Question 1

The higher the interest rate, the greater the:

Accepted Answer

A)  present value. 
B)  net present value. 
C)  Both present value and net present value are correct. 
D)  Neither present value nor net present value is correct. 
A)  present value. 
B)  net present value. 
C)  Both present value and net present value are correct. 
D)  Neither present value nor net present value is correct.

Question 2

Marginal net benefits in the table:

Accepted Answer

A)  initially increase, reach a maximum, and then decrease. 
B)  initially decrease, reach a minimum, and then increase. 
C)  remain relatively stable over different values for the control variable. 
D)  decrease at a constant rate. 
A)  initially increase, reach a maximum, and then decrease. 
B)  initially decrease, reach a minimum, and then increase. 
C)  remain relatively stable over different values for the control variable. 
D)  decrease at a constant rate.

Question 3

The value of the firm is the:

Accepted Answer

A)  current value of profits. 
B)  present discounted value of all future profits. 
C)  average value of all future profits. 
D)  total value of all future profits. 
A)  current value of profits. 
B)  present discounted value of all future profits. 
C)  average value of all future profits. 
D)  total value of all future profits.

Question 4

Basic principles that comprise good management include:

Accepted Answer

A)  identifying goals and constraints. 
B)  recognizing the nature and importance of profits. 
C)  understanding incentives. 
D)  All of the statements associated with this question are correct. 
A)  identifying goals and constraints. 
B)  recognizing the nature and importance of profits. 
C)  understanding incentives. 
D)  All of the statements associated with this question are correct.

Question 5

Given the benefit function B(Y) = 200Y - 3Y2, the marginal benefit is:

Accepted Answer

A)  600Y. 
B)  200 - 3Y. 
C)  200 - 6Y2. 
D)  200 - 6Y. 
A)  600Y. 
B)  200 - 3Y. 
C)  200 - 6Y2. 
D)  200 - 6Y.

Question 6

Suppose total benefits and total costs are given by B(Y) = 220Y - 15Y2 and C(Y) = 10Y. What level of Y will yield the maximum net benefits?

Accepted Answer

A)  7 
B)  10/9 
C)  5 
D)  150/20 
A)  7 
B)  10/9 
C)  5 
D)  150/20

Question 7

The lower the interest rate:

Accepted Answer

A)  the greater the present value of a future amount. 
B)  the smaller the present value of a future amount. 
C)  the greater the level of inflation. 
D)  None of the statements associated with this question are correct. 
A)  the greater the present value of a future amount. 
B)  the smaller the present value of a future amount. 
C)  the greater the level of inflation. 
D)  None of the statements associated with this question are correct.

Question 8

What is the level of net benefits when four units are produced?

Accepted Answer

A)  0 
B)  70 
C)  -70 
D)  20 
A)  0 
B)  70 
C)  -70 
D)  20

Question 9

Property owners move scarce resources toward the production of goods most valued by society because:

Accepted Answer

A)  government controls the allocation of resources. 
B)  consumers demand inexpensive goods and services. 
C)  managers are solely pursuing the interests of society. 
D)  firms attempt to maximize profits. 
A)  government controls the allocation of resources. 
B)  consumers demand inexpensive goods and services. 
C)  managers are solely pursuing the interests of society. 
D)  firms attempt to maximize profits.

Question 10

Total costs in the table are:

Accepted Answer

A)  decreasing at a constant rate. 
B)  decreasing at a decreasing rate. 
C)  increasing at a constant rate. 
D)  increasing at an increasing rate. 
A)  decreasing at a constant rate. 
B)  decreasing at a decreasing rate. 
C)  increasing at a constant rate. 
D)  increasing at an increasing rate.

Question 11

The primary inducement for new firms to enter an industry is:

Accepted Answer

A)  increased technology. 
B)  availability of labor. 
C)  low capital costs. 
D)  presence of economic profits. 
A)  increased technology. 
B)  availability of labor. 
C)  low capital costs. 
D)  presence of economic profits.

Question 12

Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the:

Accepted Answer

A)  interest rate is larger than the growth rate in profits and both are constant. 
B)  growth rate in profits is constant and is larger than the interest rate. 
C)  interest rate is smaller than the growth rate of profits. 
D)  growth rate of profits and the interest rate are equal. 
A)  interest rate is larger than the growth rate in profits and both are constant. 
B)  growth rate in profits is constant and is larger than the interest rate. 
C)  interest rate is smaller than the growth rate of profits. 
D)  growth rate of profits and the interest rate are equal.

Question 13

If the interest rate is 5 percent, the present value of $200 received at the end of five years is:

Accepted Answer

A)  $121.34. 
B)  $156.71. 
C)  $176.41. 
D)  $132.62. 
A)  $121.34. 
B)  $156.71. 
C)  $176.41. 
D)  $132.62.

