The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
TEST BANK
The Economics of Managerial Decisions
Roger Blair, Mark Rush
1st Edition
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Table of Contents
Part 1 Economic Foundations
Chapter 1 Managerial Economics and Decision Making
Chapter 2 Demand and Supply
Chapter 3 Measuring and Using Demand
Part 2 Market Structure and Managerial Decisions
Chapter 4 Production and Costs
Chapter 5 Perfect Competition
Chapter 6 Monopoly and Monopolistic Competition
Chapter 7 Cartels and Oligopoly
Chapter 8 Game Theory and Oligopoly
Chapter 9 A Manager’s Guide to Antitrust Policy
Part 3 Managerial Decisions
Chapter 10 Advanced Pricing Decisions
Chapter 11 Decisions About Vertical Integration and Distribution
Chapter 12 Decisions About Production, Products, and Location
Chapter 13 Marketing Decisions: Advertising and Promotion
Chapter 14 Business Decisions Under Uncertainty
Chapter 15 Managerial Decisions About Information
Chapter 16 Using Present Value to Make Multiperiod Managerial Decisions
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Test Bank For Economics of Managerial Decisions, The 1st Edition
Chapter 1 Managerial Economics and Decision Making
Chapter 1 Managerial Economics and Decision Making
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
1) There are no questions in this section. 1) _____________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
2) The simplest form of a business organization is a ________. 2) _______
A) corporation B) proprietorship
C) partnership D) limited liability company
3) Which of the following is an example of a proprietorship? 3) _______
A) a taxi driver B) the United States Post Office
C) the American Cancer Society D) Coca-Cola
4) Which of the following is an example of a proprietorship? 4) _______
A) the American Cancer Society B) the owner of a local nail salon
C) Hunter Construction, LLC D) the United States Post Office
5) Which of the following is an example of a proprietorship? 5) _______
A) the American Heart Association B) Luxe Windows, LLC
C) FedEx D) a freelance photographer
6) All of the following are true for a proprietorship except which one? 6) _______
A) It is easy to organize.
B) It exists only for the life of the owner.
C) The government requires that it is registered.
D) Profits are taxed only once.
7) All of the following are true for a partnership except which one? 7) _______
A) The owners have limited liability.
B) It is owned by two or more people.
C) Profits are taxed only once.
D) The government requires that it is registered.
8) All of the following are true for a partnership except which one? 8) _______
A) Profits are taxed twice.
B) The owners have unlimited liability.
C) It is owned by two or more people.
D) The government requires that it is registered.
9) All of the following are true for a limited liability company except which one? 9) _______
A) It exists for the lifetime of the owner.
B) The owners have limited liability.
C) Profits are taxed only once.
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Chapter 1 Managerial Economics and Decision Making
D) The government requires that it is registered.
10) All of the following are true for a corporation except which one? 10) ______
A) It has legal requirements in addition to registration.
B) The owners have limited liability.
C) Profits are taxed only once.
D) It has perpetual life.
11) Which of the following is an example of a limited liability company? 11) ______
A) the owner of a local dry cleaner B) Cooper and Cooper, LLC
C) the United States Post Office D) a taxi driver
12) A small law firm that is NOT registered as a limited liability company is likely to be a ________ or a ________. 12)
______
A) proprietorship; partnership B) proprietorship; corporation
C) corporation; LLC D) partnership; corporation
13) Which type of firm is subject to double-taxation? 13) ______
A) corporation B) partnership
C) proprietorship D) limited liability company
14) A ________ profits are taxed twice. 14) ______
A) partnership B) corporation
C) limited liability company D) proprietorship
15) Which of the following is an example of a corporation? 15) ______
A) Cooper and Cooper, LLC B) the United States Post Office
C) Coca-Cola D) a taxi driver
16) Owners of a ________ and a ________ both have limited liability. 16) ______
A) proprietorship; partnership B) partnership; limited liability company
C) corporation; proprietorship D) limited liability company; corporation
17) The government requires that each of the following types of firms register the firm except which one? 17) ______
A) corporation B) proprietorship
C) limited liability company D) partnership
18) In a ________, employees are motivated to become an owner. 18) ______
A) limited liability company B) corporation
C) partnership D) proprietorship
19) A ________ is typically run on a day-to-day basis by professional managers. 19) ______
A) corporation B) proprietorship
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Chapter 1 Managerial Economics and Decision Making
C) limited liability company D) partnership
20) A ________ is typically overseen by a board of directors. 20) ______
A) proprietorship B) limited liability company
C) partnership D) corporation
21) A ________ only exists for the life of the owner, while a ________ has perpetual life. 21) ______
A) corporation; proprietorship B) proprietorship; limited liability company
C) proprietorship; corporation D) partnership; limited liability company
22) If you want to establish and run your own business, but are very concerned about your liability should anything go
wrong, which of the following would be the best kind of firm for you? 22) ______
A) corporation B) limited liability company
C) proprietorship D) partnership
23) In a corporation, board members ________. 23) ______
A) face unlimited liability
B) only have their firm's profits taxed once
C) oversee the actions of managers
D) typically run the corporation on a day-to-day basis
24) Which type of firm pays dividends? 24) ______
A) limited liability company B) partnership
C) proprietorship D) corporation
25) Which type of firm is legally required to setup a double-entry booking system to record its business transactions?
