SCHOOL OF BUSINESS: QUESTION BANK WITH ANSWERS MANAGERIAL
ECONOMICS Q & A
1) The "core" inflation rate is typically defined as the change in
consumer prices for all goods included in the CPI basket except energy
and food products. Suppose the overall inflation rate based on the CPI
was 4 percent for the past year, and energy and food prices did not
change during the year. Is the core inflation rate for the past year higher
or lower than 4 percent?
A) Higher
B) Lower
C) They are the same
D) We do not have enough information to answer
this question Answer: A
2) We can approximate the real return on an investment by subtracting
the inflation rate from the nominal return on the investment. For
example, an investment that returns 10% per year while inflation is 4%
per year has a real (inflation adjusted) return of approximately 6%. Which
of the following outcomes is NOT possible?
A) Nominal and real returns are positive
B) Nominal return is positive, real return is negative
C) Nominal return is negative, real return is positive
D) all of these outcomes are
possible Answer: D
1.4 Why Study Microeconomics?
1)Which of the following is NOT an example of ways in which
microeconomic analysis can help Toyota Motor Corporation its in
corporate decision making?
A) Forecasting demand for new automobiles
B) Determining how many automobiles to produce in order to maximize
profits
C) Predicting how competitors will react to the firm's pricing strategy
,D)Forecasting the effect of Toyota's hiring patterns on the U.S.
unemployment rate
E) Forecasting the effect of an oil price increase on demand
for hybrid autos Answer: D
2)Which of the following is NOT an example of a way in which
microeconomic analysis can help in designing environmental policy?
A) Determining the optimal level of vehicle fuel efficiency standards
B) Designing laws to provide incentives for firms to implement clean
technologies in new vehicles
C) Lobbying consumers and firms to reduce consumption of energy
D)Examining the tradeoffs between ecological benefits of environmental
legislation and its impacts on consumers' standard of living
Answer: C
3)To evaluate the potential impact of changes to its SUV business, Ford
Motor Company would use:
A) normative economic analysis.
B) positive economic analysis.
C) negative economic analysis.
D)arbitrage
analysis.
Answer: B
4)The Clean Air Act is designed to restrict automobile emissions and
reduce the external costs of air pollution. The economic analysis used
to develop the Clean Air Act was:
A) normative.
B) positive.
C) macroeconomic.
D)none of the
above Answer: A
5)To evaluate the potential impact of introducing the hybrid Prius auto
into the U.S. market, Toyota Motor Corporation would use:
A) positive economic analysis.
,B) normative economic analysis.
C) negative economic analysis.
D)forensic
analysis.
Answer: A
6)The Corporate Average Fuel Economy (CAFE) standards are designed
to improve the average fuel economy of cars and light trucks sold in the
U.S. The economic analysis used to develop the CAFE standards was:
A) macroeconomic.
B) positive.
C) normative.
D)none of the
above Answer: C
A valid and useful theory of gold prices:
helps to predict the movements of gold prices
over time. B may be founded on simplifying
assumptions.
need not exactly predict every change in
gold prices. all of the above
none of the
above Answer:
D
1)Microeconomics is the branch of economics that deals with which of the
following topics?
A)The behavior of individual consumers
B) Unemployment and interest rates
C) The behavior of individual firms and investors
D)B and C
E) A and
C
Answer:
E
, 2)A Rolling Stones song goes: "You can't always get what you want."
This echoes an important theme from microeconomics. Which of the
following statements is the best example of this theme?
A) Consumers must make the best purchasing decisions they can, given
their limited incomes.
B) Workers do not have as much leisure as they would like, given their
wages and working conditions.
C) Workers in planned economies, such as North Korea, do not have much
choice over jobs.
D)Firms in market economies have limited financial resources.
3. Economics is about the allocation of scarce resources. Which of the
following is NOT an example of economic scarcity?
A) If Steve goes to see a movie on Saturday, he will not be able to afford
buying ice cream.
B) If Jenny studies for her economics quiz this evening, she will not have
time to walk her dog.
C) If General Motors increases its production of SUVs this year, it will have
to spend more on advertising.
D)If Barnes and Noble bookstore increases the number of titles it
carries, it will have to reallocate shelf space to accommodate the new
titles.
4) A valid and useful theory of gold prices:
A) helps to predict the movements of gold prices over time.
B) may be founded on simplifying assumptions.
C) need not exactly predict every change in gold prices.
D) all of the above
E) none of the above
Use the following two statements to answer this question:
I. Economic theories are developed to explain observed phenomena by
deducing from a set of basic rules and assumptions.
