Managerial Economics Study Guide
Questions
Course Introduction
Managerial Economics explores the application of microeconomic and macroeconomic principles to business decision-making and strategy. The course examines how managers can use economic concepts such as demand and supply analysis, production and cost functions, pricing strategies, market structure, and risk analysis to solve real-world business problems. By integrating economic theory with practical business operations, students develop analytical tools for making informed and effective managerial decisions in uncertain and competitive environments.
Recommended Textbook
Microeconomics 3rd Edition by
R. Glenn Hubbard
Available Study Resources on Quizplus
16 Chapters
3331 Verified Questions
3331 Flashcards
Source URL: https://quizplus.com/study-set/3440
2
Chapter 1: Economics Foundations and Models
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/68317
Sample Questions
Q1) Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-colour pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-colour pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is the marginal cost of moving up from the 1-colour application to the 3-colour application?
A) $35
B) $40
C) $80
D) $175
Answer: B
Q2) Explain why economics is considered a social science.
Answer: Economics is a social science because it studies the actions of individuals. As a social science, economics considers human behaviour, particularly decision-making behaviour, in every context.
Q3) Define microeconomics.
Answer: Microeconomics is the study of how household and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
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/68318
Sample Questions
Q1) Consider the following items: a. the album '21' by Adele
B. a Dutch horticulturalist's new method for cultivating hybrid tulips
C. Rolls Royce's 'Spirit of Ecstasy' hood ornament design
D. the sale of Tumi luggage at a Macy's department store
Which of the items listed is an example of intellectual property?
A) a and b only
B) a, b, and c
C) a and d only
D) all of the items listed
Answer: B
Q2) Refer to Table 2-7. What is Horace's opportunity cost of grooming a dog?
A) half a bathed cat
B) two bathed cats
C) two-thirds of a bathed cat
D) one and a half bathed cats
Answer: C
Q3) What is meant by the term 'opportunity cost'?
Answer: Opportunity cost is the highest-valued alternative that must be given up to engage in an activity.
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Where Prices Come Frome : 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/68319
Sample Questions
Q1) All else equal, the decrease in consumer preference predicted by Apple for its iPhone 5 would be represented by a
A) shift of the supply curve for iPhones to the right.
B) shift of the supply curve for iPhones to the left.
C) shift of the demand curve for iPhones to the right.
D) shift of the demand curve for iPhones to the left.
Answer: D
Q2) Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are
A) substitutes in consumption.
B) both inferior goods.
C) complements in consumption.
D) both luxury goods.
Answer: A
Q3) A shortage occurs when the market price is lower than the equilibrium price.
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
226 Verified Questions
226 Flashcards
Source URL: https://quizplus.com/quiz/68320
Sample Questions
Q1) There is a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.
A)True
B)False
Q2) Demand for a luxury item, such as a yacht, is likely to be
A) both income and price inelastic.
B) both income elastic and price elastic.
C) income elastic and price inelastic.
D) income inelastic and price elastic.
Q3) If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in
A) a decrease in total revenue.
B) a decrease in non-toll road usage.
C) an increase in total revenue.
D) an increase in toll road usage.
Q4) What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
Q5) What factors would make you more sensitive or less sensitive to price when purchasing petrol?
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/68321
Sample Questions
Q1) Refer to Figure 5-4. The figure above represents the market for pecans. Assume that this is a competitive market. If 4000 pounds of pecans are sold,
A) the deadweight loss is equal to $12 000.
B) consumer surplus equals zero.
C) the marginal benefit of each of the 4000 pounds of pecans equals $3.
D) marginal benefit is equal to marginal cost.
Q2) The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the
A) supply curve for imported champagne is vertical.
B) demand curve for imported champagne is vertical.
C) demand curve for imported champagne is horizontal.
D) demand curve is downward sloping and the supply curve is upward sloping.
Q3) Refer to Table 5-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specialises in producing fancy dress costumes. If the market price of cowboy hats is $50, producer surplus is
A) $0.
B) $4.
C) $62.
D) $138.
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Concumer Choice and Behavioural Economics
Available Study Resources on Quizplus for this Chatper
254 Verified Questions
254 Flashcards
Source URL: https://quizplus.com/quiz/68322
Sample Questions
Q1) What is the marginal rate of substitution?