25) ______
A) partnership B) corporation
C) limited liability company D) proprietorship
26) Which type of firm is legally required file an annual report to their state government? 26) ______
A) partnership B) corporation
C) proprietorship D) limited liability company
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
27) Regardless of their organizational structure, all firms convert inputs into outputs that can sell or distribute. 27)
______
28) Non-profit firms are the only type of firm that does not convert inputs into outputs that can be sold or distributed.
28) ______
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Chapter 1 Managerial Economics and Decision Making
29) A partnership can be owned by just one person. 29) ______
30) The dividend a corporation pays per share is determined by the corporation's board of directors. 30) ______
31) If a corporation fails, the shareholders are responsible for repaying all of the debt. 31) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
32) Total revenue is equal to 32) ______
A) price x cost B) price x quantity
C) price x profit D) quantity x profit
33) If Big Brothers Hot Dog stand sold 500 hot dogs at a price $2 per hot dog, the total revenue is 33) ______
A) $5,000 B) $1,000 C) $2 D) $500
34) All of the following can affect a firm's total revenue except which one? 34) ______
A) accounting costs B) allowances
C) returns D) discounts
35) All of the following can affect a firm's total revenue except which one? 35) ______
A) returns B) opportunity costs
C) discounts D) rebates
36) Which of the following can affect a firm's total revenue? 36) ______
A) explicit costs B) opportunity costs
C) allowances D) implicit costs
37) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 400 customers and charges
$1,000 per annual lawn service. The company offers an 8 percent discount if customers pay in full at the start of the
season. If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 37) ______
A) $368,000 B) $323,000 C) $375,000 D) $400,000
38) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 350 customers and charges
$750 per annual lawn service. The company offers a 4 percent discount if customers pay in full at the start of the season.
If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 38) ______
A) $252,000 B) $262,500 C) $10,500 D) $15,500
39) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 225 customers and charges
$800 per annual lawn service. The company offers a 5 percent discount if customers pay in full at the start of the season.
If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 39) ______
A) $180,000 B) $171,000 C) $9,000 D) $12,000
40) ________ is an example of an implicit cost. 40) ______
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Chapter 1 Managerial Economics and Decision Making
A) A firm's electric bill B) A salary paid to an employee
C) The cost to transport a firm's goods D) The wear and tear on a firm's machinery
41) A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is
holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800.
What is the opportunity cost of holding the 6,000 pieces of hardware in inventory? 41) ______
A) $3,000 B) $2,800 C) $4,000 D) $5,000
42) A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is
holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800.
What is the sunk cost of purchasing the cabinet hardware? 42) ______
A) $3,000 B) $2,800 C) $4,000 D) $5,000
43) A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200
vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the opportunity cost of
holding the 200 vases in inventory? 43) ______
A) $200 B) $1,200 C) $600 D) $300
44) A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200
vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the sunk cost of purchasing
the vases? 44) ______
A) $600 B) $300 C) $200 D) $1,200
45) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. What is the straight-line depreciation of the dump truck?
