question
1. According to Froeb, McCann, Shor, and Ward (textbook authors), the first lesson of business is:
A) tracing the consequences of a policy.
B) promoting a policy change to eradicate inefficiencies.
C) moving assets from lower to higher value uses, thereby creating wealth.
D) none of the above.
A) tracing the consequences of a policy.
B) promoting a policy change to eradicate inefficiencies.
C) moving assets from lower to higher value uses, thereby creating wealth.
D) none of the above.
answer
C) moving assets from lower to higher value uses, thereby creating wealth
question
2) Wealth is created when:
A) assets move from lower value use to higher value use.
B) assets move from higher value use to lower value use.
C) assets move from individuals who are willing to pay to more for them to individuals who are willing to pay less for them.
D) Both A and C.
A) assets move from lower value use to higher value use.
B) assets move from higher value use to lower value use.
C) assets move from individuals who are willing to pay to more for them to individuals who are willing to pay less for them.
D) Both A and C.
answer
A) assets move from lower value use to higher value use.
question
3) If you are willing to sell your car business for $500,000 and someone offers you $420,000 for it, this transaction will generate:
A) There is no surplus created
B) $80,000 worth of seller surplus and unknown amount of buyer surplus
C) $40,000 worth of buyer surplus and $40,000 of seller surplus
D) $80,000 worth of buyer surplus and unknown amount of seller surplus
A) There is no surplus created
B) $80,000 worth of seller surplus and unknown amount of buyer surplus
C) $40,000 worth of buyer surplus and $40,000 of seller surplus
D) $80,000 worth of buyer surplus and unknown amount of seller surplus
answer
A) There is no surplus created
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4) The biggest advantage of capitalism is that:
A) It generates wealth with the help of government intervention
B) Prices hinder in moving assets from high-value to low-value uses
C) It forces involuntary exchanges
D) It creates wealth by letting a person follow his or her own self-interest
A) It generates wealth with the help of government intervention
B) Prices hinder in moving assets from high-value to low-value uses
C) It forces involuntary exchanges
D) It creates wealth by letting a person follow his or her own self-interest
answer
D) It creates wealth by letting a person follow his or her own self-interest
question
5) In a principal-agent relationship:
A) the principal wants the agent to act on her own behalf.
B) the agent wants the principal to act on his behalf.
C) the principal wants the agent to act on the behalf of others.
D) the agent wants the principal to act on the behalf of others.
A) the principal wants the agent to act on her own behalf.
B) the agent wants the principal to act on his behalf.
C) the principal wants the agent to act on the behalf of others.
D) the agent wants the principal to act on the behalf of others.
answer
A) the principal wants the agent to act on her own behalf
question
6) Scott used $4,000,000 from his savings account that paid an annual interest of 5% and a $60,000 loan at an annual interest rate of 5% to purchase a hardware store. After one year, Scott sold the busi- ness for $4,100,000. His economic profits is:
A) $300,000
B) $100,000
C) $97,000
D) None. He runs an economic loss of $103,000
A) $300,000
B) $100,000
C) $97,000
D) None. He runs an economic loss of $103,000
answer
D) None. He runs an economic loss of $103,000
question
7) After graduating from college, Jim had two choices. He can either move to Florida, from Philadelphia, where he can work as an analyst and earn $60,000 or he can stay in Philadelphia and work in a car deal- ership earning $59,000. His opportunity cost of moving to Florida includes:
A) The benefits he could have received from playing soccer.
B) $59,000.
C) both a and b.
D) none of the above.
A) The benefits he could have received from playing soccer.
B) $59,000.
C) both a and b.
D) none of the above.
answer
B) $59,000.
question
8) Economic reasoning is based on the premise that:
A) all decisions or actions are costless.
B) only non-economic decisions or actions have a cost associated with them. C) only economic decisions or actions have a cost associated with them.
D) all decisions and actions have a cost associated with them.
A) all decisions or actions are costless.
B) only non-economic decisions or actions have a cost associated with them. C) only economic decisions or actions have a cost associated with them.
D) all decisions and actions have a cost associated with them.
answer
D) all decisions and actions have a cost associated with them.
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9) Marginal cost:
A) Is the incremental cost incurred by producing an additional unit of output.
B) Is the total cost of production.
C) Is the total fixed cost of production.
D) None of the above.
A) Is the incremental cost incurred by producing an additional unit of output.
B) Is the total cost of production.
C) Is the total fixed cost of production.
D) None of the above.
answer
A) Is the incremental cost incurred by producing an additional unit of output.
question
10) Farmer John can produce as much corn as he wants at the going price of $48 per bushel. At his cur- rent production level, the marginal cost is $18. What should the company do?
