Which of the following is a test of the statistical significance of a particular regression
coefficient?
A) t-test
B) R2
C) F-test
D) Durbin-Watson test
Other things remaining the same, an increase in the price of butter can be expected to
A) increase margarine sales.
B) decrease margarine sales.
C) increase butter sales.
D) None of the above
A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit. The marginal
revenue from the tenth unit is
A) $1000.
B) $1350.
C) $100.
D) $350.
Given the Production Function Q = 72X + 15X2 – X3, where Q = Output and X = Input
a. What is the Marginal Product (MP) when X = 8?
b. What is the Average Product (AP) when X = 6?
c. At what value of X will Q be at its maximum?
d. At what value of X will Diminishing Returns set in?
In perfect competition
A) the firm’s demand curve is relatively elastic.
B) the firm’s demand curve is relatively inelastic.
C) the firm’s demand curve is perfectly elastic.
D) the firm’s demand curve is perfectly inelastic.
John takes out a student loan at a bank but spends his money in Las Vegas to play at the
casino. This situation is an example of
A) moral hazard.
B) moral suasion.
C) adverse selection.
D) fraud.
From a management policy perspective, which regression result is the most useful?
A) a regression equation that passes the F-test
B) a regression equation whose explanatory variables all pass the t-test
C) a regression equation that has the highest R2
D) a regression equation that has the least number of dummy variables
In using regression analysis to estimate demand, which of the following problems is
most directly a result of insufficient data?
A) the identification problem
B) the problem of a low R2
C) the problem of high standard errors
D) the problem of insignificant F-statistics
Which of the following is the best example of a product or service that provides a
benefit externality?
A) the construction of a private road that allows vehicles if a toll is paid
B) a public library
C) a bookstore that is open to everyone
D) All of the above
E) None of the above
In a call center, which of the following situations can be considered as a variable input
in the short run?
A) the level of computer software being utilized
B) the number of call center representatives on duty at the center
C) the number of call center managers or supervisors
D) the size (e.g., square footage) of the call center
The cross-price elasticity of demand for coffee and coffee-cream is likely to be
A) greater than zero.
B) less than zero.
C) zero.
D) infinity.
The position of a cartel will become weaker if there is ________ excess-capacity
among the firms belonging to the cartel.
A) minimum
B) no
C) zero
D) high
Managerial economics is best defined as the economic study of
A) how businesses can make the most profits.
B) how businesses can decide on the best use of scarce resources.
C) how businesses can operate at the lowest costs.
D) how businesses can sell the most products.
When a firm has the power to establish its price
A) P = MR.
B) P = MC.
C) P > MR.
D) P < MR.
Table 1
The following information is provided for Tony Romo’s income and expenditures.
Quantity Purchased per Month
Monthly Income Steaks Pizzas
$2,000 2 8
$3,000 4 6
In Table 1, steaks are classified as a(n)
A) normal good.
B) positive good.
C) inferior good.
D) marginal good.
Which of the following statements best represents a difference between short-run and
long-run cost?
A) Less than one year is considered the short run; more than one year the long run.
B) There are no fixed costs in the long run.
C) In the short-run labor must always be considered the variable input and capital the
fixed input.
D) All of the above are true.
An example of an activity that is likely to generate benefit (positive) externality is
A) a well manicured lawn of your neighbor.
B) growing wild flowers on city street islands.
C) fireworks on the 4th of July.
D) an educated workforce.
E) All of the above
When a firm sets a price relatively low in order to increase the market share, it is
referred as
A) price skimming.
B) limit pricing.
C) penetration pricing.
D) predatory pricing.
For a demand curve that is horizontal, the marginal revenue curve
A) will be to the right of the demand curve and half as steep.
B) will be to the left of the demand curve and half as steep.
C) will be to the right of the demand curve and twice as steep.
D) will be the same as the demand curve.
The method of estimating long-run costs in which knowledgeable professionals familiar
with production facilities and processes calculate optimal combination of inputs to
produce given quantities and then estimate costs is known as
A) engineering cost estimating.
B) the survivorship method.
C) regression analysis.
D) None of the above
The forecasting technique which involves the use of the least squares statistical method
to examine trends, and takes into account seasonal and cyclical fluctuations, is known
as
A) compound growth rate projection.
B) the Delphi method.
C) time series projection.
D) exponential smoothing projection.
