Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the
corresponding isoquants are:
A. convex to the origin.
B. concave to the origin.
C. L-shaped.
D. linear.
The manager institutes an incentive structure to ensure:
A. workers are in fact working at the expected potential.
B. workers are in fact working at their utility-maximizing effort level.
C. the firm produces on the production function.
D. the firm produces above the production function.
If the interest rate is 5 percent, $100 received at the end of seven years is worth how
much today?
A. 100/(0.05)7
B. 100/(1 + 0.05)7
C. 100/(1 + 5)7
D. 100
You are the manager of a firm that sells its product in a competitive market at a price of
$40. Your firms cost function is C = 60 + 4Q2. Your firms maximum profits are:
A. 36
B. 60
C. 40
D. 80
The external marginal cost of producing coal is MCexternal = 6Q while the internal
marginal cost is MCinternal = 4Q. The inverse demand for coal is given by P = 120 – 2Q.
How much output would a competitive industry produce?
A. 10
B. 20
C. 15
D. 8
If supply increases, then the
A. supply curve shifts to the left.
B. equilibrium price goes down.
C. equilibrium quantity goes down.
D. demand curve shifts to the right.
Suppose a worker is offered a wage of $8 per hour, plus a fixed payment of $100 per
day, and he can use 24 hours per day. What are the maximum total earnings the worker
can earn in a day?
A. $492
B. $392
C. $192
D. $292
Franchising mitigates:
A. opportunism.
B. relationship-specific investment.
C. the hold-up problem.
D. the principal-agent problem.
Jiffyburger, a fast-food outlet, sells approximately 8,000 quarter-pound hamburgers in a
given week. To meet that demand, Jiffyburger needs 2,000 pounds of ground beef
delivered to its premises every Monday morning by 8:00 A.M. sharp. If you were the
manager of a Jiffyburger franchise, how would you acquire the ground beef? Explain.
The first-order condition for a firm maximizing its profit operating in a
monopolistically competitive market is:
A. (dMR/dQ) = (dMC/dQ).
B. P – (dC(Q)/dQ) = 0.
C. (dR(Q)/dQ) – (dC(Q)/dQ) = 0.
D. (dMR/dQ) < (dMC/dQ).
The domestic demand and supply for sugar are Qd = 700 – 2P and QSD = 100 + 4P. The
foreign supply is QSF = 150 + 3P. What is the domestic market price of sugar?
A. 100
B. 110
C. 90
D. 150
Refer to the normal-form game of price competition shown below.
Firm B is the incumbent facing potential entry from its rival, firm A. Firm As strategies
consist of {entry, stay out}. Firm Bs strategies are then {hard if entry; hard if stay out;
soft if entry; soft if stay out}. Find the subgame Nash equilibrium to this game, if one
exists.
A. Firm A plays {stay out}; firm B plays {hard if entry}.
B. Firm A plays {entry}; firm B plays {hard if entry}.
C. Firm A plays {entry}; firm B plays {soft if entry}.
D. There is no subgame Nash equilibrium to this game.
Suppose compensation is given by W = 100,000 + 157 + 12S, where W =
total compensation of the CEO, = company profits (in millions) = $340,
and S = sales (in millions) = $700. What percentage of the CEOs total earnings is tied
to sales of the firm?
A. 5.2 percent
B. 13.5 percent
C. 19.6 percent
D. 33.0 percent
Managerial economics:
A. has little to say about day-to-day decisions.
B. is valuable to the coordinator of a shelter for the homeless.
C. is not relevant for managers of not-for-profit groups.
D. is the study of how to get rich in the stock market.
The additional benefits that arise by using an additional unit of the managerial control
variable is defined as the:
A. total benefit.
B. opportunity cost.
C. marginal benefit.
D. present value of benefits.
Point B in the figure below is:
A. efficient since it produces 20 units of output at the lowest possible cost.
B. efficient since it produces 10 units of output at the lowest possible cost.
C. inefficient since it produces 20 units of output at a cost greater than the minimum
cost.
D. inefficient since it produces 10 units of output at a cost greater than the minimum
cost.
Suppose option A has a higher variance than option B. Which of the following
statements is, in general, true?
A. A risk-neutral person is indifferent between options A and B.
B. A risk-averse person prefers option B to option A.
C. A risk-averse person prefers option A to option B.
D. There is insufficient information to determine which is true.
Consider a market characterized by the following inverse demand and supply functions:
PX = 40 – 4QX and PX = 10 + 2QX. Compute the surplus received by consumers and
producers.
A. $25 and $25, respectively.
B. $20 and $40, respectively.
C. $40 and $20, respectively.
D. $50 and $25, respectively.
Which of the following statements is NOT correct about information?
A. It is always desirable for some people to have more information than others.
B. Adverse selection will not occur if there is full information given to all market
participants.
C. Information plays an important role in how the economy functions.
D. Asymmetric information may lead to the disappearance of a market.
Given the benefit function B(Y) = 400Y – 2Y2, the marginal benefit is:
A. 200Y.
B. 400 – 2Y2.
C. 400 – 4Y.
D. 800 – 2Y.