) increase; demand for labor; increase; supply
D) decrease; demand; increase; demand
Q4) A change in expectations will not shift the supply curve of labor.
A)True
B)False
Page 14
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Chapter 13: Interest Rates and the Markets for Capital and Natural Resources
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) The market in which borrowers and lenders meet is called the:
A) loanable funds market.
B) money market.
C) stock market.
D) product market.
Q2) Which of the following is (are) true?
A) The NPV of an investment project is equal to the present value of its expected revenues minus the present value of its expected costs.
B) The demand curve for capital shows that firms demand a greater quantity of capital at higher interest rates.
C) Changes in technology cause movements along the demand for capital curve. D) A and B are true.
Q3) Given an interest rate of 3 percent, the present value of a future payment of $2,080 to be paid in one year is:
A) $1,904.76
B) $2,000.00
C) $2,019.42
D) $2,080.00
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Chapter 14: Imperfectly Competitive Markets for Factors of Production
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Where unions operate in otherwise competitive markets, they _______ economic efficiency.
A) may increase
B) may decrease C) probably don't change
D) enhance
Q2) (Exhibit: Monopsony) Given perfect competition in the factor market, the wage would be:
A) determined where the MRP < MFC.
B) W .
C) W .
D) MRP .
Q3) (Exhibit: Monopsony) Given monopsony in the factor market, the wage would be:
A) determined where MRP > MFC.
B) determined where MRP < MFC.
C) W .
D) W .
Q4) A firm will hire labor at the quantity where MRP = MFC.
A)True B)False
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Chapter 15: Public Finance and Public Choice
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188 Flashcards
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Sample Questions
Q1) Transfer payments represent government purchases.
A)True
B)False
Q2) Tax incidence analysis seeks to determine:
A) who actually sends the tax payment to the government.
B) the actual burden of where the tax rests.
C) who ultimately gets the tax revenue.
D) whether a tax is in the benefits-received category or the ability-to-pay category.
Q3) A condition necessary for a market to achieve economic efficiency is that the market:
A) demand curve must include the willingness to pay of all members of society who benefit from the good.
B) demand curve must exclude the willingness to pay of all members of society who benefit from the good.
C) demand curve must include all opportunity costs imposed on society for producing the good.
D) supply curve must include the willingness to pay of all members of society who benefit from the good.
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Chapter 16: Antitrust Policy and Business Regulation
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The rule of reason was first considered in the:
A) Reebok Shoe case.
B) ALCOA case.
C) Microsoft case.
D) Standard Oil case.
Q2) The attempt of regulatory agencies to find market solutions that are economically efficient is explained by:
A) theories of public finance.
B) imperfectly competitive models.
C) the public choice theory of regulation.
D) the public interest theory of regulation.
Q3) When judging the anticompetitive effects of a horizontal merger, the FTC and Justice Department are likely to look most closely at the:
A) combined concentration ratio of the merged firms.
B) size of the Herfindahl-Hirschman Index but not the change in the index.
C) change in the Herfindahl-Hirschman Index but not the size of the index.
D) size of the Herfindahl-Hirschman Index and the change in the index.
Q4) What are the major considerations in the economic arguments against concentration of industry?
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Chapter 17: International Trade
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186 Flashcards
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Sample
Questions
Q1) (Exhibit: Production Possibilities Curve) If an economy is operating on its production possibilities curve, the law of increasing opportunity costs predicts that:
A) as more tractors are produced, fewer and fewer drill presses must be given up.
B) as more tractors are produced, more and more drill presses must be given up.
C) as more tractors are produced, the same amount of drill presses must be given up.
D) as more drill presses are produced, fewer and fewer tractors must be given up.
Q2) (Exhibit: The Production of Tires and Radios) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated.Further assume that the only input is labor and that it remains fully employed.Assume that there is unrestricted trade and complete specialization.According to comparative advantage, country:
A) Y would import tires.
B) Y would export radios.
C) Y would export tires.
D) X would import radios.
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19
Chapter 18: The Economics of the Environment
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Moral suasion is the most widely accepted approach to environmental problems by economists.
A)True
B)False
Q2) As the quantity of pollution emissions per period rises, the marginal cost of pollution stays the same.
A)True
B)False
Q3) If it costs motorists $1 to reduce carbon monoxide emissions from 10 pounds to 9 pounds and $3 to reduce them from 9 pounds to 8 pounds, the marginal benefit of the 9th pound of carbon monoxide is:
A) $1.
B) $3.
C) $8.
D) $9.
Q4) Surveys are used to measure the marginal benefits of emissions.
A)True
B)False
Q5) Discuss the benefits and the costs of pollution.
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Chapter 19: Inequality, Poverty, and Discrimination
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140 Flashcards
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Sample Questions
Q1) To the extent that labor market discrimination exists in a country:
A) the country will not be allocating resources efficiently.
B) the country will be operating on its production possibilities curve.
C) the country will be operating beyond its production possibilities curve.
D) None of the above are true.
Q2) Between 1968 and 2015, the income group in the United States showing the greatest income gains was the _______ 20 percent.
A) bottom
B) third
C) fourth
D) top
Q3) If a female professor receives a higher salary than a male professor, this must be due to discrimination.
A)True
B)False
Q4) In 2015, the poverty line for a family of four in the United States was an income of about $24,000.
A)True
B)False
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