II. Economic theories use value judgments to determine which people
ought to pay more taxes.
ECONOMICS Q & A
1) The "core" inflation rate is typically defined as the change in
consumer prices for all goods included in the CPI basket except energy
and food products. Suppose the overall inflation rate based on the CPI
was 4 percent for the past year, and energy and food prices did not
change during the year. Is the core inflation rate for the past year higher
or lower than 4 percent?
A) Higher
B) Lower
C) They are the same
D) We do not have enough information to answer
this question Answer: A
2) We can approximate the real return on an investment by subtracting
the inflation rate from the nominal return on the investment. For
example, an investment that returns 10% per year while inflation is 4%
per year has a real (inflation adjusted) return of approximately 6%. Which
of the following outcomes is NOT possible?
A) Nominal and real returns are positive
B) Nominal return is positive, real return is negative
C) Nominal return is negative, real return is positive
D) all of these outcomes are
possible Answer: D
1.4 Why Study Microeconomics?
1)Which of the following is NOT an example of ways in which
microeconomic analysis can help Toyota Motor Corporation its in
corporate decision making?
A) Forecasting demand for new automobiles
B) Determining how many automobiles to produce in order to maximize
profits
C) Predicting how competitors will react to the firm's pricing strategy
,D)Forecasting the effect of Toyota's hiring patterns on the U.S.
unemployment rate
E) Forecasting the effect of an oil price increase on demand
for hybrid autos Answer: D
2)Which of the following is NOT an example of a way in which
microeconomic analysis can help in designing environmental policy?
A) Determining the optimal level of vehicle fuel efficiency standards
B) Designing laws to provide incentives for firms to implement clean
technologies in new vehicles
C) Lobbying consumers and firms to reduce consumption of energy
D)Examining the tradeoffs between ecological benefits of environmental
legislation and its impacts on consumers' standard of living
Answer: C
3)To evaluate the potential impact of changes to its SUV business, Ford
Motor Company would use:
A) normative economic analysis.
B) positive economic analysis.
C) negative economic analysis.
D)arbitrage
analysis.
Answer: B
4)The Clean Air Act is designed to restrict automobile emissions and
reduce the external costs of air pollution. The economic analysis used
to develop the Clean Air Act was:
A) normative.
B) positive.
C) macroeconomic.
D)none of the
above Answer: A
5)To evaluate the potential impact of introducing the hybrid Prius auto
into the U.S. market, Toyota Motor Corporation would use:
A) positive economic analysis.
,B) normative economic analysis.
C) negative economic analysis.
D)forensic
analysis.
Answer: A
6)The Corporate Average Fuel Economy (CAFE) standards are designed
to improve the average fuel economy of cars and light trucks sold in the
U.S. The economic analysis used to develop the CAFE standards was:
A) macroeconomic.
B) positive.
C) normative.
D)none of the
above Answer: C
A valid and useful theory of gold prices:
helps to predict the movements of gold prices
over time. B may be founded on simplifying
assumptions.
need not exactly predict every change in
gold prices. all of the above
none of the
above Answer:
D
1)Microeconomics is the branch of economics that deals with which of the
following topics?
A)The behavior of individual consumers
B) Unemployment and interest rates
C) The behavior of individual firms and investors
D)B and C
E) A and
C
Answer:
E
, 2)A Rolling Stones song goes: "You can't always get what you want."
This echoes an important theme from microeconomics. Which of the
following statements is the best example of this theme?
A) Consumers must make the best purchasing decisions they can, given
their limited incomes.
B) Workers do not have as much leisure as they would like, given their
wages and working conditions.
C) Workers in planned economies, such as North Korea, do not have much
choice over jobs.
D)Firms in market economies have limited financial resources.
3. Economics is about the allocation of scarce resources. Which of the
following is NOT an example of economic scarcity?
A) If Steve goes to see a movie on Saturday, he will not be able to afford
buying ice cream.
B) If Jenny studies for her economics quiz this evening, she will not have
time to walk her dog.
C) If General Motors increases its production of SUVs this year, it will have
to spend more on advertising.
D)If Barnes and Noble bookstore increases the number of titles it
carries, it will have to reallocate shelf space to accommodate the new
titles.
4) A valid and useful theory of gold prices:
A) helps to predict the movements of gold prices over time.
B) may be founded on simplifying assumptions.
C) need not exactly predict every change in gold prices.
D) all of the above
E) none of the above
Use the following two statements to answer this question:
I. Economic theories are developed to explain observed phenomena by
deducing from a set of basic rules and assumptions.
II. Economic theories use value judgments to determine which people
ought to pay more taxes.
