question
Which of the following areas of study refers to the application of economic theory and the tools of analysis of decision science to examine how an organization can achieve its aims or objectives most efficiently?
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
answer
A. Managerial Economics
question
Which of the following refers to the study of the economic behavior of individual decision-making units, such as individual consumers, resource owners, and business firms, in a free-enterprise system?
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
answer
B. Microeconomics
question
Which of the following refers to the study of the total aggregate level of output, income, employment, consumption, investment, and prices for the economy viewed as a whole?
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Economics
answer
C. Macroeconomics
question
Which of the following refers to the study of the application of statistical tools (particularly regression analysis) to real-world data to estimate the models postulated by economic theory?
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Econometrics
A. Managerial Economics
B. Microeconomics
C. Macroeconomics
D. Econometrics
answer
D. Econometrics
question
Which of the following is an implicit cost?
A. Insurance payments
B. Property taxes
C. Interest payments on a loan
D. None of the above is an implicit cost
A. Insurance payments
B. Property taxes
C. Interest payments on a loan
D. None of the above is an implicit cost
answer
D. None of the above is an implicit cost
question
Fred earns $50,000 business profit per year by selling donuts. He pays $12,000 per year in rent to his Uncle George for the building in which his business is located. If his Uncle George gives him the building, then Fred's...
A. Business profit will increase by $12,000 per year
B. Economic profit will increase by $12,000 per year
C. Implicit cost will decrease by $12,000 per year
D. All of the above are correct
A. Business profit will increase by $12,000 per year
B. Economic profit will increase by $12,000 per year
C. Implicit cost will decrease by $12,000 per year
D. All of the above are correct
answer
A. Business profit will increase by $12,000 per year
question
Monica quit her $40,000 per year job, purchased a building that was previously rented by the operator of a candy store for $1,500 per month, and used the space to breed and sell tropical fish. In her first year she made a business profit of $60,000. What was her economic profit?
A. Her economic profit was the same as her business profit
B. $42,000
C. $20,000
D. $2,000
A. Her economic profit was the same as her business profit
B. $42,000
C. $20,000
D. $2,000
answer
D. $2,000
question
An economic theory is judged primarily on the basis of:
A. the correspondence between its assumptions and reality
B. its ability to accurately predict economic phenomena
C. the ease with which it can be understood
D. its normative qualities
A. the correspondence between its assumptions and reality
B. its ability to accurately predict economic phenomena
C. the ease with which it can be understood
D. its normative qualities
answer
B. its ability to accurately predict economic phenomena
question
Business ethics refers to:
A. enforceable laws that govern business behavior
B. an area of study of little relevance to actual business practices
C. guideline that describe appropriate behavior in the environment of business
D. all of the above are correct
A. enforceable laws that govern business behavior
B. an area of study of little relevance to actual business practices
C. guideline that describe appropriate behavior in the environment of business
D. all of the above are correct
answer
C. guideline that describe appropriate behavior in the environment of business
question
Businesses have responded to the incentive for ethical behavior by:
A. establishing codes of ethical behavior for employees
B. appointing "ethics officers" with responsibility for ensuring that employees behave in an ethical manner
C. providing training sessions in ethical behavior for employees
D. all of the above are correct
A. establishing codes of ethical behavior for employees
B. appointing "ethics officers" with responsibility for ensuring that employees behave in an ethical manner
C. providing training sessions in ethical behavior for employees
D. all of the above are correct
answer
D. all of the above are correct
question
Management decision problems are composed of three elements. Which of the following is NOT one of them?
A. Profitability
B. Alternatives
C. Constants
D. Objectives
A. Profitability
B. Alternatives
C. Constants
D. Objectives
answer
A. Profitability
question
Which of the following is defined as the study of the aggregate economy studied as a whole?
A. Mathematical economics
B. Economics
C. Macroeconomics
D. Microeconomics
A. Mathematical economics
B. Economics
C. Macroeconomics
D. Microeconomics
answer
C. Macroeconomics
question
Business profit is equal to total revenue minus:
A. Economic costs
B. Explicit costs
C. Implicit costs
D. Managerial costs
A. Economic costs
B. Explicit costs
C. Implicit costs
D. Managerial costs
answer
B. Explicit costs
question
A decline in the supply will cause a change in:
A. the level of quantity demanded
B. the demand
C. none of the above is correct
A. the level of quantity demanded
B. the demand
C. none of the above is correct
answer
A. the level of quantity demanded
question
A decline in the demand will cause a change in:
A. the level of quantity supplied
B. the supply
C. none of the above is correct
A. the level of quantity supplied
B. the supply
C. none of the above is correct
answer
A. the level of quantity supplied
question
If both supply and demand increase as the same time, then:
A. the price of the product will definitely increase
B. the price of the product will definitely decrease
C. the market-clearing quantity of the product will definitely increase
D. the market-clearing quantity of the product will definitely decrease
A. the price of the product will definitely increase
B. the price of the product will definitely decrease
C. the market-clearing quantity of the product will definitely increase
D. the market-clearing quantity of the product will definitely decrease
answer
C. the market-clearing quantity of the product will definitely increase
question
Which of the following statements is incorrect?