45) ______
A) $87,500 B) $12,500 C) $70,000 D) $30,000
46) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. What is the economic depreciation of the dump truck? 46)
______
A) $30,000 B) $87,500 C) $12,500 D) $70,000
47) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. If the highest one-year return available is 10 percent, what is the
one-year return from selling the dump truck? 47) ______
A) $60,000 B) $7,000 C) $10,000 D) $70,000
48) To start up a two-person partnership law firm, the partners each invest $125,000 of their own funds. If the partners
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could have earned 5 percent return on these funds in another endeavor, what is their competitive return? 48) ______
A) $6,250 B) $12,500 C) $237,500 D) $118,750
49) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the
opportunity cost of your time? 49) ______
A) $75,000 B) $125,000 C) $100,000 D) $50,000
50) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the explicit
opportunity cost of your time? 50) ______
A) $75,000 B) $125,000 C) $50,000 D) $100,000
51) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the implicit
opportunity cost of your time? 51) ______
A) $75,000 B) $50,000 C) $125,000 D) $100,000
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation D Cost of using building and equipment $25,000
Allowance (opportunity cost)
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that
are paid $31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a
competitor for $85,000. At the beginning of the year, the building and the salon equipment are worth $100,000 and at the
end of the year, they are worth $85,000. The accountant for Happy Nails uses straight-line depreciation for the 15-year life
of the building and salon equipment. The table above provides some additional information on revenue and the
opportunity cost of using the building and equipment.
52) Refer to the table above. What is the value of A? 52) ______
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A) $31,250 B) $312,500 C) $250,000 D) $62,500
53) Refer to the table above. What is the value of B? 53) ______
A) $31,250 B) $85,000 C) $100,000 D) $75,000
54) Refer to the table above. What is the value of C? 54) ______
A) $85,000 B) $31,250 C) $100,000 D) $75,000
55) Refer to the table above. What is the value of D? 55) ______
A) $6,666.67 B) $4,250 C) $5,666.67 D) $5,000
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
56) Refer to the table above. The value of E is greater than the value of F. 56) ______
57) Competition from profit-maximizing firms will drive firms that are not maximizing profits out of business. 57)
______
58) Both accounting cost and opportunity costs include explicit and implicit costs. 58) ______
59) Effective profit-maximizing managers work hard to minimize sunk costs. 59) ______
60) Managers should use straight-line depreciation when making decisions. 60) ______
61) Opportunity cost is a better measure of the true costs faced by firms than accounting costs. 61) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
62) If the marginal ________ of an action exceeds its marginal ________ then the action ________ be performed. 62)
______
A) benefit; cost; should not B) cost; benefit; should
C) benefit; cost; should D) none of the above
63) At the 30th unit of action, the marginal benefit is equal to $50 and the marginal cost is equal to $40. Which of the
following is true? 63) ______
A) The 30th unit of action maximizes total gains (total profits).
B) The 30th unit of action minimizes total costs.
C) The 30th unit of action should be undertaken.
D) The 30th unit of action should not be undertaken.
64) At the 50th unit of action, the marginal benefit is equal to $20 and the marginal cost is equal to $25. Which of the
following is true? 64) ______
A) The 50th unit of action should be undertaken.
B) The 50th unit of action maximizes total gains (total profits).
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C) The 50th unit of action should not be undertaken.
D) The 50th unit of action minimizes total costs.
65) To maximize total profit, managers want to produce the quantity in which marginal benefit ________ marginal cost.
65) ______
A) minimizes B) is equal to C) exceeds D) maximizes
66) To maximize total profit, managers want to produce the quantity in which marginal cost ________ marginal benefit.
66) ______
A) maximizes B) is equal to C) minimizes D) exceeds
67) If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward
sloping, an increase in the marginal cost that causes an upward shift of the curve will ________ the profit-maximizing
number of units undertaken. 67) ______
A) increase B) not change C) exactly double D) decrease
68) If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward
sloping, a decrease in the marginal cost that causes a downward shift of the curve will ________ the profit-maximizing
number of units undertaken. 68) ______
A) decrease B) reduce by exactly half
C) not change D) increase
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TEST BANK
The Economics of Managerial Decisions
Roger Blair, Mark Rush
1st Edition
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Table of Contents
Part 1 Economic Foundations
Chapter 1 Managerial Economics and Decision Making
Chapter 2 Demand and Supply
Chapter 3 Measuring and Using Demand
Part 2 Market Structure and Managerial Decisions
Chapter 4 Production and Costs
Chapter 5 Perfect Competition
Chapter 6 Monopoly and Monopolistic Competition
Chapter 7 Cartels and Oligopoly
Chapter 8 Game Theory and Oligopoly
Chapter 9 A Manager’s Guide to Antitrust Policy
Part 3 Managerial Decisions
Chapter 10 Advanced Pricing Decisions
Chapter 11 Decisions About Vertical Integration and Distribution
Chapter 12 Decisions About Production, Products, and Location
Chapter 13 Marketing Decisions: Advertising and Promotion
Chapter 14 Business Decisions Under Uncertainty
Chapter 15 Managerial Decisions About Information
Chapter 16 Using Present Value to Make Multiperiod Managerial Decisions
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Test Bank For Economics of Managerial Decisions, The 1st Edition
Chapter 1 Managerial Economics and Decision Making
Chapter 1 Managerial Economics and Decision Making
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
1) There are no questions in this section. 1) _____________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
2) The simplest form of a business organization is a ________. 2) _______
A) corporation B) proprietorship
C) partnership D) limited liability company
3) Which of the following is an example of a proprietorship? 3) _______
A) a taxi driver B) the United States Post Office
C) the American Cancer Society D) Coca-Cola
4) Which of the following is an example of a proprietorship? 4) _______
A) the American Cancer Society B) the owner of a local nail salon
C) Hunter Construction, LLC D) the United States Post Office
5) Which of the following is an example of a proprietorship? 5) _______
A) the American Heart Association B) Luxe Windows, LLC
C) FedEx D) a freelance photographer
6) All of the following are true for a proprietorship except which one? 6) _______
A) It is easy to organize.