A) the price ratio
B) the rate at which the consumer must give up one good to purchase an additional unit of the other goods in the market
C) the rate at which the consumer is willing to trade one good for another so that she increases her utility
D) the rate at which the consumer is willing to trade one good for another without any loss in utility
Q2) The word 'util' has been used by economists in the past as an objective measure of utility. Today economists believe that
A) utility cannot be measured objectively.
B) utility can be measured objectively because people can use prices of different goods to measure utility.
C) all of the important conclusions of the economic model of consumer behaviour depend on utility being measured objectively.
D) the util truly is an objective, rather than a subjective, measure of utility.
Q3) Explain the concept of network externalities.
Q4) Explain the endowment effect.
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
300 Verified Questions
300 Flashcards
Source URL: https://quizplus.com/quiz/68323
Sample Questions
Q1) Refer to Figure 7-13. The lines shown in the diagram are isocost lines. Which of the following shows a decrease in the price of capital while the price of labour remains unchanged?
A) the movement from AF to BF
B) the movement from BF to AF
C) the movement from BF to BD
D) the movement from BF to CE
Q2) Which of the following can a firm do in the long run but not in the short run?
A) decrease the size of its physical plant
B) reduce its rate of output by laying off workers
C) increase its variable costs
D) increase its use of raw materials
Q3) If a firm decreases its plant size and finds that its long-run average costs have decreased, then
A) its labour is more productive in a smaller plant.
B) its diseconomies of scale are less.
C) the firm should reduce its plant size even more.
D) the firm is now profitable.
Q4) In economics, what is the difference between the short run and the long run?
Q5) What is an isoquant? What is the slope of an isoquant?
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Firms in Perfectly Compitive Markets
Available Study Resources on Quizplus for this Chatper
270 Verified Questions
270 Flashcards
Source URL: https://quizplus.com/quiz/68324
Sample Questions
Q1) What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?
Q2) For a perfectly competitive firm, at profit maximisation
A) market price exceeds marginal cost.
B) total revenue is maximised.
C) marginal revenue equals marginal cost.
D) production must occur where average cost is minimised.
Q3) Of the following industries, which are perfectly competitive? For those that are not perfectly competitive, explain why.
a. Restaurants
b. Corn
c. University education
d. Local radio and television
Q4) Refer to Figure 8-8. Total revenue at the profit-maximising level of output is
A) $1200.
B) $2500.
C) $4800.
D) $6000.
Q5) Under what conditions should a competitive firm shut down in the short run?
Page 10
Q6) What is meant by the term 'long-run competitive equilibrium'?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Monopoly Markets
Available Study Resources on Quizplus for this Chatper
281 Verified Questions
281 Flashcards
Source URL: https://quizplus.com/quiz/68325
Sample Questions
Q1) One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.
A)True
B)False
Q2) Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is
A) 16%.
B) 20%.
C) 25%.
D) It cannot be determined from the information given.
Q3) A monopoly is a seller of a product
A) with many substitutes.
B) without a close substitute.
C) with a perfectly inelastic demand. D) without a well-defined demand curve.
Q4) 'Being the only seller in the market, the monopolist can choose any price and quantity it desires.' Evaluate this statement: Is it true or false? Explain your answer.
Q5) Identify two ways by which the government controls monopolies?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Monopolistic Competition : The Competitive Model
in More Realistic Setting
Available Study Resources on Quizplus for this Chatper
255 Verified Questions
255 Flashcards
Source URL: https://quizplus.com/quiz/68326
Sample Questions
Q1) If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?
A) Demand decreases and becomes less elastic.
B) Demand decreases and becomes more elastic.
C) Demand increases and becomes less elastic.
D) Demand increases and becomes more elastic.
Q2) Refer to Figure 10-15. It is possible to lower the average cost of production by expanding output beyond Q<sub>0</sub> to Q<sub>1</sub>. Why wouldn't a firm expand its output to Q<sub>1</sub>?
A) The firm wants to maximise accounting profit rather than economic profit.
B) The firm would suffer an economic loss at Q<sub>1</sub> while it would break even at Q<sub>0</sub>.
C) The firm's marginal revenue would be negative at Q<sub>1</sub>.
D) Demand is not sufficient for consumers to buy Q<sub>1</sub>.
Q3) How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?
Q4) What is meant by 'excess capacity'? How does it relate to consumer utility?
Q5) What is the difference between the terms 'marketing' and 'advertising'?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Oligopoly : Firms in Less Competitve Markets
Available Study Resources on Quizplus for this Chatper
186 Verified Questions
186 Flashcards
Source URL: https://quizplus.com/quiz/68327
Sample Questions
Q1) Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6000 units of output. In this case, this industry would be
A) perfectly competitive if the market quantity demanded is 20 000 units.
