Managerial Economics
Mock Exam
Course Introduction
Managerial Economics applies microeconomic theories and methodologies to solve practical business problems and support decision-making in organizations. The course covers key concepts such as demand analysis, production and cost functions, market structures, pricing strategies, and the impact of regulatory and competitive environments. By integrating economic theory with business practices, students develop analytical tools to forecast market trends, optimize resources, and formulate efficient strategies, enabling them to make informed managerial decisions that contribute to organizational success.
Recommended Textbook
Microeconomics 19th Edition by Paul A. Samuelson
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Chapter 1: The Central Concepts of Economics
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Sample Questions
Q1) Normative economics refers to:
A)economic policies that are in effect when inflation and unemployment are at their normal levels.
B)tax programs aimed at the middle class leads to more inflation.
C)economic programs that have been in place for five or more years.
D)economic statements with a value judgment of what ought to be, or what should be.
E)both statements A)and B).
Answer: D
Q2) Compared with physical sciences, economics is more practical-hence not so concerned with theory.
A)True
B)False
Answer: False
Q3) Primary factors of production could include land, labor and capital.
A)True
B)False
Answer: True
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Chapter 2: The Modern Mixed Economy
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Sample Questions
Q1) Macroeconomic policies for stabilization include:
A)fiscal and monetary policies.
B)pollution policy.
C)lending policy.
D)business demand policy.
E)none of the above.
Answer: A
Q2) Which of the following does not indicate market failure?
A)Existence of monopolies.
B)Excessive air and water pollution.
C)A lack of such necessities as national defense.
D)Insufficient levels of research and development expenditures.
E)Severe income inequalities.
Answer: E
Q3) The prices of productive factors influence how goods are produced.
A)True
B)False
Answer: True
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Chapter 3: Basic Elements of Supply and Demand Part
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Q1) Over time the fact that some people buy less hamburger at 69 cents per pound than at 89 cents per pound refutes the law of downward-sloping demand.
A)True
B)False
Answer: False
Q2) When we say that a price in a competitive market is "too low to clear the market," we usually mean that:
A)the quantity supplied exceeds the quantity demanded at that price, so there is too much competition among producers to try to get rid of that supply.
B)consumers are not willing to buy enough at that price.
C)producers are leaving the industry.
D)the quantity demanded exceeds the quantity supplied at that price.
E)no producer can cover costs of production at that price.
Answer: D
Q3) Equilibrium occurs where the demand curve intersects the supply curve.
A)True
B)False
Answer: True
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Chapter 4: Supply and Demand: Elasticity and Applications
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Sample Questions
Q1) In general, supply curves become less elastic the longer the time period under consideration.
A)True
B)False
Q2) Everyone agrees that increasing the minimum wage is the best thing for the economy.
A)True
B)False
Q3) A perfectly price inelastic demand curve must be a vertical line.
A)True
B)False
Q4) If at a price of $8, the quantity of movie tickets bought will be 3300 per day, and at $12, the ticket quantity bought will be 2700 per day, then the price elasticity of demand for movie tickets is approximately:
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Chapter 5: Demand and Consumer Behavior
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Sample Questions
Q1) The rise in the price of butter will lead to:
A)a fall in the demand curve for butter.
B)a rightward shift in the demand curve for butter's substitute.
C)a leftward shift in the demand curve for butter's substitute.
D)an increase in the marginal utility of the last unit consumed of butter's substitute.
E)none of the above.
Q2) If we know a consumer's tastes, if we know how much his income (or budget)is, and if we know the price of any one good, then we can predict how much of that good he will buy.
A)True
B)False
Q3) It is possible to sum individual demand curves to get the market demand curve only when all consumers are exactly alike in their demands.
A)True
B)False
Q4) If prices go up, your real income goes down.
A)True
B)False
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Chapter 6: Production and Business Organization
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Sample Questions
Q1) The production process illustrated by the function recorded in Table 6-2 displays decreasing returns to scale.
A)True
B)False
Q2) History matters in network markets because once consumers become accustomed to certain features, they dislike having to adjust to changes.
A)True
B)False
Q3) Numerically, the bulk of businesses in the U.S.are:
A)corporations.
B)partnerships.
C)sole proprietorships.
D)farms.
E)mom-and-pop retail shops.
Q4) If production displays increasing returns to scale, then it cannot display diminishing returns for all of its inputs.
A)True
B)False
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Chapter 7: Analysis of Costs
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Sample Questions
Q1) In Figure 7-2 what is AVC at Q = 5?
A)9
B)10
C)12
D)17.5
E)None of the above.
Q2) Unlike fixed costs, variable costs are zero if output is zero.
A)True
B)False
Q3) Net worth on a company's balance sheet is properly described as:
A)the market value of the company itself.
B)the market value of the company's shares.
C)accumulated undistributed profits.
D)capital contributed by the shareholders.