B) It exists only for the life of the owner.
C) The government requires that it is registered.
D) Profits are taxed only once.
7) All of the following are true for a partnership except which one? 7) _______
A) The owners have limited liability.
B) It is owned by two or more people.
C) Profits are taxed only once.
D) The government requires that it is registered.
8) All of the following are true for a partnership except which one? 8) _______
A) Profits are taxed twice.
B) The owners have unlimited liability.
C) It is owned by two or more people.
D) The government requires that it is registered.
9) All of the following are true for a limited liability company except which one? 9) _______
A) It exists for the lifetime of the owner.
B) The owners have limited liability.
C) Profits are taxed only once.
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D) The government requires that it is registered.
10) All of the following are true for a corporation except which one? 10) ______
A) It has legal requirements in addition to registration.
B) The owners have limited liability.
C) Profits are taxed only once.
D) It has perpetual life.
11) Which of the following is an example of a limited liability company? 11) ______
A) the owner of a local dry cleaner B) Cooper and Cooper, LLC
C) the United States Post Office D) a taxi driver
12) A small law firm that is NOT registered as a limited liability company is likely to be a ________ or a ________. 12)
______
A) proprietorship; partnership B) proprietorship; corporation
C) corporation; LLC D) partnership; corporation
13) Which type of firm is subject to double-taxation? 13) ______
A) corporation B) partnership
C) proprietorship D) limited liability company
14) A ________ profits are taxed twice. 14) ______
A) partnership B) corporation
C) limited liability company D) proprietorship
15) Which of the following is an example of a corporation? 15) ______
A) Cooper and Cooper, LLC B) the United States Post Office
C) Coca-Cola D) a taxi driver
16) Owners of a ________ and a ________ both have limited liability. 16) ______
A) proprietorship; partnership B) partnership; limited liability company
C) corporation; proprietorship D) limited liability company; corporation
17) The government requires that each of the following types of firms register the firm except which one? 17) ______
A) corporation B) proprietorship
C) limited liability company D) partnership
18) In a ________, employees are motivated to become an owner. 18) ______
A) limited liability company B) corporation
C) partnership D) proprietorship
19) A ________ is typically run on a day-to-day basis by professional managers. 19) ______
A) corporation B) proprietorship
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C) limited liability company D) partnership
20) A ________ is typically overseen by a board of directors. 20) ______
A) proprietorship B) limited liability company
C) partnership D) corporation
21) A ________ only exists for the life of the owner, while a ________ has perpetual life. 21) ______
A) corporation; proprietorship B) proprietorship; limited liability company
C) proprietorship; corporation D) partnership; limited liability company
22) If you want to establish and run your own business, but are very concerned about your liability should anything go
wrong, which of the following would be the best kind of firm for you? 22) ______
A) corporation B) limited liability company
C) proprietorship D) partnership
23) In a corporation, board members ________. 23) ______
A) face unlimited liability
B) only have their firm's profits taxed once
C) oversee the actions of managers
D) typically run the corporation on a day-to-day basis
24) Which type of firm pays dividends? 24) ______
A) limited liability company B) partnership
C) proprietorship D) corporation
25) Which type of firm is legally required to setup a double-entry booking system to record its business transactions?