Which of the following best applies to the distinction between the “long run” and the
“short run”?
A) The short run is a period of approximately 1-6 months while the long run is any time
frame which is longer.
B) In the short run, only new firms may enter, while in the long-run firms may either
enter or exit the market.
C) The rationing function of price is a short-run phenomenon whereas the guiding
function is a long-run phenomenon.
D) All of the above statements are correct.
In evaluating the required rate of return for equity financing of a capital project, the
Beta value is
A) the expected rate of growth in a firm’s profits.
B) the expected future value of a firm’s stock.
C) the volatility in the rate of return on a firm’s stock compared with the volatility in the
rate of return on a market portfolio of stocks.
D) None of the above
The practice by a monopolist of charging each buyer the highest price he/she is willing
to pay is called
A) first-degree discrimination.
B) second-degree discrimination.
C) third-degree discrimination.
D) fourth-degree discrimination.
In the long run, a firm is said to be experiencing decreasing returns to scale if a 10
percent increase in inputs results in
A) an increase in output from 100 to 110.
B) a decrease in output from 100 to 90.
C) an increase in output from 100 to 105.
D) a decrease in output from 100 to 85.
Which of the following conditions would definitely cause a perfectly competitive
company to shut down in the short run?
A) P < MC
B) P = MC < AC
C) P < AVC
D) P = MR
A perfectly competitive firm sells 15 units of output at the going market price of $10.
Suppose its average fixed cost is $15 and its average variable cost is $8. Its contribution
margin (i.e., contribution to fixed cost) is
A) $30.
B) $150.
C) $105.
D) Cannot be determined from the above information
A successful and stable cartel can be established if there are
A) many firms producing a storable product.
B) many firms producing a perishable product.
C) a few firms producing a storable product.
D) a few firms producing a perishable product.
When future events cannot be assigned probabilities, we are talking about
A) risk.
B) uncertainty.
C) a clouded future.
D) financial risk.
The income elasticity for most staple foods, such as wheat, is known to be between zero
and one.
a. As incomes rise over time, what will happen to the demand for wheat?
b. What will happen to the quantity of wheat purchased by consumers?
c. What will happen to the percentage of their budgets that consumers spend on wheat?
d. All other things equal, are farmers likely to be relatively better off or relatively worse
off in periods of rising incomes?
How long is the “short-run” time period in the economic analysis of the market?
A) three months or one business quarter
B) total time in which sellers already in the market respond to changes in demand and
equilibrium price
C) total amount of time it takes new sellers to enter the market
D) total amount of time it takes original sellers to leave the market
Suppose that the demand for oranges increases. Explain the long-run effects of the
guiding function of price in this scenario.
What economic conditions are relevant in managerial decision making?
What is a “payoff matrix”?
The following questions refer to this regression equation, (standard errors in
parentheses.)
Q = 8,400 – 10 P + 5 A + 4 Px + 0.05 I, (1,732) (2.29) (1.36) (1.75) 0.15)
R2 = 0.65
N = 120
F = 35.25
Standard error of estimate = 34.3
Q = Quantity demanded
P = Price = 1,000
A = Advertising expenditures, in thousands = 40
PX = price of competitor’s good = 800
I = average monthly income = 4,000
Should this firm be concerned if macroeconomic forecasters predict a recession?
Explain.
What is “asymmetric information”?
How can break-even analysis be used to project the level of operation needed to achieve
a targeted profit level?
Some charge that third-degree price discrimination is unfair or that it reduces social
welfare. Why does charging one group a lower price hurt anyone?
Describe the market structure of the beverage industry.
Describe the real option approach to risk-adjusted capital budgeting.
Explain why risk can be insured against but uncertainty cannot.
How do the three basic economic questions relate to the firm?
Would it ever make sense for a firm to charge a price at or below the cost of the
product?
Explain the difference between Cross-Section and Time-Series Regression Analysis.
A firm is making a long-run planning decision. It wants to decide on the optimal size of
plant and labor force. It is considering building a medium-sized plant and hiring 100
workers. Engineering estimates suggest that at those levels, the marginal product of
capital will be 100 and the marginal product of labor will be 75. If the wage rate is $5
and the rental rate on capital is $10, is the firm making the right decision? Support your
answer.
Microsoft has integrated many components into its Windows operating systems, such as
a web browser, media player, etc. How might this be an example of nonprice
competition?