A) Increase production
B) Decrease production
C) Stay at this level of production
D) None of the above
A) Increase production
B) Decrease production
C) Stay at this level of production
D) None of the above
answer
A) Increase production
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11) A publisher is deciding whether or not to invest in a new printer. The printer would cost $900, and would increase the cash flows in year 1 by $500 and in year 3 by $800. Cash flows do not change in year 2. If the interest rate is 12%, what is the present value of the cash flows from the investment?
A) $155.59.
B) $1015.85.
C) $1076.56.
D) $346.78.
A) $155.59.
B) $1015.85.
C) $1076.56.
D) $346.78.
answer
B) $1015.85
question
12) Lucy invested $10,000 at the rate of 12%. According to the rule of 72, it would take ______ years for her money to double.
A) 4
B) 5
C) 6
D) 7
A) 4
B) 5
C) 6
D) 7
answer
C) 6
question
13) Its lunch time, you are hungry and would like to have some pizza. By the law of diminishing mar- ginal value,
A) you would pay more for your first slice of pizza than your second.
B) you would pay more for your second slice of pizza than your first.
C) you would pay an equal amount of money for both the slices since they are identical.
D) none of the above.
A) you would pay more for your first slice of pizza than your second.
B) you would pay more for your second slice of pizza than your first.
C) you would pay an equal amount of money for both the slices since they are identical.
D) none of the above.
answer
A) you would pay more for your first slice of pizza than your second.
question
14) A demand curves describes:
A) the amount of units a consumer will purchase at a given price.
B) the amount of units a producer will sell at a given price.
C) both the amount of units that a consumer will buy and a producer will produce at a given price.
D) the amount of units supplied given a change in prices.
A) the amount of units a consumer will purchase at a given price.
B) the amount of units a producer will sell at a given price.
C) both the amount of units that a consumer will buy and a producer will produce at a given price.
D) the amount of units supplied given a change in prices.
answer
A) the amount of units a consumer will purchase at a given price.
question
15) In general, the smaller the price elasticity:
A) the smaller the responsiveness of price to changes in quantity.
B) the smaller the responsiveness of quantity to changes in price.
C) the larger the responsiveness of price to changes in quantity.
D) the larger the responsiveness of quantity to changes in price.
A) the smaller the responsiveness of price to changes in quantity.
B) the smaller the responsiveness of quantity to changes in price.
C) the larger the responsiveness of price to changes in quantity.
D) the larger the responsiveness of quantity to changes in price.
answer
B) the smaller the responsiveness of quantity to changes in price.
question
16) Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250. What is Jim's own price elasticity of de- mand?
A) 1.29
B) 1
C) 0.25
D) 0.78
A) 1.29
B) 1
C) 0.25
D) 0.78
answer
A) 1.29
question
17) Changes in the price of a product can cause:
A) A movement along the demand curve.
B) A shift of the demand curve.
C) A shift of the supply curve.
D) All of the above.
A) A movement along the demand curve.
B) A shift of the demand curve.
C) A shift of the supply curve.
D) All of the above.
answer
A) A movement along the demand curve.
question
18) Which of the following is a normative economic statement?
A) If the college offers free textbooks for students, more students will read their textbooks.
B) The University should increase tuition to help fund athletic programs and programs related to the arts.
C) If the college provides less financial aid for out-of-state students more in-state students will benefit.
D) If the college increases admission requirements class size will decline.
A) If the college offers free textbooks for students, more students will read their textbooks.
B) The University should increase tuition to help fund athletic programs and programs related to the arts.
C) If the college provides less financial aid for out-of-state students more in-state students will benefit.
D) If the college increases admission requirements class size will decline.
answer
B) The University should increase tuition to help fund athletic programs and programs related to the arts.
question
19) After the housing bubble burst, consumer confidence plummeted and housing sales dropped to all- time lows. This caused the demand curve for normal goods to shift:
A) right.
B) left.
C) stay constant.
D) none of the above.
A) right.
B) left.
C) stay constant.
D) none of the above.
answer
B) Left
question
20) The problem the principal faces when deciding which agent to hire is called:
A) Adverse selection
B) Moral hazard
C) Both of the above
D) None of the above
A) Adverse selection
B) Moral hazard
C) Both of the above
D) None of the above
answer
A) Adverse selection
question
21) Consider an apple orchard owner deciding how to incentivize his fruit pickers to get them to pick more apples he should:
A) To pay the pickers per pound of apples picked.
B) To pay the pickers an hourly rate.
