Question 1

Economics:

Accepted Answer

A)  exists because of scarcity. 
B)  is not related to decision making. 
C)  is the science of the rich. 
D)  has nothing to do with the allocation of resources. 
A)  exists because of scarcity. 
B)  is not related to decision making. 
C)  is the science of the rich. 
D)  has nothing to do with the allocation of resources.

Question 2

Which of the following is incorrect?

Accepted Answer

A)  Accounting profits generally overstate economic profits. 
B)  Accounting profits do not take opportunity cost into account. 
C)  Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production. 
D)  Managers should only be interested in accounting profits. 
A)  Accounting profits generally overstate economic profits. 
B)  Accounting profits do not take opportunity cost into account. 
C)  Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production. 
D)  Managers should only be interested in accounting profits.

Question 3

A bond pays $100 at the end of each year for five years, plus an additional $1,000 when the bond matures at the end of five years. What is the most you would be willing to pay for this bond if your opportunity cost of funds is 6 percent?

Accepted Answer

The maximum amount you should

Question 4

In 1995 a $50 million major renovation project of the 19-year-old Seattle Kingdome was completed nearly $18 million over the initial budget. Several million dollars in other expenses were incurred during the renovation phase, including payments to the Seattle Seahawks football team and the Mariners baseball team for revenue they lost by not being able to play in the Kingdome. If you were on the city council, what information would you have needed to determine whether the renovation project was a sound investment?

Accepted Answer

You need to obtain the information requi

Question 5

In the Wealth of Nations, Adam Smith argues that:

Accepted Answer

A)  self-interest leads to the efficient allocation of resources. 
B)  benevolence leads to the efficient allocation of resources. 
C)  profits are maximized where marginal revenue equals net marginal benefits. 
D)  None of the statements associated with this question are correct. 
A)  self-interest leads to the efficient allocation of resources. 
B)  benevolence leads to the efficient allocation of resources. 
C)  profits are maximized where marginal revenue equals net marginal benefits. 
D)  None of the statements associated with this question are correct.

Question 6

According to the five forces framework, sustainable industry profits depend upon:

Accepted Answer

A)  industry entry conditions. 
B)  the power of input suppliers. 
C)  the degree of industry rivalry. 
D)  All of the statements associated with this question are correct. 
A)  industry entry conditions. 
B)  the power of input suppliers. 
C)  the degree of industry rivalry. 
D)  All of the statements associated with this question are correct.

Question 7

What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)?

Accepted Answer

A)  600 
B)  2,600 
C)  3,000 
D)  3,400 
A)  600 
B)  2,600 
C)  3,000 
D)  3,400

Question 8

If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer:

Accepted Answer

A)  must buy the good at that price. 
B)  will refuse to purchase the good. 
C)  must revalue the good. 
D)  None of the statements associated with this question are correct. 
A)  must buy the good at that price. 
B)  will refuse to purchase the good. 
C)  must revalue the good. 
D)  None of the statements associated with this question are correct.

Question 9

What is the marginal cost associated with producing three units of the control variable, Q (identify point E in the table)?

Accepted Answer

A)  50 
B)  100 
C)  200 
D)  300 
A)  50 
B)  100 
C)  200 
D)  300

Question 10

Suppose B(Q) = 5Q - Q2 and C(Q) = 1 + Q2. Then, net benefits are ______ when Q equals __________ units since the second-order condition is ______________.

Accepted Answer

A)  maximized; 5/4; negative 
B)  minimized; -1; positive 
C)  maximized; 4/5; positive 
D)  minimized; 4/5; negative 
A)  maximized; 5/4; negative 
B)  minimized; -1; positive 
C)  maximized; 4/5; positive 
D)  minimized; 4/5; negative

Question 11

As more firms enter an industry:

Accepted Answer

A)  accounting profits increase. 
B)  economic profits decrease. 
C)  prices rise. 
D)  None of the statements associated with this question are correct. 
A)  accounting profits increase. 
B)  economic profits decrease. 
C)  prices rise. 
D)  None of the statements associated with this question are correct.

Question 12

Total benefits in the table are:

Accepted Answer

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

Question 13

What is the marginal net benefit of producing the fourth unit?

Accepted Answer

A)  -50 
B)  0 
C)  60 
D)  40 
A)  -50 
B)  0 
C)  60 
D)  40

Question 14

Negotiations between the buyer and seller of a new house are an example of:

Accepted Answer

A)  consumer-consumer rivalry. 
B)  consumer-producer rivalry. 
C)  producer-producer rivalry. 
D)  monopoly. 
A)  consumer-consumer rivalry. 
B)  consumer-producer rivalry. 
C)  producer-producer rivalry. 
D)  monopoly.

