Course Introduction
Managerial Economics Review
Questions
Managerial Economics explores the application of economic theories, methodologies, and quantitative tools to managerial decision-making processes within organizations. This course focuses on understanding and analyzing market dynamics, demand forecasting, production and cost analysis, pricing strategies, and risk assessment to solve business problems and improve organizational performance. By integrating microeconomic principles with real-world business scenarios, students will learn how to make informed and rational choices that align with an organizations objectives in a complex and competitive environment.
Recommended Textbook
Economics for Today 4th Asia Pacific Edition by Allan Layton
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19 Chapters
2245 Verified Questions
2245 Flashcards
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Page 2
Chapter 1: Thinking like an economist
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89 Flashcards
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Sample Questions
Q1) An economic model:
A)cannot be rejected.
B)cannot be tested.
C)always yields accurate predictions.
D)is valid if the evidence is consistent with the predictions.
Answer: D
Q2) Scarcity is a problem:
A)that only poor people face.
B)because human wants are limited while resources are unlimited.
C)because human wants are unlimited while resources are limited.
D)only in third world countries.
Answer: C
Q3) Select the positive statement that completes the following sentence: 'If the competition is prohibited in the car manufacturing industry:
A)cost per unit of output will rise'.
B)cars will be unfairly priced'.
C)the rate of inflation should hold steady'.
D)government should pay compensation to workers'.
Answer: A
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Page 3
Chapter 2: Production possibilities and opportunity cost
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Sample Questions
Q1) The production possibility curve is bowed outward from the origin because of:
A)the law of decreasing opportunity costs.
B)the finite nature of the resource base.
C)inefficiency.
D)the changes in the opportunity cost due to different efficiencies of the same resource in different use.
E)unemployment.
Answer: D
Q2) Which of the following moves from one point to another in Exhibit 2-7 would represent an increase in economic efficiency?
A)Z to W.
B)W to Y.
C)Z to X.
D)X to W.
Answer: D
Q3) Increase in current consumption is necessary for economic growth.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Market demand and supply
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Sample Questions
Q1) 'Coal mining companies anticipate an additional tax.' This statement indicates that the:
A)price of coal will fall.
B)quantity of coal that will be available at any given price has decreased.
C)demand for coal will shift to the left.
D)quantity of coal that will be available at any given price has increased.
Answer: B
Q2) Suppose there are only three people in the economy: Jane,Harry and Bob.The individual demand for corn for each of these consumers is given in Exhibit 3-1.The total quantity demanded of corn if the market price is $5 is _____.
A)3
B)25
C)17
D)8
E)26
Answer: B
Q3) A shortage occurs when a good is in great demand.
A)True
B)False
Answer: False
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Chapter 4: Markets in action
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Sample Questions
Q1) In Exhibit 4-1,suppose that a reduction in the price of an important input used to produce the good causes an increase in quantity supplied of 300 units at every price level.Assuming that demand does not change,the new equilibrium price will be:
A)$10.
B)$15.
C)$20.
D)$25.
Q2) A public good will:
A)be efficiently provided by the free market as long as its total benefits exceed its total costs.
B)be efficiently provided by the free market as long as its marginal benefits exceed its marginal costs.
C)be provided in less than efficient quantities by the free market.
D)be provided in efficient quantities by voluntary contributions.
E)not be provided by the government.
Q3) The presence of negative externalities that are incorporated in price results in misallocation of resources.
A)True
B)False
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Page 6
Chapter 5: Elasticity of demand and supply
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Sample Questions
Q1) Which of the statements below does not describe a demand curve that is unit elastic?
A)The percentage change in the quantity demanded equals the percentage change in product price.
B)An increase in product price will not change total revenue.
C)The price elasticity of demand equals one.
D)A change in price does not change quantity demanded.
E)A decrease in product price will not change total revenue.
Q2) In the long run,price elasticities of demand are usually:
A)less than they are in the short run because people can adjust.
B)the same as they are in the short run because tastes don't change.
C)greater than they are in the short run because prices rise over time.
D)less than they are in the short run because real prices fall over time.
E)greater than they are in the short run because consumers have time to adjust.
Q3) The tax incidence indicates that tax is always paid by sellers.
A)True
B)False
Q4) A horizontal demand curve indicates perfectly elastic demand.
A)True
B)False
Page 7
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Chapter 6: Production costs
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Sample Questions
Q1) If MC is less than ATC,we know that:
A)ATC must be rising.
B)AVC must be falling.
C)ATC must be falling.
D)ATC could be rising or falling.
E)AVC must be rising.
Q2) By filling in the blanks in Exhibit 6-8,the AVC of 3 pizzas is shown to be equal to:
A)$9.00.
B)$10.00.
C)$13.33.
D)$22.33.
E)$40.00.
Q3) Which of the following is true if the total variable cost curve is rising?
A)Average fixed cost is increasing.
B)Marginal cost is decreasing.
C)Marginal cost is increasing.
D)Average fixed cost is constant.
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Chapter 7: Perfect competition
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Sample Questions
Q1) In a perfectly competitive market,firms:
A)enter the industry in the long run.
B)exit the industry in the long run.
