Managerial Economics Final
Test Solutions
Course Introduction
Managerial Economics is a course that bridges economic theory and business practice, equipping students with the analytical tools needed to make effective managerial decisions. The course covers fundamental concepts such as demand analysis, production and cost theory, market structure, pricing strategies, and decision-making under uncertainty. Emphasizing real-world applications, students learn how economic principles guide resource allocation, optimize operational efficiency, and address challenges faced by firms in competitive and non-competitive markets. By integrating quantitative techniques and case studies, the course empowers future managers to apply economic logic to solve complex business problems and formulate strategic policies.
Recommended Textbook
Microeconomics 4th Australian Edition by Glenn Hubbard
Available Study Resources on Quizplus 16 Chapters
3337 Verified Questions
3337 Flashcards
Source URL: https://quizplus.com/study-set/2629
Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/52473
Sample Questions
Q1) Allocative efficiency is achieved when firms produce goods and services________.
A)at the lowest possible cost.
B)that consumers value most.
C)at the lowest opportunity cost.
D)at a marginal cost of zero.
Answer: B
Q2) Optimal decisions are made at the point where marginal cost equals zero.
A)True
B)False
Answer: False
Q3) All economic questions arise from the fact that resources are unlimited.
A)True
B)False
Answer: False
Q4) 'The distribution of income should be left to the market' is an example of a positive economic statement.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Choices and Trade-Offs in the Market
Available Study Resources on Quizplus for this Chatper
192 Verified Questions
192 Flashcards
Source URL: https://quizplus.com/quiz/52474
Sample Questions
Q1) Refer to Figure 2.3.Consider the following movements:
a.from point V to point W
b.from point W to point Y
c.from point Y to point Z
Which of the movements listed above represents economic growth?
A)a, b, and c
B)b and c only
C)a only
D)b only
Answer: B
Q2) What is a major factor contributing to the slow growth rate of less developed economies?
A)The lack of well-defined and enforceable property rights
B)The lack of natural resources
C)The lack of workers
D)The high rate of illiteracy
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Where Prices Come From: The Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/52475
Sample Questions
Q1) As the number of firms in a market increases, the supply curve will shift to the right and the equilibrium quantity will rise.
A)True
B)False
Answer: True
Q2) Refer to Figure 3.2.A decrease in the price of the product would be represented by a movement from:
A)A to B
B)B to A
C)S<sub>1</sub> to S<sub>2</sub>
D)S<sub>2 </sub>to S<sub>1</sub> Answer: B
Q3) If the demand curve for a product shifts to the left and the supply curve for the product shifts to the left, the equilibrium quantity will decrease.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Elasticity: The Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
224 Verified Questions
224 Flashcards
Source URL: https://quizplus.com/quiz/52476
Sample Questions
Q1) What does total revenue equal?
A)Price per unit times quantity sold
B)Price per unit times quantity supplied
C)Price per unit times change in quantity sold
D)Change in price per unit times quantity sold
Q2) At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Using the midpoint formula, what is the absolute value of the price elasticity of demand for canoe rentals?
A)2
B)1)25
C)0)9
D)0)75
Q3) Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03.This means that________.
A)beer and wine are substitutes and wine is an inferior good.
B)beer and wine are complements and wine is a luxury good.
C)beer and wine are substitutes and wine is a luxury good.
D)beer and wine are complements and wine is an inferior good.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Economic Efficiency, Government Price Setting and Taxes
Available Study Resources on Quizplus for this Chatper
187 Verified Questions
187 Flashcards
Source URL: https://quizplus.com/quiz/52477
Sample Questions
Q1) If the quantity of soccer balls demanded is represented by the equation Q<sub>D</sub> = 80 - 2P, then the corresponding price of soccer balls is represented by the equation
A)P = 1.6Q<sub>D</sub> + 80.
B)P = 80 - Q<sub>D</sub>.
C)P = 40 - 0.5Q<sub>D</sub>.
D)P = Q<sub>D</sub> + 160.
Q2) Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which
A)the sum of consumer surplus and producer surplus is at a maximum.
B)economic surplus is minimised.
C)the sum of the benefits to firms is equal to the sum of the benefits to consumers.
