Test Bank with Study Guide for
Managerial Economics, 10th
Edition
Economic theory is a valuable tool for business decision making because it - ANSWERSidentifies for
managers the essential information for making a decision
Which of the following is NOT one of the economic forces that promotes long-run profitability of
business firms? - ANSWERSfierce rivalry among the firms competing in the industry
Which of the following is an example of an implicit cost for a firm? - ANSWERSboth "the value of
time worked by the owner" and "forgone rent on property owned by firm"
Economic profit - ANSWERSis negative when total costs exceed total revenues
Which of the following statements is false? - ANSWERSIf economic profit is negative, accounting
profit must also be negative.
Corporate control mechanisms - ANSWERSmay not be important when corporate takeovers
effectively impose external forces to ensure managerial decisions are value maximizing
Which of the following conditions must hold in order to have a principal-agent problem? -
ANSWERSBoth "Managers and owners have different objectives for the firm" and "it is very costly to
oversee every managerial decision to make sure all decisions increase the value of the firm."
In markets characterized by oligopoly, - ANSWERSentry into the market is restricted so that profit
may be positive in the long run.
Which of the following is NOT one of the features characterizing market structures? - ANSWERSthe
level of capital investment in research and development
A price-setting firm - ANSWERScan lower the price of its product and sell more units
, A parameter is said to be statistically significant if there is sufficient evidence that the -
ANSWERStrue value of the parameter does not equal zero
An estimator is unbiased if it produces - ANSWERSestimates of a parameter that are, on average,
equal to the true parameter.
If the t-statistic exceeds the critical value of t , then one can - ANSWERSreject the hypothesis that
the true value of the parameter equals zero
To test whether the overall regression equation is statistically significant, one uses the - ANSWERSF-
statistic
In the nonlinear function Y = aX^bZ^c, the parameter c measures - ANSWERSthe elasticity of Y with
respect to Z.
If the p-value is 0.01 for the parameter estimate for b, the - ANSWERSprobability of finding statistical
significance when the true value of b is zero is exactly 1%.
If the level of significance for testing is specified to be 5%, then the parameter estimate for b is
statistically significant if its p-value is - ANSWERS0.048
What are the 5 main economic goals? - ANSWERSEfficiency, equity, full employment, stability, and
economic growth
What does an efficiency goal mean? - ANSWERSthe government should be efficient.
What does an equity goal mean? - ANSWERSensuring the equal distribution of resources.
What does a full employment goal mean? - ANSWERSthe government should ensure it provides
equal job opportunities to its citizens.
What does a stability goal mean? - ANSWERSensure the economy is stable by controlling inflation.
What does an economic growth goal mean? - ANSWERSthe government should focus on growing the
country's GDP.
Managerial Economics, 10th
Edition
Economic theory is a valuable tool for business decision making because it - ANSWERSidentifies for
managers the essential information for making a decision
Which of the following is NOT one of the economic forces that promotes long-run profitability of
business firms? - ANSWERSfierce rivalry among the firms competing in the industry
Which of the following is an example of an implicit cost for a firm? - ANSWERSboth "the value of
time worked by the owner" and "forgone rent on property owned by firm"
Economic profit - ANSWERSis negative when total costs exceed total revenues
Which of the following statements is false? - ANSWERSIf economic profit is negative, accounting
profit must also be negative.
Corporate control mechanisms - ANSWERSmay not be important when corporate takeovers
effectively impose external forces to ensure managerial decisions are value maximizing
Which of the following conditions must hold in order to have a principal-agent problem? -
ANSWERSBoth "Managers and owners have different objectives for the firm" and "it is very costly to
oversee every managerial decision to make sure all decisions increase the value of the firm."
In markets characterized by oligopoly, - ANSWERSentry into the market is restricted so that profit
may be positive in the long run.
Which of the following is NOT one of the features characterizing market structures? - ANSWERSthe
level of capital investment in research and development
A price-setting firm - ANSWERScan lower the price of its product and sell more units
, A parameter is said to be statistically significant if there is sufficient evidence that the -
ANSWERStrue value of the parameter does not equal zero
An estimator is unbiased if it produces - ANSWERSestimates of a parameter that are, on average,
equal to the true parameter.
If the t-statistic exceeds the critical value of t , then one can - ANSWERSreject the hypothesis that
the true value of the parameter equals zero
To test whether the overall regression equation is statistically significant, one uses the - ANSWERSF-
statistic
In the nonlinear function Y = aX^bZ^c, the parameter c measures - ANSWERSthe elasticity of Y with
respect to Z.
If the p-value is 0.01 for the parameter estimate for b, the - ANSWERSprobability of finding statistical
significance when the true value of b is zero is exactly 1%.
If the level of significance for testing is specified to be 5%, then the parameter estimate for b is
statistically significant if its p-value is - ANSWERS0.048
What are the 5 main economic goals? - ANSWERSEfficiency, equity, full employment, stability, and
economic growth
What does an efficiency goal mean? - ANSWERSthe government should be efficient.
What does an equity goal mean? - ANSWERSensuring the equal distribution of resources.
What does a full employment goal mean? - ANSWERSthe government should ensure it provides
equal job opportunities to its citizens.
What does a stability goal mean? - ANSWERSensure the economy is stable by controlling inflation.
What does an economic growth goal mean? - ANSWERSthe government should focus on growing the
country's GDP.