B) monopolistically competitive if the market quantity demanded is 12 000 units.
C) an oligopoly if the market quantity demanded is 18 000 units.
D) an oligopoly if the four-firm concentration ratio is more than 10 per cent.
Q2) Most economists are concerned about entry barriers. Why is this so important to them?
Q3) Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.
A)True
B)False
Q4) An oligopolistic industry is characterised by all of the following except A) existence of entry barriers.
B) the possibility of reaping long-run economic profits.
C) firms pursuing aggressive business strategies, independent of rivals' strategies.
D) production of standardised products.
Q5) Explain why OPEC is caught in a prisoner's dilemma?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Market for Labour and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
253 Verified Questions
253 Flashcards
Source URL: https://quizplus.com/quiz/68328
Sample Questions
Q1) The demand for labour depends primarily on the additional output produced as a result of hiring an additional worker and
A) the additional revenue received from selling the output produced as a result of hiring an additional worker.
B) the payment made to the worker for producing the additional output.
C) the elasticity of demand for the output produced by the worker.
D) the number of workers willing to produce the additional output.
Q2) A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labour.
A)True
B)False
Q3) An organisation of employees that has the legal right to bargain with employers about wages and working conditions is called a
A) closed shop.
B) guild.
C) labour union.
D) monopsony.
Q4) What is the difference between 'straight-time pay,' 'commission pay,' and 'piece-rate pay'?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: International Trade
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/68329
Sample Questions
Q1) The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called absolute advantage.
A)True
B)False
Q2) The World Trade Organisation (WTO) promotes foreign trade and investment, or globalisation. In recent years opposition to globalsation has led to violent protests at meetings of the WTO. One reason for these anti-globalisation protests is
A) foreign trade and investment are examples of zero-sum games.
B) protesters believe that globalisation will result in a return to communism in developing countries.
C) protesters believe that free trade destroys the distinctive cultures of many countries. D) protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.
Q3) Selling a product at a price below its cost is known as dumping.
A)True
B)False
Q4) Distinguish between a voluntary export restraint and a quota.
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
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/68330
Sample Questions
Q1) Refer to Figure 14-2. How much is Bree willing to pay to have 4 street lights installed?
A) $1500
B) $1800
C) $2700
D) $7200
Q2) Economic rent refers to the price of a factor of production which is fixed in supply.
A)True
B)False
Q3) The market demand for a public good can be determined by
A) adding up the total private benefits and external benefits that each quantity provides the citizens of a country.
B) adding up how much each citizen expects to consume at each possible price.
C) adding up how much each consumer is willing to pay for each unit of the public good.
D) estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.
Q4) What is the principle-agent problem?
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/68331
Sample Questions
Q1) Assume that air pollution from a copper smelter imposes external costs on people who live near the smelter. If the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction
A) would be significantly less than if the owners of the smelter were legally liable for damages.
B) would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost.
C) would be the same as if it would be if the owners of the smelter were legally liable.
D) would be too small; the government would have to intervene to bring about an efficient outcome.
Q2) What is an externality?
Q3) 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 benefit of harvesting salmon
B) the social marginal benefit of harvesting salmon
C) the private marginal cost of harvesting salmon
D) the social marginal cost of harvesting salmon
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
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/68332
Sample Questions
Q1) Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate
A) determines how tax revenue will change as national income increases.
B) affects people's willingness to work, save, and invest.
C) always equals the average tax rate, which is harder to measure.
D) determines how much revenue the government will have to spend.
Q2) The government of Silverado raises revenue through a general income tax paid by all its residents to operate the city's marina. The marina is used by private boat owners. This method of raising revenue to operate the marina is
A) consistent with the benefits-received principle.
B) consistent with the ability-to-pay principle.
C) inconsistent with the benefits-received principle.
D) inconsistent with the ability-to-pay principle.
Q3) A marginal tax rate is
A) the fraction of income that must be paid in taxes.
B) the fraction of each additional dollar of income that must be paid in taxes.
C) the incremental income one must earn to offset each additional dollar of tax.
D) the ratio of a change in income to a change in taxes paid.
Q4) Describe the main factors economists believe cause inequality of income.
To view all questions and flashcards with answers, click on the resource link above. Page 18