Question 14

Given the benefit function B(Y) = 400Y - 2Y2, the marginal benefit is:

Accepted Answer

A)  200Y. 
B)  400 - 2Y2. 
C)  400 - 4Y. 
D)  800 - 2Y. 
A)  200Y. 
B)  400 - 2Y2. 
C)  400 - 4Y. 
D)  800 - 2Y.

Question 15

You have just been hired as a consultant to help a firm to decide which of three options to take to maximize the value of the firm over the next three years. The following table shows year-end profits for each option. Interest rates are expected to be stable at 8 percent over the next three years.   a. Discuss the difference in the profits associated with each option. Provide an example of real-world options that might generate such profit streams.
b. Which option has the greatest present value?

Accepted Answer

a. Option A has the highest first-year p

Question 16

In order to maximize net benefits, firms should produce where:

Accepted Answer

A)  total benefits equal total costs. 
B)  profits are zero. 
C)  marginal cost is minimized. 
D)  marginal benefits equal marginal costs. 
A)  total benefits equal total costs. 
B)  profits are zero. 
C)  marginal cost is minimized. 
D)  marginal benefits equal marginal costs.

Question 17

A new manager recently was given an assignment to create two possible wage schemes for a design firm. The manager came up with the following packages: (1) Each employee will start at $15 per hour and will work eight hours per day; (2) each employee will receive $8 per hour and one-tenth of 1 percent of profits (expected profits are $80,000 per day if everyone puts out maximum effort). Which program will motivate the employees more? Which program would you choose? Why?

Accepted Answer

Package 2 will motivate the employees be

Question 18

Suppose total benefits and total costs are given by B(Y) = 150Y - 10Y2 and C(Y) = 5Y2. What level of Y will yield the maximum net benefits?

Accepted Answer

A)  7 
B)  10/9 
C)  5 
D)  150/20 
A)  7 
B)  10/9 
C)  5 
D)  150/20

Question 19

Incentive plans imply:

Accepted Answer

A)  if managers get highly paid, then they work hard. 
B)  if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales, they receive a lot of pay. 
C)  managers are not selfish. 
D)  managers should be watched all the time. 
A)  if managers get highly paid, then they work hard. 
B)  if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales, they receive a lot of pay. 
C)  managers are not selfish. 
D)  managers should be watched all the time.

Question 20

At what level of output does marginal cost equal marginal revenue?

Accepted Answer

A)  10 
B)  20 
C)  30 
D)  40 
A)  10 
B)  20 
C)  30 
D)  40

The higher the interest rate, the greater the:

Marginal net benefits in the table:

The value of the firm is the:

Basic principles that comprise good management include:

Given the benefit function B(Y) = 200Y - 3Y², the marginal benefit is:

Suppose total benefits and total costs are given by B(Y) = 220Y - 15Y² and C(Y) = 10Y. What level of Y will yield the maximum net benefits?

The lower the interest rate:

What is the level of net benefits when four units are produced?

Property owners move scarce resources toward the production of goods most valued by society because:

Total costs in the table are:

The primary inducement for new firms to enter an industry is:

Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the:

If the interest rate is 5 percent, the present value of $200 received at the end of five years is:

Given the benefit function B(Y) = 400Y - 2Y², the marginal benefit is:

In order to maximize net benefits, firms should produce where:

Suppose total benefits and total costs are given by B(Y) = 150Y - 10Y² and C(Y) = 5Y². What level of Y will yield the maximum net benefits?

Incentive plans imply:

At what level of output does marginal cost equal marginal revenue?

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 1: The Fundamentals of Managerial Economics

The higher the interest rate, the greater the:

Marginal net benefits in the table:

The value of the firm is the:

Basic principles that comprise good management include:

Given the benefit function B(Y) = 200Y - 3Y2, the marginal benefit is:

Suppose total benefits and total costs are given by B(Y) = 220Y - 15Y2 and C(Y) = 10Y. What level of Y will yield the maximum net benefits?

The lower the interest rate:

What is the level of net benefits when four units are produced?

Property owners move scarce resources toward the production of goods most valued by society because:

Total costs in the table are:

The primary inducement for new firms to enter an industry is:

Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the:

If the interest rate is 5 percent, the present value of $200 received at the end of five years is:

Given the benefit function B(Y) = 400Y - 2Y2, the marginal benefit is:

In order to maximize net benefits, firms should produce where:

Suppose total benefits and total costs are given by B(Y) = 150Y - 10Y2 and C(Y) = 5Y2. What level of Y will yield the maximum net benefits?

Incentive plans imply:

At what level of output does marginal cost equal marginal revenue?

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Given the benefit function B(Y) = 200Y - 3Y², the marginal benefit is:

Suppose total benefits and total costs are given by B(Y) = 220Y - 15Y² and C(Y) = 10Y. What level of Y will yield the maximum net benefits?

Given the benefit function B(Y) = 400Y - 2Y², the marginal benefit is:

Suppose total benefits and total costs are given by B(Y) = 150Y - 10Y² and C(Y) = 5Y². What level of Y will yield the maximum net benefits?