MANAGERIAL ECONOMICS (BSP
1703) EXAM 1 PRACTICE QUESTIONS
WITH ACTUAL ANSWERS AND
EXPLANATIONS RATED A 100%
VERIFIED, UNIVERSITY OF
SINGAPORE.
, Sample Exam 1
Part1: MCQ
1. Newspaper Market Equilibrium Shift
Question:
Suppose that the market for newspaper is initially in equilibrium. Further suppose that there is
both an increase in the price of ink and a decrease in the price of magazines, which people may
read in place of a newspaper. Which of the following accurately describes the new equilibrium?
Correct Answer:
a) The equilibrium price will rise; the equilibrium quantity is ambiguous.
Explanation:
• An increase in the price of ink (a key input) causes the supply of newspapers to
decrease, shifting the supply curve left — this puts upward pressure on price and
reduces quantity.
• A decrease in the price of magazines (a substitute for newspapers) causes the demand
for newspapers to decrease, shifting the demand curve left — this puts downward
pressure on both price and quantity.
• Because supply and demand are both decreasing, quantity will definitely fall, but the
price could go up or down, depending on the relative size of the shifts.
• However, since input cost increases (especially for a necessity like ink) often have a
stronger effect on price, the most consistent result is price rising with ambiguous
quantity.
Answer a is most accurate.
Commented [S1]:
2. Fixed Labor Costs
Question:
We often think of labor as a variable cost, even in the short run. However, some labor costs may
be fixed. Which of the following represents an example of a fixed labor cost?
Correct Answer:
a) a salaried manager who has a five-year employment contract
Explanation:
• Fixed costs do not change with the level of output.
• A salaried manager on a long-term contract is paid the same regardless of how much is
produced — a classic example of a fixed cost.
• Hourly workers and output-based workers are variable costs because their payment
changes with production.
Answer a is correct.
3. Dominant Strategies in Simultaneous Games
Question:
In a simultaneous move game with two players,
Which statement is true?
Correct Answer:
d) if both players have a dominant strategy, these constitute their Nash equilibrium
strategies.
Explanation:
1703) EXAM 1 PRACTICE QUESTIONS
WITH ACTUAL ANSWERS AND
EXPLANATIONS RATED A 100%
VERIFIED, UNIVERSITY OF
SINGAPORE.
, Sample Exam 1
Part1: MCQ
1. Newspaper Market Equilibrium Shift
Question:
Suppose that the market for newspaper is initially in equilibrium. Further suppose that there is
both an increase in the price of ink and a decrease in the price of magazines, which people may
read in place of a newspaper. Which of the following accurately describes the new equilibrium?
Correct Answer:
a) The equilibrium price will rise; the equilibrium quantity is ambiguous.
Explanation:
• An increase in the price of ink (a key input) causes the supply of newspapers to
decrease, shifting the supply curve left — this puts upward pressure on price and
reduces quantity.
• A decrease in the price of magazines (a substitute for newspapers) causes the demand
for newspapers to decrease, shifting the demand curve left — this puts downward
pressure on both price and quantity.
• Because supply and demand are both decreasing, quantity will definitely fall, but the
price could go up or down, depending on the relative size of the shifts.
• However, since input cost increases (especially for a necessity like ink) often have a
stronger effect on price, the most consistent result is price rising with ambiguous
quantity.
Answer a is most accurate.
Commented [S1]:
2. Fixed Labor Costs
Question:
We often think of labor as a variable cost, even in the short run. However, some labor costs may
be fixed. Which of the following represents an example of a fixed labor cost?
Correct Answer:
a) a salaried manager who has a five-year employment contract
Explanation:
• Fixed costs do not change with the level of output.
• A salaried manager on a long-term contract is paid the same regardless of how much is
produced — a classic example of a fixed cost.
• Hourly workers and output-based workers are variable costs because their payment
changes with production.
Answer a is correct.
3. Dominant Strategies in Simultaneous Games
Question:
In a simultaneous move game with two players,
Which statement is true?
Correct Answer:
d) if both players have a dominant strategy, these constitute their Nash equilibrium
strategies.
Explanation:
