Multiple Choice Questions Set 1 Managerial Economics

1. Select the group that best represents the basic factors of production. a. land, labor, capital, entrepreneurship b. land, labor, money, management skills c. land, natural resources, labor, capital d. land, labor, capital, technology Scarcity is a condition that exists when a. there is a fixed supply of resources. b. there is a large demand for a product. c. resources are not able to meet the entire demand for a product. d. all of the above. Managerial economics is best defined as a. the study of economics by managers. b. the study of the aggregate economic activity. c. the study of how managers make decisions about the use of scarce resources. d. all of the above are good definitions. A critical element of entrepreneurship (as opposed to managerial skills) is a. leadership skills. b. risk taking. c. technology. d. political skills. A company will strive to minimize a. transaction costs. b. costs of internal operations. c. total costs of transactions and internal operations combined. d. variable costs. Company goals that are concerned with creating employee and customer satisfaction and maintaining a high degree of social responsibility are called ___________ objectives. a. social b. noneconomic c. welfare d. public relations ______________ risk involves variation in returns due to the ups and downs of the economy, the industry and the firm. a. structural b. fluctuation c. business d. financial _____________ risk concerns the variation in returns that is

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induced by leverage. a. business risk b. premium c. business d. financial 9. A new taco-making machine that is similar in size and cost to hot dog carts has encouraged more street vendors to begin selling tacos. What short-run impact do you think this might have on the market for hot dogs? a. decrease in the demand for hot dogs b. increase in the demand for hot dogs c. decrease in the supply of hot dogs d. increase in the supply of hot dogs

10. Which of the following is not a non-price determinant of demand? a. tastes and preferences b. income c. technology d. future expectations 11. Which of the following is not a nonprice determinant of supply? a. costs b. technology c. income d. future expectations 12. Which of the following statements is not true? a. an increase in demand causes equilibrium price and quantity to rise. b. a decrease in demand causes equilibrium price and quantity to fall. c. an increase in supply causes equilibrium price to fall and quantity to rise. d. a decrease in supply causes equilibrium price to rise and quantity to rise. 13. Which of the following would cause a decrease in the demand for fish? a. the price of red meat increases. b. the price of fish increases. c. the price of chicken decreases. d. the number of fishing boats decreases. 14. Which of the following will not cause a short run shift in the supply curve? a. a change in the number of sellers b. a change in the cost of resources c. a change in the price of the product d. a change in future expectations 15. In a. b. c. the short run, a change in the equilibrium price will always lead to inflation. cause a shift in the demand curve. cause a shift in the supply curve.

d. cause a change in the quantity demanded or supplied. 16. The switch to the use of HFCS from sugar in soft drinks was prompted in large part by its relatively lower price. Assuming a competitive market, what effect would this change have on the equilibrium price and output for soft drinks? a. price rises, output falls b. price falls, output rises c. price rises, output rises d. price falls, output falls 17. Which of the following would indicate that price is temporarily below its market equilibrium? a. There are a number of producers who are left with unwanted inventories. b. There are a number of customers who must be placed on waiting lists for the product. c. Firms decide to leave the market. d. The government must step in and subsidize the product. 18. Suppose demand is expressed as QD = 300 - 50P. If we want to make this equation consistent with the typical supply and demand diagram, this equation must be stated as: a. P = 300 - 50Q b. P = 6 - .02Q c. P = 50 - 300Q d. Q = 6 - .02P 19. Which of the following refers to a shift in the demand curve? a. "This new advertising campaign should really increase our demand." b. "Let's drop our price to increase our demand." c. "We dare not raise our price because our demand will drop." d. "If new sellers enter the market, the demand for the product is bound to increase." 20. A decrease in the price of personal computers can result from a. a decrease in the price of chips. b. improvements in methods of assembling computers. c. an increase in the gross national product. d. both a. and b. 21. Which of the following can result in an increase in the supply of residential housing in the short run? a. a decrease in the price of lumber b. a decrease in real household incomes c. an increase in the wages of electricians d. none of the above 22. Which of the following is a key determinant of both supply and demand? a. income b. future expectations c. tastes and preferences d. sales tax

23. A market is in equilibrium when a. supply is equal to demand. b. the price is adjusting upward. c. the quantity supplied is equal to the quantity demanded. d. tastes and preference remain constant. 24. Which of the following indicates that there is a shortage in the market? a. demand is rising b. demand is falling c. price is rising d. price is falling 25. The sensitivity of the change in quantity demanded to a change in price is called a. income elasticity. b. cross-elasticity. c. price elasticity of demand. d. coefficient of elasticity. 26. The sensitivity of the change in quantity consumed of one product to a change in the price of a related product is called a. cross-elasticity. b. substitute elasticity. c. complementary elasticity. d. price elasticity of demand. 27. A product that is similar to another, and can be consumed in place of it, is called a. a normal good. b. an inferior good. c. a complementary good. d. a substitute good. 28. Two goods are _____________ if the quantity consumed of one increases when the price of the other decreases. a. normal b. superior c. complementary d. substitute 29. The government unit that wants to achieve "revenue enhancement" will find it considerably more favorable to enact an excise tax on products whose demand is a. highly elastic. b. relatively elastic. c. highly inelastic. d. unitary elastic. 30. A product consumed in conjunction with another is called a(n) a. inferior good. b. complementary good. c. normal good. d. substitute good.

Multiple Choice Questions Answer to Set 1 Managerial Economics

1. Select the group that best represents the basic factors of production. a. land, labor, capital, entrepreneurship b. land, labor, money, management skills c. land, natural resources, labor, capital d. land, labor, capital, technology Scarcity is a condition that exists when a. there is a fixed supply of resources. b. there is a large demand for a product. c. resources are not able to meet the entire demand for a product. d. all of the above. Managerial economics is best defined as a. the study of economics by managers. b. the study of the aggregate economic activity. c. the study of how managers make decisions about the use of scarce resources. d. all of the above are good definitions. A critical element of entrepreneurship (as opposed to managerial skills) is a. leadership skills. b. risk taking. c. technology. d. political skills. A company will strive to minimize a. transaction costs. b. costs of internal operations. c. total costs of transactions and internal operations combined. d. variable costs. Company goals that are concerned with creating employee and customer satisfaction and maintaining a high degree of social responsibility are called ___________ objectives. a. social b. noneconomic c. welfare d. public relations ______________ risk involves variation in returns due to the ups and downs of the economy, the industry and the firm. a. structural b. fluctuation c. business d. financial _____________ risk concerns the variation in returns that is

2.

3.

4.

5.

6.

7.

8.

induced by leverage. a. business risk b. premium c. business d. financial 9. A new taco-making machine that is similar in size and cost to hot dog carts has encouraged more street vendors to begin selling tacos. What short-run impact do you think this might have on the market for hot dogs? a. decrease in the demand for hot dogs b. increase in the demand for hot dogs c. decrease in the supply of hot dogs d. increase in the supply of hot dogs

10. Which of the following is not a non-price determinant of demand? a. tastes and preferences b. income c. technology d. future expectations 11. Which of the following is not a nonprice determinant of supply? a. costs b. technology c. income d. future expectations 12. Which of the following statements is not true? a. an increase in demand causes equilibrium price and quantity to rise. b. a decrease in demand causes equilibrium price and quantity to fall. c. an increase in supply causes equilibrium price to fall and quantity to rise. d. a decrease in supply causes equilibrium price to rise and quantity to rise. 13. Which of the following would cause a decrease in the demand for fish? a. the price of red meat increases. b. the price of fish increases. c. the price of chicken decreases. d. the number of fishing boats decreases. 14. Which of the following will not cause a short run shift in the supply curve? a. a change in the number of sellers b. a change in the cost of resources c. a change in the price of the product d. a change in future expectations 15. In a. b. c. the short run, a change in the equilibrium price will always lead to inflation. cause a shift in the demand curve. cause a shift in the supply curve.

d. cause a change in the quantity demanded or supplied. 16. The switch to the use of HFCS from sugar in soft drinks was prompted in large part by its relatively lower price. Assuming a competitive market, what effect would this change have on the equilibrium price and output for soft drinks? a. price rises, output falls b. price falls, output rises c. price rises, output rises d. price falls, output falls 17. Which of the following would indicate that price is temporarily below its market equilibrium? a. There are a number of producers who are left with unwanted inventories. b. There are a number of customers who must be placed on waiting lists for the product. c. Firms decide to leave the market. d. The government must step in and subsidize the product. 18. Suppose demand is expressed as QD = 300 - 50P. If we want to make this equation consistent with the typical supply and demand diagram, this equation must be stated as: a. P = 300 - 50Q b. P = 6 - .02Q c. P = 50 - 300Q d. Q = 6 - .02P 19. Which of the following refers to a shift in the demand curve? a. "This new advertising campaign should really increase our demand." b. "Let's drop our price to increase our demand." c. "We dare not raise our price because our demand will drop." d. "If new sellers enter the market, the demand for the product is bound to increase." 20. A decrease in the price of personal computers can result from a. a decrease in the price of chips. b. improvements in methods of assembling computers. c. an increase in the gross national product. d. both a. and b. 21. Which of the following can result in an increase in the supply of residential housing in the short run? a. a decrease in the price of lumber b. a decrease in real household incomes c. an increase in the wages of electricians d. none of the above 22. Which of the following is a key determinant of both supply and demand? a. income b. future expectations c. tastes and preferences d. sales tax

23. A market is in equilibrium when a. supply is equal to demand. b. the price is adjusting upward. c. the quantity supplied is equal to the quantity demanded. d. tastes and preference remain constant. 24. Which of the following indicates that there is a shortage in the market? a. demand is rising b. demand is falling c. price is rising d. price is falling 25. The sensitivity of the change in quantity demanded to a change in price is called a. income elasticity. b. cross-elasticity. c. price elasticity of demand. d. coefficient of elasticity. 26. The sensitivity of the change in quantity consumed of one product to a change in the price of a related product is called a. cross-elasticity. b. substitute elasticity. c. complementary elasticity. d. price elasticity of demand. 27. A product that is similar to another, and can be consumed in place of it, is called a. a normal good. b. an inferior good. c. a complementary good. d. a substitute good. 28. Two goods are _____________ if the quantity consumed of one increases when the price of the other decreases. a. normal b. superior c. complementary d. substitute 29. The government unit that wants to achieve "revenue enhancement" will find it considerably more favorable to enact an excise tax on products whose demand is a. highly elastic. b. relatively elastic. c. highly inelastic. d. unitary elastic. 30. A product consumed in conjunction with another is called a(n) a. inferior good. b. complementary good. c. normal good. d. substitute good.