E)total assets minus total liabilities, as shown on the books of the company.
Q4) The item "taxes payable" is a long-term liability.
A)True
B)False
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Chapter 8: Analysis of Perfectly Competitive Markets
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Sample Questions
Q1) A tax on the emission of a pollutant from the firms of a competitive industry can be expected to cause the equilibrium quantity demanded and supplied to decline.
A)True
B)False
Q2) When there are only perfectly competitive producers in a market economy, there will be an efficient allocation of resources (ignoring externalities)because:
A)even though excess profits are earned in some industries, capital is prevented from moving into those industries.
B)even though excess profits are earned in some industries, there will be excess losses earned in other industries.
C)some firms will produce too little output and other firms will produce too much output.
D)the prices of goods will tend to reflect their marginal costs of production.
E)none of the above.
Q3) When its variable costs are less than total revenue, a firm should shut down.
A)True
B)False
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Chapter 9: Imperfect Competition and Monopoly
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Sample Questions
Q1) If marginal revenue becomes negative, this must mean that the firm's total revenue is declining with additional output.
A)True
B)False
Q2) MR becomes negative when:
A)the demand price becomes negative.
B)the demand elasticity drops from elastic to inelastic.
C)total revenue becomes negative.
D)the loss on previous units is at its maximum.
E)both b and c.
Q3) Intense rivalry between Chrysler, Ford and GM means perfect competition in the U.S.auto industry.
A)True
B)False
Q4) An oligopoly exists when:
A)a few sellers have complete control over the industry.
B)a few sellers have no control over the industry.
C)many sellers are in control of the industry.
D)no one controls the industry.
E)none of the above.
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Chapter 10: Competition Among the Few
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Sample Questions
Q1) Practically, a business does not set prices and output by equating marginal cost to marginal revenue because it finds that it can make more profits by setting a high markup on its product.
A)True
B)False
Q2) Which of the following is a reason why a firm may not maximize profits?
A)Firms have limited resources and so must make imperfect decisions.
B)Profit maximizing price and output level is often very difficult to determine.
C)Managers may be more interested in maximizing their salaries, rather than profits.
D)Firms do not know exactly what their marginal revenue and marginal cost curves are.
E)All of the above.
Q3) Monopolistic deviation from P = MC means that:
A)nobody can be made better off without making someone else worse off.
B)goods are being produced efficiently.
C)society is better able to achieve its welfare optimum.
D)someone can be made better off without making someone else worse off.
E)none of the above.
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Chapter 11: Economics of Uncertainty
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Sample Questions
Q1) What is meant by the term intellectual property rights?
A)rights to any property.
B)rights to manufactured property.
C)special laws governing patents, copyrights, business and trade secrets, and electronic media.
D)property insurance.
E)None of the above.
Q2) A person who is unwilling to pay anything for insurance with a certain payoff of $4000 to replace a risky situation which would pay $2,000 some of the time and $4,000 other times is
A)irrational.
B)risk neutral.
C)risk averse.
D)a speculator.
E)none of the above.
Q3) Arbitrage is the purchasing of a good or asset in one market for immediate resale in another market in order to profit from a price discrepancy.
A)True
B)False
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Chapter 12: The Labor Market
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Sample Questions
Q1) The government provides incomes for some in the form of:
A)taxes.
B)medicare.
C)transfer payments.
D)relief payments.
E)none of the above.
Q2) An increase in the price of one factor (without an equivalent increase in its productivity)will cause employment of that factor to fall, both because of substitution into cheaper factors and because the minimum-profit output may now be smaller.
A)True
B)False
Q3) The marginal revenue product of an input is:
A)the selling price of the last unit of output.
B)the increment of total revenue resulting from the use of an additional unit of input.
C)used in determining marginal product.
D)harder to determine in pure competition than in monopoly.
E)harder to determine in pure competition than in oligopoly.
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14
Chapter 13: Land, Natural Resources, and the Environment
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Sample Questions
Q1) Wages in East Asian countries have been rising rapidly in recent years.This is because the countries are:
A)investing lots of money in education and training for workers.
B)investing heavily in capital equipment and machinery.
C)importing the latest in technology.
D)all of the above.
E)none of the above.
Q2) Unions have fought immigration restrictions primarily because many of their members are themselves immigrants.
A)True
B)False
Q3) What is the equilibrium wage rate in Figure 13-2 if discrimination didn't exist?
A)$12
B)$9.50
C)$8
D)$4
E)none of the above
Q4) Wage incomes sometimes contain rent elements.
A)True
B)False
Page 15
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Chapter 14: Capital, Interest, and Profits Part Four:
Applications of Economic Principles
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Q1) Actions to slow global warming would be considered global public goods.
A)True
B)False
Q2) If a factor of production receives rent, the rent is determined by the:
A)price of the final good.
B)elasticity of the factor's supply.
C)cost of the factor's inputs.
D)price of all other factors.
E)all of the above.
Q3) A commodity is called appropriable when:
A)firms or consumers can capture its full economic value.
B)firms or consumers can not capture its full economic value
C)firms or consumers can capture only a small part of its economic value
D)none of the above.
Q4) Rent is calculated as dollars per unit of the fixed factor per unit of time.
A)True
B)False
Q5) Global warming is one of the most worrisome problems facing the world today. A)True
B)False
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Chapter 15: Government Taxation and Expenditure
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Sample Questions
Q1) The nominal interest rate plus the percentage price rise equals the real interest rate.
A)True
B)False
Q2) The present discounted value of $100 payable 1 year from now, assuming a market rate of interest of 10 percent, is:
A)$100.
B)$10.
C)$90.
D)slightly less than $90.
E)slightly more than $90.
Q3) A capital project has a positive rate of return if the present value of total future receipts resulting from its use exceeds its original cost.
A)True
B)False
Q4) According to the law of diminishing returns, the lower the capital stock, the higher the rate of return to capital.
A)True
B)False
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Chapter 16: Efficiency Vsequality: The Big Trade-Off
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Sample Questions
Q1) Regulation in the United States began to be imposed as it became clear that laissez-faire policies were being undermined by:
A)pockets of poverty that were exploited by the more advantaged.
B)wide swings in the business cycle marked by frequent banking crises.
C)widespread discrimination on the basis of sex, race, and other factors.
D)flagrant abuse of the environment.
E)all of the above.
Q2) The cost of government at all levels has grown in the United States since 1913.
A)True
B)False
Q3) Welfare payments are an example of a redistributional government policy.
A)True
B)False
Q4) Which of the following taxes, as structured in the United States, is the best example of ability-to-pay taxation?
A)The federal excise tax on cigarettes.
B)The federal corporate income tax.
C)A state imposed highway user tax.
D)A proportional state sales tax.
E)The federal personal income tax.
Page 18
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Chapter 17: International Trade
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Sample Questions
Q1) The largest federal program targeted directly at the poor is Medicaid.
A)True
B)False
Q2) Differences in abilities account for most income differentials.
A)True
B)False
Q3) Which of the following is a serious problem with the current welfare state of the United States?
A)There are no poor people so the programs are not necessary.
B)The marginal tax rates on low-income families are very high when loss of benefits is considered.
C)Eligibility is easy to check, so the roles of people employed by the welfare program are too large.
D)Poverty is a northeastern problem, so federal support is unnecessary.
E)All of the above.
Q4) Most income-security programs are targeted at the elderly rather than the poor.
A)True
B)False
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Page 19
Chapter 18: Overview of Macroeconomics
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Sample Questions
Q1) The tariff provides an efficient tool for reducing long term unemployment.
A)True
B)False
Q2) The theory of comparative advantage is proven invalid when the United States sells steel to Japan and purchases the final products from Japan.
A)True
B)False
Q3) Properly designed tariffs or quotas can increase the real wages of workers in the domestic industry involved.
A)True
B)False
Q4) If a foreign country imposes a tariff on our exports, then it would always pay us to retaliate.
A)True
B)False
Q5) In the long run, a tariff can increase the real wages of workers in the domestic industry.
A)True
B)False
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Chapter 19: Geometrical Analysis of Consumer Equilibrium
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Sample Questions
Q1) The slope of the budget line BD in Figure 5A-2 is -2.
A)True
B)False
Q2) Increasing all prices and income in exactly the same proportion:
A)leaves equilibrium quantities consumed unchanged.
B)increases consumption of luxuries.
C)decreases consumption of necessities.
D)both B and C are correct.
E)none of the above are correct.
Q3) The slope at any point on an indifference curve measures the relative marginal utilities of the two goods at that point.
A)True
B)False
Q4) If your income is halved, your budget line will shift twice as far from the origin in a parallel way.
A)True
B)False
Q5) All consumers have the same indifference curves.
A)True
B)False
21
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Chapter 20: Production Cost Theory and Decisions of the Firm
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Sample Questions
Q1) Identify the incorrect answer.If the price of each of the two factors used in production is a constant, then the least-cost principle is satisfied when the:
A)marginal product per dollar received from the last dollar of expenditure is the same for every productive factor.
B)slope of the equal-product curve is equal to the slope of the equal-cost line.
C)marginal product per dollar of each factor is equal to the inverse of the marginal cost. D)ratio of the marginal products of the two factors equals the ratio of their prices.
E)equal-product curve cuts across an equal-cost line from above.
Q2) If point D is the least-cost factor combination for Q = 100 when the price of labor = $5 and the price of land = $4 for Table 7A-1, what is the (marginal productivity of labor)/(marginal productivity of capital)?
A)1
B)1.25
C)1.5
D)2
E)It cannot be determined from the information given.
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Page 22