D)the sum of consumer surplus and producer surplus is minimised.
Q3) What is producer surplus? What does producer surplus measure?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Consumer Choice and Behavioural Economics
Available Study Resources on Quizplus for this Chatper
254 Verified Questions
254 Flashcards
Source URL: https://quizplus.com/quiz/52478
Sample Questions
Q1) The slope of the indifference curve is referred to as
A)the marginal rate of substitution.
B)the price ratio.
C)the marginal rate of consumption.
D)the marginal trade-off rate.
Q2) What did economists Robert Jensen and Nolan Miller determine must be true for a good to be a Giffen good, where the income effect is larger than its substitution effect?
Q3) The demand curve for a luxury good is upward sloping.
A)True
B)False
Q4) One reason university students do not study enough to get high grades is that they are unrealistic about their future behaviour.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Technology Production and Costs
Available Study Resources on Quizplus for this Chatper
301 Verified Questions
301 Flashcards
Source URL: https://quizplus.com/quiz/52479
Sample Questions
Q1) All of the following statements are true of the minimum efficient scale except one.Which one?
A)All possible economies of scale have been exhausted.
B)The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point.
C)Any increase in the scale of operation will encounter diseconomies of scale.
D)An increase in the output level will increase profit.
Q2) Average fixed cost is equal to
A)the amount of total cost that does not change as output changes in the short run.
B)fixed cost divided by the quantity of output produced.
C)fixed cost multiplied by the quantity of output produced.
D)average total cost plus average variable cost.
Q3) What happens when the marginal product of labour rises?
A)the marginal cost of production will exceed the average total cost.
B)the marginal cost of production also rises.
C)the marginal cost of production falls.
D)the average total cost of production also rises.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
269 Verified Questions
269 Flashcards
Source URL: https://quizplus.com/quiz/52480
Sample Questions
Q1) Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?
A)productive efficiency
B)allocative efficiency
C)marginal efficiency
D)profit maximisation
Q2) If a perfectly competitive firm's price is above its average total cost, the firm
A)is earning a profit.
B)should shut down.
C)is incurring a loss.
D)is breaking even.
Q3) If a firm shuts down in the short run it will
A)break even.
B)declare bankruptcy.
C)suffer a loss equal to its variable costs.
D)suffer a loss equal to its fixed costs.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Monopoly Markets
Available Study Resources on Quizplus for this Chatper
281 Verified Questions
281 Flashcards
Source URL: https://quizplus.com/quiz/52481
Sample Questions
Q1) In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service.
A)True
B)False
Q2) Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is
A)after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat.
B)firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses.
C)the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls.
D)after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug.
Q3) How do the price and quantity of a monopoly compare to that of a perfectly competitive industry?
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Monopolistic Competition: The Competitive
Model in a More Realistic
Available Study Resources on Quizplus for this Chatper
255 Verified Questions
255 Flashcards
Source URL: https://quizplus.com/quiz/52482
Sample Questions
Q1) Refer to Figure 10.12.The productively efficient output for the firm represented in the diagram is
A)Q<sub>1</sub> units
B)Q<sub>2</sub> units
C)Q<sub>3</sub> units
D)Q<sub>4</sub> units
Q2) In the long run, if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve, then A)the firm would break even.
B)the firm would shut down temporarily.
C)the firm would earn enough revenue to cover its variable costs, but not its fixed costs. D)the firm would earn an economic profit.
Q3) Refer to Table 10.3.The average variable cost of production at its optimal output level is
A)$0 (because its optimal output = 0)
B)$15
C)$14.75
D)$29
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Oligopoly: Markets With Few Competitors
Available Study Resources on Quizplus for this Chatper
186 Verified Questions
186 Flashcards
Source URL: https://quizplus.com/quiz/52483
Sample Questions
Q1) Economists use game theory to analyse oligopolies because
A)real markets are too complicated to analyse without using games.
B)it is more enjoyable for economists and students to learn by playing games.
C)game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies.
D)game theory is useful in understanding the actions of firms that are price takers.
Q2) Explain why OPEC is caught in a prisoner's dilemma?
Q3) Refer to Table 11.3.If Alistair assumes that Baine would increase its advertising budget, what should it do?