25) ______
A) partnership B) corporation
C) limited liability company D) proprietorship
26) Which type of firm is legally required file an annual report to their state government? 26) ______
A) partnership B) corporation
C) proprietorship D) limited liability company
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
27) Regardless of their organizational structure, all firms convert inputs into outputs that can sell or distribute. 27)
______
28) Non-profit firms are the only type of firm that does not convert inputs into outputs that can be sold or distributed.
28) ______
3
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Chapter 1 Managerial Economics and Decision Making
29) A partnership can be owned by just one person. 29) ______
30) The dividend a corporation pays per share is determined by the corporation's board of directors. 30) ______
31) If a corporation fails, the shareholders are responsible for repaying all of the debt. 31) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
32) Total revenue is equal to 32) ______
A) price x cost B) price x quantity
C) price x profit D) quantity x profit
33) If Big Brothers Hot Dog stand sold 500 hot dogs at a price $2 per hot dog, the total revenue is 33) ______
A) $5,000 B) $1,000 C) $2 D) $500
34) All of the following can affect a firm's total revenue except which one? 34) ______
A) accounting costs B) allowances
C) returns D) discounts
35) All of the following can affect a firm's total revenue except which one? 35) ______
A) returns B) opportunity costs
C) discounts D) rebates
36) Which of the following can affect a firm's total revenue? 36) ______
A) explicit costs B) opportunity costs
C) allowances D) implicit costs
37) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 400 customers and charges
$1,000 per annual lawn service. The company offers an 8 percent discount if customers pay in full at the start of the
season. If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 37) ______
A) $368,000 B) $323,000 C) $375,000 D) $400,000
38) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 350 customers and charges
$750 per annual lawn service. The company offers a 4 percent discount if customers pay in full at the start of the season.
If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 38) ______
A) $252,000 B) $262,500 C) $10,500 D) $15,500
39) Weed Masters provides an annual lawn care service to its customers. Weed Masters has 225 customers and charges
$800 per annual lawn service. The company offers a 5 percent discount if customers pay in full at the start of the season.
If every customer pays in full at the start of the season, Weed Masters' total revenue is ________. 39) ______
A) $180,000 B) $171,000 C) $9,000 D) $12,000
40) ________ is an example of an implicit cost. 40) ______
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Chapter 1 Managerial Economics and Decision Making
A) A firm's electric bill B) A salary paid to an employee
C) The cost to transport a firm's goods D) The wear and tear on a firm's machinery
41) A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is
holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800.
What is the opportunity cost of holding the 6,000 pieces of hardware in inventory? 41) ______
A) $3,000 B) $2,800 C) $4,000 D) $5,000
42) A cabinet firm paid $5,000 for 10,000 pieces of cabinet hardware. The firm has used 4,000 pieces of hardware and is
holding the remaining 6,000 pieces in inventory. The current market price for the 6,000 pieces of hardware is $2,800.
What is the sunk cost of purchasing the cabinet hardware? 42) ______
A) $3,000 B) $2,800 C) $4,000 D) $5,000
43) A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200
vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the opportunity cost of
holding the 200 vases in inventory? 43) ______
A) $200 B) $1,200 C) $600 D) $300
44) A florist paid $1,200 for 500 glass vases. The florist has used 300 of the glass vases and is holding the remaining 200
vases in inventory. The current market price for the 200 pieces of hardware is $600. What is the sunk cost of purchasing
the vases? 44) ______
A) $600 B) $300 C) $200 D) $1,200
45) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. What is the straight-line depreciation of the dump truck?