C) To pay the pickers an hourly rate plus a bonus.
D) To not pay the pickers.
A) To pay the pickers per pound of apples picked.
B) To pay the pickers an hourly rate.
C) To pay the pickers an hourly rate plus a bonus.
D) To not pay the pickers.
answer
A) To pay the pickers per pound of apples picked.
question
22) By switching its sales agents to a sales neutral profit commission, the firm is trying to convince the agents:
A) To not change their sales patterns, as it would not change their compensation.
B) Improve their compensation by pricing less aggressively.
C) Improve their compensation by pricing more aggressively (lowering prices).
D) None of the above.
A) To not change their sales patterns, as it would not change their compensation.
B) Improve their compensation by pricing less aggressively.
C) Improve their compensation by pricing more aggressively (lowering prices).
D) None of the above.
answer
B) Improve their compensation by pricing less aggressively
question
23) Which of the following is TRUE?
A) Maximizing division profits will always lead to maximizing company profit.
B) Maximizing division profits will always lead to minimizing company profit.
C) Maximizing division profits can sometimes lead to reducing company-wide profit.
D) Maximizing division profits has no effect on company-wide profits.
A) Maximizing division profits will always lead to maximizing company profit.
B) Maximizing division profits will always lead to minimizing company profit.
C) Maximizing division profits can sometimes lead to reducing company-wide profit.
D) Maximizing division profits has no effect on company-wide profits.
answer
C) Maximizing division profits can sometimes lead to reducing company-wide profit.
question
24) A business owner makes 50 items a day. She spends 8 hours in producing those items. If hired else- where she could have earned $10 an hour. The item sells for $10 each. Production occurs seven days a week. If the explicit costs total $10,000 a month the economic profit for the month equals:
A) $2,600.
B) $2,240.
C) $11,760.
D) $5,000.
A) $2,600.
B) $2,240.
C) $11,760.
D) $5,000.
answer
A) $2,600
question
25) Which of the following is a feature of an M-Form organization?
A) divisions can respond more easily to changes in customer demand
B) it is difficult to maintain customer relationships
C) coordination across divisions is simple and does not take much management time
D) evaluating employees is easier because managers typically are similarly trained
A) divisions can respond more easily to changes in customer demand
B) it is difficult to maintain customer relationships
C) coordination across divisions is simple and does not take much management time
D) evaluating employees is easier because managers typically are similarly trained
answer
A) divisions can respond more easily to changes in customer demand
question
26) When managing an ISTJ, it is best to:
A) give them space to work on their own.
B) let them define their own rules.
C) give them a team to work with.
D) let them define the project priorities.
A) give them space to work on their own.
B) let them define their own rules.
C) give them a team to work with.
D) let them define the project priorities.
answer
A) give them space to work on their own.
question
27) A budget constraint is the:
A) set of consumption bundles that represents the amount the consumer cannot afford.
B) set of consumption bundles that represents the minimum amount the consumer can afford.
C) set of consumption bundles that represents the maximum amount the consumer can afford.
D) set of consumption bundles facing a consumer with an unlimited budget and no opportunity costs.
A) set of consumption bundles that represents the amount the consumer cannot afford.
B) set of consumption bundles that represents the minimum amount the consumer can afford.
C) set of consumption bundles that represents the maximum amount the consumer can afford.
D) set of consumption bundles facing a consumer with an unlimited budget and no opportunity costs.
answer
C) set of consumption bundles that represents the maximum amount the consumer can afford.
question
28) The income elasticity of demand for housing property is exactly 1.40. Due to a recession, you expect incomes to drop by 5% next year. How will consumers adjust their purchase for housing property?
A) Buy 5% more houses
B) Buy 5% fewer houses
C) Buy 7% more houses
D) Buy 7% fewer houses
A) Buy 5% more houses
B) Buy 5% fewer houses
C) Buy 7% more houses
D) Buy 7% fewer houses
answer
D) Buy 7% fewer houses
question
29) Economic choice and competitive behavior are the result of
A) basic human greed
B) poverty
C) private ownership of resources
D) scarcity
A) basic human greed
B) poverty
C) private ownership of resources
D) scarcity
answer
D) scarcity
question
30) Given that the own-price elasticity of demand for a brand of shoes is -2, if the price rises by 8%, what will happen to the quantity of shoes demanded?
A) It will decrease by 16%
B) It will increase by 16%
C) It will decrease by 1.6%
D) It will decrease by 1.6%
A) It will decrease by 16%
B) It will increase by 16%
C) It will decrease by 1.6%
D) It will decrease by 1.6%
answer
A) It will decrease by 16%
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