Managerial Economics FINAL EXAM Questions with ALL
Solved Correct Answers
1.Transactions that are create wealth by letting people follow
.
a. voluntary; their self-interest
b. regulated; their self-interest
c. mandated; the societal good
d. socialized; the societal good: a. voluntary; their self-interest
2.Which of the following statements is correct?
a. Sunk costs can be avoided with planning
b. Post-investment hold-up is unavoidable
c. If cost includes all your costs, including your opportunity cost of
capital, you are earning zero profit when P=AC
d. Before investing, look back and reason ahead: c. If cost includes all your
costs, including your opportunity cost of capital, you are earning zero
profit when P=AC
3.The enforcement of property rights contributes to:
a. poverty
b. unconsummated mutual beneficial transactions
c. wealth-creating transactions
d. minimization of total surplus: c. wealth-creating transactions
4.There are three levers one can push to correct bad decision-making.
Which of the following is NOT such a lever?
a. Change the current decision makers' incentives.
b. Let someone else who has no relationship to the problem make the
deci- sion.
c. Let someone else who has better information or incentives make the
deci- sion.
d. Give more information to the current decision-maker.: b. Let someone
else who has no relationship to the problem make the decision.
5.A model of how humans behave, particularly "the rational actor"
paradigm, is a necessary assumption for
a. computerization of data within a business organization.
b. not assuming people are inherently good.
c. the problem-solving algorithm.
d. assuming that humans are inherently altruistic.: c. the problem-solving
algo- rithm.
6.Suppose you're trying to compare the year-to-year performance of one
of your regional salespeople over a period during which income grew by
,3%. If demand for your products has an income elasticity of 2, how would
you measure the salesperson's performance?
a. You would expect quantity to increase by 6%
b. You would expect quantity to increase by 8%
c. You would expect quantity to increase by 4%
d. You would expect quantity to increase by 2%: a. You would expect
quantity to increase by 6%
7.Total costs increase from $1,500 to $1,800 when a firm increases
output from 40 to 50 units. Which of the following is true?
a. VC rise by $1,800
b. VC rise by $0
c. VC rise by $1,500
d. VC rise by $30: 0d . VC rise by $300
8.An example of a price floor is
a. a clearance sale price.
b. an insurance maximum out-of-pocket expense.
c. rent controls in New York.
d. minimum wages.: d. minimum wages.
9.Musicians sometimes sell the right to the future proceeds of their perfor-
mances to investors for lump-sums of cash (often at a discount). These are
called royalties. When artists sell their royalties to investors, wealth is
created by
a. providing untalented investors the possibility of earning a living from music
b. shifting money forward in time for musicians to satisfy their present
needs and providing a steady income to investors with potential upside of
securing the rights to performances of a would-be star.
c. providing untalented artists the possibility of earning a living from
invest- ments.
d. shifting money from those who have a lot (investors) to those who have
little (artists).: b. shifting money forward in time for musicians to satisfy
their present needs and providing a steady income to investors with
potential upside of securing the rights to performances of a would-be
star.
10.If company X is successfully outsourcing its production of T-shirts
to China, it:
a. Should be stopped on economic grounds since it is destroying wealth
b. Creates wealth by moving labor in China from lower-value use to higher-
,val- ue use
c. Destroys wealth by acquiring cheaper labor from China
, d. Destroys wealth by depriving labor in other countries of jobs: b.
Creates wealth by moving labor in China from lower-value use to
higher-value use
11.What company would a rational actor rather work for?
a. A company who gives equal raises to everyone annually
b. A company who gives raises based on title, not effort
c. A company who gives raises/bonuses based on a clear effort scale
d. A company who gives bonuses on objects not directly tied to work: c. A
company who gives raises/bonuses based on a clear effort scale
12.A firm produces 1000 units per week. It hires 10 full-time workers (40
hours/week each) at an hourly wage of $20. Raw materials costs $5 per unit.
Rent for the factory is $1,500 per week. What are the overall costs for the
week?
a. total variable cost is $13,000; total fixed cost is $1,500; total cost is
$14,500
b. total variable cost is $13,000; total fixed cost is $9,500; total cost is
$22,500
c. total variable cost is $5,000; total fixed cost is $9,500; total cost is $14,50
d. total variable cost is $5,000; total fixed cost is $1,500; total cost is $6,50:
0a . total variable cost is $13,000; total fixed cost is $1,500; total cost
is $14,500
13.The figure below shows a long-run average cost curve. What part of
the long-run average cost curve exhibits economies of scale?
a. Between 20 and 40 units per hour
b. Between 10 and 20 units per hour
c. Along the entire curve
d. Between 40 and 50 units per hour: b. Between 10 and 20 units per hour
14.hen economics speak of "marginal," they mean
a. scarcity
b. incremental
c. opportunity
d. unimportant: b. incremental
15.A firm produces 2300 units per month. The firm hires 15 full-time
workers (160 hours per month each) at an hourly wage of $17.50. Raw
materials cost
$7 per unit. Rent for the factory is $4,000 per month. What are the costs for the
month?