45) ______
A) $87,500 B) $12,500 C) $70,000 D) $30,000
46) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. What is the economic depreciation of the dump truck? 46)
______
A) $30,000 B) $87,500 C) $12,500 D) $70,000
47) Big Trucking Company has purchased a $100,000 dump truck that has a useful life of 8 years. After the first year of
use, the market value of the dump truck falls to $70,000. If the highest one-year return available is 10 percent, what is the
one-year return from selling the dump truck? 47) ______
A) $60,000 B) $7,000 C) $10,000 D) $70,000
48) To start up a two-person partnership law firm, the partners each invest $125,000 of their own funds. If the partners
5
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Test Bank For Economics of Managerial Decisions, The 1st Edition
Chapter 1 Managerial Economics and Decision Making
could have earned 5 percent return on these funds in another endeavor, what is their competitive return? 48) ______
A) $6,250 B) $12,500 C) $237,500 D) $118,750
49) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the
opportunity cost of your time? 49) ______
A) $75,000 B) $125,000 C) $100,000 D) $50,000
50) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the explicit
opportunity cost of your time? 50) ______
A) $75,000 B) $125,000 C) $50,000 D) $100,000
51) Suppose you have recently graduated and have been offered a salary position at a reputable accounting firm of
$125,000 (including all benefits) per year. After much consideration, you turn down the offer to start your own
accounting firm. You pay yourself $75,000 (including all benefits) a year. Which of the following represents the implicit
opportunity cost of your time? 51) ______
A) $75,000 B) $50,000 C) $125,000 D) $100,000
Profit Using Accounting Costs Profit Using Opportunity Costs
Total Revenue $700,000Total Revenue $700,000
Cost Cost
Nail technicians A Nail technicians A
Owner's Salary B Owner's Time C
Depreciation D Cost of using building and equipment $25,000
Allowance (opportunity cost)
Total Cost Total Cost
Total Profit E Total Profit F
Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that
are paid $31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a
competitor for $85,000. At the beginning of the year, the building and the salon equipment are worth $100,000 and at the
end of the year, they are worth $85,000. The accountant for Happy Nails uses straight-line depreciation for the 15-year life
of the building and salon equipment. The table above provides some additional information on revenue and the
opportunity cost of using the building and equipment.
52) Refer to the table above. What is the value of A? 52) ______
6
, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Test Bank For Economics of Managerial Decisions, The 1st Edition
Chapter 1 Managerial Economics and Decision Making
A) $31,250 B) $312,500 C) $250,000 D) $62,500
53) Refer to the table above. What is the value of B? 53) ______
A) $31,250 B) $85,000 C) $100,000 D) $75,000
54) Refer to the table above. What is the value of C? 54) ______
A) $85,000 B) $31,250 C) $100,000 D) $75,000
55) Refer to the table above. What is the value of D? 55) ______
A) $6,666.67 B) $4,250 C) $5,666.67 D) $5,000
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
56) Refer to the table above. The value of E is greater than the value of F. 56) ______
57) Competition from profit-maximizing firms will drive firms that are not maximizing profits out of business. 57)
______
58) Both accounting cost and opportunity costs include explicit and implicit costs. 58) ______
59) Effective profit-maximizing managers work hard to minimize sunk costs. 59) ______
60) Managers should use straight-line depreciation when making decisions. 60) ______
61) Opportunity cost is a better measure of the true costs faced by firms than accounting costs. 61) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
62) If the marginal ________ of an action exceeds its marginal ________ then the action ________ be performed. 62)
______
A) benefit; cost; should not B) cost; benefit; should
C) benefit; cost; should D) none of the above
63) At the 30th unit of action, the marginal benefit is equal to $50 and the marginal cost is equal to $40. Which of the
following is true? 63) ______
A) The 30th unit of action maximizes total gains (total profits).
B) The 30th unit of action minimizes total costs.
C) The 30th unit of action should be undertaken.
D) The 30th unit of action should not be undertaken.
64) At the 50th unit of action, the marginal benefit is equal to $20 and the marginal cost is equal to $25. Which of the
following is true? 64) ______
A) The 50th unit of action should be undertaken.
B) The 50th unit of action maximizes total gains (total profits).
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, The Economics of Managerial Decisions 1st Edition (Blair, 2020) - Test Bank
Test Bank For Economics of Managerial Decisions, The 1st Edition
Chapter 1 Managerial Economics and Decision Making
C) The 50th unit of action should not be undertaken.
D) The 50th unit of action minimizes total costs.
65) To maximize total profit, managers want to produce the quantity in which marginal benefit ________ marginal cost.
65) ______
A) minimizes B) is equal to C) exceeds D) maximizes
66) To maximize total profit, managers want to produce the quantity in which marginal cost ________ marginal benefit.
66) ______
A) maximizes B) is equal to C) minimizes D) exceeds
67) If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward
sloping, an increase in the marginal cost that causes an upward shift of the curve will ________ the profit-maximizing
number of units undertaken. 67) ______
A) increase B) not change C) exactly double D) decrease
68) If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward
sloping, a decrease in the marginal cost that causes a downward shift of the curve will ________ the profit-maximizing
number of units undertaken. 68) ______
A) decrease B) reduce by exactly half
C) not change D) increase
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