A. in a recession, normal goods manufacturers are expected to have reductions in the demand
B. in a recession, inferior goods manufacturers are not expected to have reductions in the demand
C. all producers are going to be negatively affected in a recession
D. none of the above is correct
A. in a recession, normal goods manufacturers are expected to have reductions in the demand
B. in a recession, inferior goods manufacturers are not expected to have reductions in the demand
C. all producers are going to be negatively affected in a recession
D. none of the above is correct
answer
C. all producers are going to be negatively affected in a recession
question
If supply increases while demand decreases:
A. the equilibrium price will definitely increase
B. the equilibrium quantity will definitely increase
C. the equilibrium price will definitely decrease
D. the equilibrium quantity will definitely decrease
A. the equilibrium price will definitely increase
B. the equilibrium quantity will definitely increase
C. the equilibrium price will definitely decrease
D. the equilibrium quantity will definitely decrease
answer
C. the equilibrium price will definitely decrease
question
When rent controls are imposed below the current market price they can do all except:
A. increase the quantity of rental housing demanded
B. reduce the quality of rental housing
C. reduce the level of supply of rental housing
D. create excess supply of rental housing
A. increase the quantity of rental housing demanded
B. reduce the quality of rental housing
C. reduce the level of supply of rental housing
D. create excess supply of rental housing
answer
D. create excess supply of rental housing
question
What is the effect of an increase in the price of fuel on the transportation services market where fuel is an input?
A. the demand will increase
B. the demand will decrease
C. the supply will increase
D. the supply will decrease
A. the demand will increase
B. the demand will decrease
C. the supply will increase
D. the supply will decrease
answer
D. the supply will decrease
question
eBay shoppers are frequently asked by eBay sellers to pay the cost of shipping the purchased item. Who really pays the shipping cost in eBay transactions?
A. the buyer
B. the seller
C. both parties are likely to share the cost
D. eBay corporation
A. the buyer
B. the seller
C. both parties are likely to share the cost
D. eBay corporation
answer
C. both parties are likely to share the cost
question
At the equilibrium price:
A. quantity demanded exceeds quantity supplied
B. quantity demanded equals quantity supplied
C. quantity demanded is less than quantity supplied
A. quantity demanded exceeds quantity supplied
B. quantity demanded equals quantity supplied
C. quantity demanded is less than quantity supplied
answer
B. quantity demanded equals quantity supplied
question
Presence of unemployment implies all except:
A. the labor market clears
B. there exists an excess supply of labor
C. the labor market is an example of a non-clearing market
D. the quantity of labor supplied exceeds the quantity of labor demanded
A. the labor market clears
B. there exists an excess supply of labor
C. the labor market is an example of a non-clearing market
D. the quantity of labor supplied exceeds the quantity of labor demanded
answer
A. the labor market clears
question
In 2011, in the United States, Japan, and the European Union, the government subsidies constituted more than half of the price received by farmers for some crops.
A. True
B. False
A. True
B. False
answer
A. True
question
Assume that the demand and the supply in a market are represented by the following equations:
Qd = 100-3P
Qs = 2P-10
i. Compute the market equilibrium in this case
ii. If the government were to introduce an excise tax of $1 per unit of output, what would the new equilibrium be? What would the economic incidence of this tax be?
Qd = 100-3P
Qs = 2P-10
i. Compute the market equilibrium in this case
ii. If the government were to introduce an excise tax of $1 per unit of output, what would the new equilibrium be? What would the economic incidence of this tax be?
answer
...
question
Which of the following is a characteristic of both monopolistic competition and monopoly?
A. firms face significant barriers to entry
B. a firm's marginal revenue curve is below its demand
C. in the long run, a firm will earn zero economic profit
D. in the long run, a firm will produce a level of output that corresponds to the minimum point of its average total cost curve
A. firms face significant barriers to entry
B. a firm's marginal revenue curve is below its demand
C. in the long run, a firm will earn zero economic profit
D. in the long run, a firm will produce a level of output that corresponds to the minimum point of its average total cost curve
answer
B. a firm's marginal revenue curve is below its demand
question
If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, unlimited long-run resource mobility, and perfect knowledge, that the firm is...