C)earn economic profit in a long run.
D)earn normal profit in a long run.
Q2) If the computer market experiences a surge in demand,then the long-run supply curve for the industry is likely to be:
A)downward-sloping if it causes the price of computer chips to rise.
B)upward-sloping if it causes the price of computer chips to fall.
C)downward-sloping if it causes the price of computer chips to fall.
D)horizontal if it causes the price of computer chips to stay the same.
Q3) At an output level of 500 units,ATC = $10,AVC = $5,MR = $3 and MC = $3,the result for the perfectly competitive firm will be:
A)making a loss of ($5 - $3) ´ 500 = $1000.
B)a decrease in output, so MC > MR.
C)making a short-run loss of $2500.
D)an increased output, so MR > MC.
E)unclear, as there is not enough information.
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9
Chapter 8: Monopoly
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Sample Questions
Q1) A recent study has concluded that working adults have a price elasticity of demand of 1.72 for train services,while pensioners have a price elasticity of demand of 3.74.If price discrimination is possible,then the company providing the train service will:
A)charge a lower price to working adults than to pensioners.
B)charge a lower price to pensioners than to working adults.
C)earn higher profits by charging everyone the same price.
D)lower prices for all customers because demand is elastic for both groups.
Q2) A monopolist earning economic profit in the short run determines that,at its present level of output,marginal revenue is $23 and marginal cost is $30.Which of the following should the firm do to increase profit?
A)Raise price or lower output.
B)Lower price.
C)Raise output.
D)Lower price and raise output.
E)Lower output but leave price unchanged.
Q3) A monopoly earns the most profit by charging a price where demand is inelastic.
A)True
B)False
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Chapter 9: Monopolistic competition and oligopoly
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Sample Questions
Q1) Oligopolies are characterised by:
A)homogeneous products.
B)differentiated products.
C)independence.
D)mutual interdependence.
Q2) Cartel members have an incentive to cheat on the cartel because:
A)the cartel does not maximise profits.
B)the cartel price is the competitive price.
C)each member's output quota is too high.
D)each members MR is not equal to the cartel's MC.
E)the industry profit would be higher under competitive conditions.
Q3) Which of the following market structures describes an industry in which a group of firms formally agree to control prices and output of a product?
A)Perfect competition.
B)Monopoly.
C)Oligopoly.
D)Cartel.
E)Monopolistic competition.
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11
Chapter 10: Policy issues: resource taxes and climate change
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Sample Questions
Q1) Which of the following statements is true?
A)A per tonne royalty may increase the level of mineral output and result in government revenues which are too low when prices are low.
B)A per tonne royalty may reduce the level of mineral output and result in government revenues which are too high when prices are high.
C)A per tonne royalty may reduce the level of mineral output and result in government revenues which are too low when prices are low.
D)A per tonne royalty may reduce the level of mineral output and force some firms to exit the industry.
Q2) In Exhibit 10-2,if the external cost is not included in the supply curve 'Supply 1',the market demand and market supply curve 'Supply 1' produce a/an:
A)socially desirable outcome.
B)efficient outcome.
C)inefficient outcome.
D)better outcome than an intersection of market demand and Supply 2.
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Page 12
Chapter 11: Measuring the size of the economy
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Sample Questions
Q1) Intermediate goods are goods and services used:
A)by the ultimate user.
B)by state and local governments.
C)as inputs.
D)both as inputs and final goods.
Q2) In an economy with persistent inflation:
A)real GDP will grow faster than nominal GDP.
B)nominal GDP will grow faster than real GDP.
C)nominal and real GDP will grow at the same rate.
D)nominal and real GDP will both fall.
Q3) In the factor market,firms demand:
A)wages, rents, interest and profit.
B)goods and services.
C)material, land, labour, capital and entrepreneurship.
D)money for their goods and services.
Q4) Exports are a domestic spending for foreign products.
A)True
B)False
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13
Chapter 12: Business cycles and economic growth
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Sample Questions
Q1) In terms of the Solow growth model,the recent situation in Japan is perhaps an example of where a country has:
A)failed to increase its savings to the optimal rate.
B)been consistently able to achieve its optimal savings rate.
C)exceeded its optimal savings rate.
D)put too much emphasis on current consumption at the expense of future generations.
Q2) A business cycle is the period of time in which:
A)a business is established and ceases operations.
B)there are three phases, which are: peak, depression and recovery.
C)real GDP declines.
D)expansion and contraction of economic activity are alternated.
Q3) Total spending influences the business cycle because:
A)increases in spending flow through to higher output, employment and income.
B)it allows GDP to increase well beyond the full-employment level of output.
C)decreases in spending will increase inflation, which then reduces real GDP.
D)increases in spending will decrease inflation, which then increases real GDP.
Q4) The term 'trough' refers to the maximum point of the business cycle.
A)True
B)False
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Chapter 13: Inflation and unemployment
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Sample Questions
Q1) Unemployment that occurs from fundamental technological changes in the production,or from the substitution of new goods for customary ones,is known as:
A)underemployment.
B)seasonal unemployment.
C)frictional unemployment.
D)structural unemployment.
E)cyclical unemployment.