Solved Correct Answers
1.Transactions that are create wealth by letting people follow
.
a. voluntary; their self-interest
b. regulated; their self-interest
c. mandated; the societal good
d. socialized; the societal good: a. voluntary; their self-interest
2.Which of the following statements is correct?
a. Sunk costs can be avoided with planning
b. Post-investment hold-up is unavoidable
c. If cost includes all your costs, including your opportunity cost of
capital, you are earning zero profit when P=AC
d. Before investing, look back and reason ahead: c. If cost includes all your
costs, including your opportunity cost of capital, you are earning zero
profit when P=AC
3.The enforcement of property rights contributes to:
a. poverty
b. unconsummated mutual beneficial transactions
c. wealth-creating transactions
d. minimization of total surplus: c. wealth-creating transactions
4.There are three levers one can push to correct bad decision-making.
Which of the following is NOT such a lever?
a. Change the current decision makers' incentives.
b. Let someone else who has no relationship to the problem make the
deci- sion.
c. Let someone else who has better information or incentives make the
deci- sion.
d. Give more information to the current decision-maker.: b. Let someone
else who has no relationship to the problem make the decision.
5.A model of how humans behave, particularly "the rational actor"
paradigm, is a necessary assumption for
a. computerization of data within a business organization.
b. not assuming people are inherently good.
c. the problem-solving algorithm.
d. assuming that humans are inherently altruistic.: c. the problem-solving
algo- rithm.
6.Suppose you're trying to compare the year-to-year performance of one
of your regional salespeople over a period during which income grew by
,3%. If demand for your products has an income elasticity of 2, how would
you measure the salesperson's performance?
a. You would expect quantity to increase by 6%
b. You would expect quantity to increase by 8%
c. You would expect quantity to increase by 4%
d. You would expect quantity to increase by 2%: a. You would expect
quantity to increase by 6%
7.Total costs increase from $1,500 to $1,800 when a firm increases
output from 40 to 50 units. Which of the following is true?
a. VC rise by $1,800
b. VC rise by $0
c. VC rise by $1,500
d. VC rise by $30: 0d . VC rise by $300
8.An example of a price floor is
a. a clearance sale price.
b. an insurance maximum out-of-pocket expense.
c. rent controls in New York.
d. minimum wages.: d. minimum wages.
9.Musicians sometimes sell the right to the future proceeds of their perfor-
mances to investors for lump-sums of cash (often at a discount). These are
called royalties. When artists sell their royalties to investors, wealth is
created by
a. providing untalented investors the possibility of earning a living from music
b. shifting money forward in time for musicians to satisfy their present
needs and providing a steady income to investors with potential upside of
securing the rights to performances of a would-be star.
c. providing untalented artists the possibility of earning a living from
invest- ments.
d. shifting money from those who have a lot (investors) to those who have
little (artists).: b. shifting money forward in time for musicians to satisfy
their present needs and providing a steady income to investors with
potential upside of securing the rights to performances of a would-be
star.
10.If company X is successfully outsourcing its production of T-shirts
to China, it:
a. Should be stopped on economic grounds since it is destroying wealth
b. Creates wealth by moving labor in China from lower-value use to higher-
,val- ue use
c. Destroys wealth by acquiring cheaper labor from China
, d. Destroys wealth by depriving labor in other countries of jobs: b.
Creates wealth by moving labor in China from lower-value use to
higher-value use
11.What company would a rational actor rather work for?
a. A company who gives equal raises to everyone annually
b. A company who gives raises based on title, not effort
c. A company who gives raises/bonuses based on a clear effort scale
d. A company who gives bonuses on objects not directly tied to work: c. A
company who gives raises/bonuses based on a clear effort scale
12.A firm produces 1000 units per week. It hires 10 full-time workers (40
hours/week each) at an hourly wage of $20. Raw materials costs $5 per unit.
Rent for the factory is $1,500 per week. What are the overall costs for the
week?
a. total variable cost is $13,000; total fixed cost is $1,500; total cost is
$14,500
b. total variable cost is $13,000; total fixed cost is $9,500; total cost is
$22,500
c. total variable cost is $5,000; total fixed cost is $9,500; total cost is $14,50
d. total variable cost is $5,000; total fixed cost is $1,500; total cost is $6,50:
0a . total variable cost is $13,000; total fixed cost is $1,500; total cost
is $14,500
13.The figure below shows a long-run average cost curve. What part of
the long-run average cost curve exhibits economies of scale?
a. Between 20 and 40 units per hour
b. Between 10 and 20 units per hour
c. Along the entire curve
d. Between 40 and 50 units per hour: b. Between 10 and 20 units per hour
14.hen economics speak of "marginal," they mean
a. scarcity
b. incremental
c. opportunity
d. unimportant: b. incremental
15.A firm produces 2300 units per month. The firm hires 15 full-time
workers (160 hours per month each) at an hourly wage of $17.50. Raw
materials cost
$7 per unit. Rent for the factory is $4,000 per month. What are the costs for the
month?