A. a monopolist
B. an oligiopolist
C. a perfect competitor
D. a monopolistic competitor
A. a monopolist
B. an oligiopolist
C. a perfect competitor
D. a monopolistic competitor
answer
C. a perfect competitor
question
If a firm sells its output on a market that is characterized by a single seller and many
buyers of a homogeneous product for which there are no close substitutes and barriers to
long-run resource mobility, then the firm is
A. a monopolist
B. an oligopolist
C. a perfect competitor
D. a monopolistic competitor
buyers of a homogeneous product for which there are no close substitutes and barriers to
long-run resource mobility, then the firm is
A. a monopolist
B. an oligopolist
C. a perfect competitor
D. a monopolistic competitor
answer
A. a monopolist
question
The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The
market supply curve is QS = 3 + P. The market will be in equilibrium if
A. P = 6 and Q = 9.
B. P = 5 and Q = 2.
C. P = 4 and Q = 4.
D. P = 3 and Q = 6.
market supply curve is QS = 3 + P. The market will be in equilibrium if
A. P = 6 and Q = 9.
B. P = 5 and Q = 2.
C. P = 4 and Q = 4.
D. P = 3 and Q = 6.
answer
D. P = 3 and Q = 6.
question
Which of the following is not a barrier to entry that typically results in monopoly?
A. The firm controls the entire supply of a raw material.
B. Production of the industry's product is subject to economies of scale over a broad
range of output.
C. Production of the industry's product requires a large initial capital investment.
D. The firm holds an exclusive government franchise.
A. The firm controls the entire supply of a raw material.
B. Production of the industry's product is subject to economies of scale over a broad
range of output.
C. Production of the industry's product requires a large initial capital investment.
D. The firm holds an exclusive government franchise.
answer
C) Production of the industry's product requires a large initial capital investment.
question
The short-run supply curve of a perfectly competitive firm
A. is equal to that portion of the short-run marginal cost curve that is above the
average variable cost curve.
B. is equal to that portion of the short-run marginal cost curve that is above the
average total cost curve.
C. is equal to that portion of the short-run average total cost curve that is above the
average variable cost curve.
D. None of the above is correct.
A. is equal to that portion of the short-run marginal cost curve that is above the
average variable cost curve.
B. is equal to that portion of the short-run marginal cost curve that is above the
average total cost curve.
C. is equal to that portion of the short-run average total cost curve that is above the
average variable cost curve.
D. None of the above is correct.
answer
A. is equal to that portion of the short-run marginal cost curve that is above the
average variable cost curve.
average variable cost curve.
question
A depreciation of the U.S. dollar relative to foreign currencies will make
A. foreign imports less expensive in the United States.
B. U.S. exports less expensive in foreign countries.
C. the demand for U.S. exports decrease.
D. All of the above are correct.
A. foreign imports less expensive in the United States.
B. U.S. exports less expensive in foreign countries.
C. the demand for U.S. exports decrease.
D. All of the above are correct.
answer
B. U.S. exports less expensive in foreign countries.
question
Which of the following is a differentiated product?
A. A hamburger
B. A shirt
C. An automobile
D. All of the above are differentiated products.
A. A hamburger
B. A shirt
C. An automobile
D. All of the above are differentiated products.
answer
D. All of the above are differentiated products.
question
The demand curve faced by a monopolistically competitive firm is
A. perfectly elastic.
B. elastic.
C. unit elastic.
D. inelastic.
A. perfectly elastic.
B. elastic.
C. unit elastic.
D. inelastic.
answer
B. elastic.
question
Marginal revenue is equal to price for which one of the following types of market
structure?
A. Monopoly
B. Perfect competition
C. Monopolistic competition
D. Oligopoly
structure?
A. Monopoly
B. Perfect competition
C. Monopolistic competition
D. Oligopoly
answer
B. Perfect competition
question
Assume that a profit-maximizing perfectly competitive firm currently charges the price
of $10. The firm also incurs the average total cost of $8, the average variable cost of $7.
From this information, we can conclude that the marginal cost of the firm is
A. $10
B. $8
C. $7
D. None of the above
of $10. The firm also incurs the average total cost of $8, the average variable cost of $7.
From this information, we can conclude that the marginal cost of the firm is
A. $10
B. $8
C. $7
D. None of the above
answer
A. $10
question
Under perfect competition, changes in market supply do not affect market price.