Q2) Deflation is defined as a decrease in:
A)the real wages of workers.
B)real GDP compared with the CPI.
C)the average price level of goods and services in the economy.
D)the price of all consumer products.
Q3) During periods of hyperinflation,which of the following is the most likely response of consumers?
A)Save as much as possible.
B)Spend money as fast as possible.
C)Invest as much as possible.
D)Lend money.
E)Work harder.
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Page 15
Chapter 14: A simple model of the macro economy
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Sample Questions
Q1) Stagflation occurs when the economy experiences:
A)low unemployment and low inflation.
B)high unemployment and rapid inflation.
C)low unemployment and rapid inflation.
D)high unemployment and low inflation.
Q2) The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.
A)True
B)False
Q3) More favourable aggregate supply conditions can cause:
A)a depression.
B)a recession.
C)real GDP and employment to rise.
D)unemployment to rise.
Q4) The spending multiplier implies that any change in government spending will have a proportionally smaller impact on real GDP.
A)True
B)False
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Chapter 15: The monetary and financial system
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Sample Questions
Q1) The buying and selling of foreign currency occurs in the:
A)short-term money market.
B)exchange settlement accounts.
C)foreign exchange market (FOREX).
D)Australian Stock Exchange.
E)currency exchange market (CURREX).
Q2) Keynes called the money that people hold to make routine day-to-day purchases the:
A)transactions demand for holding money.
B)precautionary demand for spending money.
C)speculative demand for holding money.
D)store of value demand for holding money.
Q3) Assume a simplified banking system subject to a 20 per cent minimum liquidity requirement.If there is an initial increase in excess reserves of $100 000,the money supply:
A)increases $100 000.
B)increases $500 000.
C)increases $600 000.
D)decreases $500 000.
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Chapter 16: Macroeconomic policy I: monetary policy
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Sample Questions
Q1) Which of the following statements is least likely to be true?
A)By targeting the growth in the money supply, the government will be more successful in keeping inflation low if the demand for money becomes volatile.
B)Targeting the growth in the money supply will be more successful in keeping inflation low if the velocity of money is stable.
C)The demand for money influences the velocity of money.
D)A rules-based approach to monetary policy will be less effective when the demand for money is volatile.
E)A rules-based approach to monetary policy will be less effective when the velocity of money is volatile.
Q2) According to the equation of exchange,the money supply multiplied by the average number of times per year a dollar is spent on final goods and services is equal to:
A)marginal spending.
B)unemployment.
C)total spending.
D)price level.
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Chapter 17: Macroeconomic policy II: fiscal policy
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Sample Questions
Q1) Personal income taxes:
A)make recessions and inflationary episodes more severe.
B)make recessions and inflationary episodes less severe.
C)make recessions more severe and inflationary episodes less severe.
D)make recessions less severe and inflationary episodes more severe.
E)have no effect on the severity of recessions and inflationary episodes.
Q2) The following is important when interpreting the federal budget:
A)The wages in a specific industry.
B)The introduction of competition in the markets.
C)Onlythe total deficit/surplus figure.
D)The actual pattern of expenditure and revenue in attrition to the deficit/surplus figure.
Q3) An advocate of supply-side fiscal policy would advocate which of the following?
A)More taxes on research and development activities.
B)Stricter regulation.
C)Increase in resource prices.
D)Reduction in taxes.
Q4) The national debt is always a burden on future generations.
A)True
B)False
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Chapter 18: International trade and finance
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Sample Questions
Q1) Which of the following transactions would be recorded as a credit in the Australian current account?
A)A Japanese bank's purchase of Coles Myer stock.
B)A Japanese consumer's purchase of an Australian piece of beef.
C)An Australian tourist's payment to a Japanese hotel.
D)An Australian consumer's purchase of a Toshiba VCR.
Q2) In Exhibit 18-3,Australia has an absolute advantage in producing:
A)potatoes.
B)wheat.
C)both potatoes and wheat.
D)neither potatoes nor wheat.
Q3) If the Australian dollar depreciates,the effect of this is likely to be:
A)exports will be more expensive.
B)imports will be cheaper.
C)import-competing domestic goods will be relatively expensive.
D)'imported inflation' may become a problem.
Q4) Free trade often has its critics because the benefits are spread over most of the population and go largely unnoticed.
A)True
B)False
Page 20
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Chapter 19: Applying graphs to economics
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Sample Questions
Q1) Straight line AB in Exhibit 1A-1 shows which of the following?
A)X and Y have positive causation.
B)The higher the values of X, the higher the values of Y.
C)There is an inverse relationship between X and Y.
D)When values of X increase, values of Y are constant.
Q2) A direct relationship is a relationship between two variables in which they move in different directions (if one increases,the other decreases).
A)True
B)False
Q3) In Exhibit 1A-5,the slope of the straight line A-D is:
A)zero.
B)1.
C)1/2.
D)-1.
Q4) Straight line CD in Exhibit 1A-2 shows which of the following?
A)The relationship between X and Y are unknown.
B)The values of Y are independent from the values of X.
C)There is an inverse relationship between X and Y.
D)There is a direct relationship between X and Y.
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