Question 15

If marginal benefits exceed marginal costs, it is profitable to:

Accepted Answer

A)  increase Q. 
B)  decrease Q. 
C)  stay at that level of Q. 
D)  All of the statements associated with this question are correct. 
A)  increase Q. 
B)  decrease Q. 
C)  stay at that level of Q. 
D)  All of the statements associated with this question are correct.

Question 16

The opportunity cost of receiving $10 in the future as opposed to getting that $10 today is:

Accepted Answer

A)  the foregone interest that could be earned if you had the money today. 
B)  the taxes paid on any earnings. 
C)  the value of $10 relative to the total income of that person. 
D)  the value of $10 relative to the total income of all persons. 
A)  the foregone interest that could be earned if you had the money today. 
B)  the taxes paid on any earnings. 
C)  the value of $10 relative to the total income of that person. 
D)  the value of $10 relative to the total income of all persons.

Question 17

When dealing with present value, a higher interest rate:

Accepted Answer

A)  does not affect the present value of the future amount. 
B)  increases the present value of a future amount. 
C)  decreases the present value of a future amount. 
D)  None of the statements associated with this question are correct. 
A)  does not affect the present value of the future amount. 
B)  increases the present value of a future amount. 
C)  decreases the present value of a future amount. 
D)  None of the statements associated with this question are correct.

Question 18

Individuals who choose to attend school have made a decision to invest in human capital. Use the terminology of net present value analysis to explain why you are attending school.

Accepted Answer

The net present value of attending schoo

Question 19

A potential entrepreneur is trying to decide whether to open a new health spa. She currently makes $35,000 per year as an aerobics instructor and will have to give up this job if she opens the new health spa. If she chooses to open the spa, it will cost her $200,000 per year in rent and other operating expenses.
a. What are her accounting costs?
b. What are her opportunity costs?
c. How much would she need to make in revenues to earn positive accounting profits? Positive economic profits?

Accepted Answer

a. Accounting costs equal $200,000 per y

Question 20

Suppose the interest rate is 6 percent, the expected growth rate of the firm is 3 percent, and the firm is expected to continue forever. If current profits are $1,200, what is the value of the firm?

Accepted Answer

A)  $41,200 
B)  $40,000 
C)  $36,500 
D)  $42,400 
A)  $41,200 
B)  $40,000 
C)  $36,500 
D)  $42,400

Economics:

Which of the following is incorrect?

A bond pays $100 at the end of each year for five years, plus an additional $1,000 when the bond matures at the end of five years. What is the most you would be willing to pay for this bond if your opportunity cost of funds is 6 percent?

In the Wealth of Nations, Adam Smith argues that:

According to the five forces framework, sustainable industry profits depend upon:

What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)?

If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer:

What is the marginal cost associated with producing three units of the control variable, Q (identify point E in the table)?

Suppose B(Q) = 5Q - Q² and C(Q) = 1 + Q². Then, net benefits are when Q equals units since the second-order condition is __________.

As more firms enter an industry:

Total benefits in the table are:

What is the marginal net benefit of producing the fourth unit?

Negotiations between the buyer and seller of a new house are an example of:

If marginal benefits exceed marginal costs, it is profitable to:

The opportunity cost of receiving $10 in the future as opposed to getting that $10 today is:

When dealing with present value, a higher interest rate:

Individuals who choose to attend school have made a decision to invest in human capital. Use the terminology of net present value analysis to explain why you are attending school.

Suppose the interest rate is 6 percent, the expected growth rate of the firm is 3 percent, and the firm is expected to continue forever. If current profits are $1,200, what is the value of the firm?

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

Economics:

Which of the following is incorrect?

A bond pays $100 at the end of each year for five years, plus an additional $1,000 when the bond matures at the end of five years. What is the most you would be willing to pay for this bond if your opportunity cost of funds is 6 percent?

In the Wealth of Nations, Adam Smith argues that:

According to the five forces framework, sustainable industry profits depend upon:

What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)?

If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer:

What is the marginal cost associated with producing three units of the control variable, Q (identify point E in the table)?

Suppose B(Q) = 5Q - Q2 and C(Q) = 1 + Q2. Then, net benefits are ______ when Q equals __________ units since the second-order condition is ______________.

As more firms enter an industry:

Total benefits in the table are:

What is the marginal net benefit of producing the fourth unit?

Negotiations between the buyer and seller of a new house are an example of:

If marginal benefits exceed marginal costs, it is profitable to:

The opportunity cost of receiving $10 in the future as opposed to getting that $10 today is:

When dealing with present value, a higher interest rate:

Individuals who choose to attend school have made a decision to invest in human capital. Use the terminology of net present value analysis to explain why you are attending school.

Suppose the interest rate is 6 percent, the expected growth rate of the firm is 3 percent, and the firm is expected to continue forever. If current profits are $1,200, what is the value of the firm?

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

Suppose B(Q) = 5Q - Q² and C(Q) = 1 + Q². Then, net benefits are when Q equals units since the second-order condition is __________.