A. True
B. False
A. True
B. False
answer
B. False
question
The tendency for regulated monopolies to purchase quantities of capital that exceed the
optimal amount is referred to as
A. an external diseconomy of production.
B. the Averch-Johnson effect.
C. an external economy of production.
D. conscious parallelism.
optimal amount is referred to as
A. an external diseconomy of production.
B. the Averch-Johnson effect.
C. an external economy of production.
D. conscious parallelism.
answer
B. the Averch-Johnson effect.
question
One difference between the public interest theory and the economic theory of regulation
is that the former
A. asserts that regulation is a response to market failure and the latter is a response to
the existence of natural monopolies and externalities.
B. asserts that regulation is a response to market failure and the latter is a response to
pressure group action designed to promote the interests of regulated firms.
C. is based on qualitative analysis and the latter is based on quantitative analysis.
D. argues that regulation is inappropriate while the latter proves that it is essential.
is that the former
A. asserts that regulation is a response to market failure and the latter is a response to
the existence of natural monopolies and externalities.
B. asserts that regulation is a response to market failure and the latter is a response to
pressure group action designed to promote the interests of regulated firms.
C. is based on qualitative analysis and the latter is based on quantitative analysis.
D. argues that regulation is inappropriate while the latter proves that it is essential.
answer
B. asserts that regulation is a response to market failure and the latter is a response to
pressure group action designed to promote the interests of regulated firms.
pressure group action designed to promote the interests of regulated firms.
question
Which one of the following types of government regulation does not limit competition
and create artificial market power?
A. Licensing regulations
B. Patents
C. Copyrights
D. All of the above limit competition and create artificial market power.
and create artificial market power?
A. Licensing regulations
B. Patents
C. Copyrights
D. All of the above limit competition and create artificial market power.
answer
D. All of the above limit competition and create artificial market power.
question
Natural monopolies will produce a socially optimal level of output if government
subsidies ensure an economic profit of zero and the market price is set by regulators at
the point of intersection between long-run
A. marginal cost and marginal revenue.
B. marginal cost and demand.
C. average cost and marginal revenue.
D. average cost and demand.
subsidies ensure an economic profit of zero and the market price is set by regulators at
the point of intersection between long-run
A. marginal cost and marginal revenue.
B. marginal cost and demand.
C. average cost and marginal revenue.
D. average cost and demand.
answer
D. average cost and demand.
question
The Averch-Johnson effect refers to
A. the inefficiencies that result when regulators set public utility rates too high or too
low.
B. the tendency toward natural monopoly in firms that have downward-sloping longrun
average cost curves.
C. the 9- to 12-month time lag between recognition of a need for rate revision and
action by regulatory commissions.
D. All of the above are correct.
A. the inefficiencies that result when regulators set public utility rates too high or too
low.
B. the tendency toward natural monopoly in firms that have downward-sloping longrun
average cost curves.
C. the 9- to 12-month time lag between recognition of a need for rate revision and
action by regulatory commissions.
D. All of the above are correct.
answer
A. the inefficiencies that result when regulators set public utility rates too high or too
low.
low.
question
Most antitrust actions have been settled by means of
A. dissolution and divestiture.
B. an injunction.
C. a consent decree.
D. fines and jail sentences.
A. dissolution and divestiture.
B. an injunction.
C. a consent decree.
D. fines and jail sentences.
answer
C. a consent decree.
question
The economic theory of regulation holds that regulation is a response by government to
cases in which markets cannot efficiently allocate resources.
A. True
B. False
cases in which markets cannot efficiently allocate resources.
A. True
B. False
answer
B. False
question
If the production of a good gives rise to external diseconomies, then less of the good is
being produced than is socially optimal.
A. True
B. False
being produced than is socially optimal.
A. True
B. False
answer
B. False
question
Government can correct for external diseconomies of production by subsidizing
production.
A. True
B. False
production.
A. True
B. False
answer
B. False
question
A trust is an organizational structure that allows firms in an oligopolistic industry to
operate as a cartel.
A. True
B. False
operate as a cartel.
A. True
B. False
answer
A. True
question
Interlocking directorates refers to a situation in which the same individual is on the
board of directors of two or more competing corporations.
A. True
B. False
board of directors of two or more competing corporations.
A. True
B. False
answer
A. True
question
An import tariff is a direct restriction on the quantity of a particular good that can be
imported during a given time period.
A. True
B. False
imported during a given time period.
A. True
B. False
answer
B. False
question
An import tariff and an import quota both have the effect of protecting domestic
producers from foreign competition.
A. True
B. False
producers from foreign competition.
A. True
B. False
answer
A. True
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