A)Alistair should keep its own budget the same and allow Baine to incur the higher cost.
B)Alistair should also increase its advertising spending.
C)Alistair should reduce its advertising spending.
D)Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 per cent market share.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Markets for Labour and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
250 Verified Questions
250 Flashcards
Source URL: https://quizplus.com/quiz/52484
Sample Questions
Q1) The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?
A)300/(1.5)<sup>5</sup>
B)300/(1.05)<sup>5</sup>
C)300 × 1.5 × 5
D)5)05/300
Q2) Consider the market for opticians.What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens?
A)The equilibrium wage and the equilibrium quantity of opticians rise.
B)The equilibrium wage and the equilibrium quantity of opticians fall.
C)The equilibrium wage rises and the equilibrium quantity of opticians falls.
D)The equilibrium wage falls and the equilibrium quantity of opticians rises.
Q3) Why do professional basketball players earn more than police officers? Illustrate this situation graphically.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/52485
Sample Questions
Q1) The process of countries becoming more open to foreign trade and investment and a trend towards a more integrated global system is known as
A)autarky.
B)foreign exchange.
C)globalisation.
D)protectionism.
Q2) If a country has an absolute advantage in producing a product, it must also have a comparative advantage in producing that product.
A)True
B)False
Q3) Refer to Table 13.6.Prior to trade, what was the opportunity cost to produce 1 hat in Belize?
A)1/6 of a clock
B)2/3 of a clock
C)1)5 clocks
D)6 clocks
Q4) What does it mean for a country to have an absolute advantage in producing a product?
Q5) Why do domestic firms offshore production processes?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Government Intervention in the Market
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/52486
Sample Questions
Q1) Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,
A)economic surplus is maximised.
B)not enough consumers want to buy pecans.
C)the quantity supplied is less than the economically efficient quantity.
D)the quantity supplied is economically efficient, but the quantity demanded is economically inefficient.
Q2) Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production, and the sum of consumer surplus and producer surplus is maximised.
A)True
B)False
Q3) Adverse selection is a situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
A)True
B)False
Q4) What is moral hazard?
Q5) Why might a young, healthy person choose not to buy health insurance?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Externalities, Environmental Policy and Public Goods
Available Study Resources on Quizplus for this Chatper
212 Verified Questions
212 Flashcards
Source URL: https://quizplus.com/quiz/52487
Sample Questions
Q1) Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution-generating good.All of the following will result from the tax except
A)an increase in the equilibrium market price.
B)a decrease in the equilibrium quantity produced and consumed.
C)a decrease in market supply of the good.
D)an increase in the demand for the good.
Q2) Refer to Figure 15.14.The current market equilibrium output is partly the result of overfishing.In that case, what does S<sub>1</sub> represent?
A)The private marginal cost of harvesting tuna
B)The social marginal cost of harvesting tuna
C)The private marginal benefit of harvesting tuna
D)The social marginal benefit of harvesting tuna
Q3) The marginal social benefit curve is a synonym for
A)total welfare curve.
B)the demand curve for a public good
C)total social benefit curve.
D)total willingness-to-pay curve.
Q4) What are some of the limitations of the Coase theorem in practice?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: The Distribution of Income and Social Policy
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/52488
Sample Questions
Q1) If, as your taxable income decreases, you pay a larger percentage of your taxable income in taxes, then the tax is
A)regressive.
B)proportional.
C)progressive.
D)unfair.
Q2) Refer to Figure 16.2.If the government imposes an excise tax of $1.00 on every unit sold, the producer's burden of the tax
A)is greater under the more elastic supply curve S<sub>0</sub>.
B)is greater under the less elastic supply curve S<sub>0</sub>.
C)is greater under the less elastic supply curve S<sub>1</sub>.
D)is the same under either supply curve because there is a single demand curve that captures buyers' market behaviour.
Q3) Income inequality increases as the Gini coefficient approaches 1.
A)True
B)False
Q4) Explain the effect of price elasticities of supply and demand on tax incidence.
Q5) What is a Lorenz curve and what is a Gini coefficient?
Q6) Describe the main factors economists believe cause inequality of income.
Page 18
To view all questions and flashcards with answers, click on the resource link above.