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MANAGERIAL ECONOMICS Test I MULTIPLE CHOICE Instruction Underline the statement of the best answer 70 POINTS 1 The study of economics is primarily concerned with A keeping private businesses from losing money B demonstrating that capitalistic economies are superior to socialistic economies C choices that are made in seeking to use scarce resources efficiently D determining the most equitable distribution of society s output 2 The economic perspective refers to A macroeconomic phenomena but not microeconomic phenomena B microeconomic phenomena but not macroeconomic phenomena C the making of rational decisions in a context of marginal costs and marginal benefits D unlimited resources in a context of limited economic wants and needs that need to be satisfied 3 Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase This is a reflection of A resource scarcity and the necessity of choice B rational behavior C marginal costs that exceed marginal benefits D the tradeoff problem that exists between competing goals 4 Even though local newspapers are very inexpensive people rarely buy more than one of them each day This fact A B is an example of irrational behavior implies that reading should be taught through phonics rather than the whole language method C contradicts the economic perspective D implies that for most people the marginal benefit of reading a second newspaper is less than the marginal cost 5 Economists A use both the economic perspective and the scientific method B use the economic perspective but not the scientific method C make positive economic statements but not normative economic statements D reject theorizing as being impractical 6 Which of the following is a correct statement A Economic concepts or laws that are valid during depression are necessarily valid during prosperity B Though not quantitatively exact economic laws are useful because they allow us to predict and therefore control or adjust to events C Economics is as scientific as are physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry D Because economics is concerned with questions of ought it is a branch of applied ethics and not scientific 7 The term ceteris paribus means A that if event A precedes event B A has caused B B that economics deals with facts not values C other things equal D prosperity inevitably follows recession 8 Suppose an economist says that Other things equal the lower the price of bananas the greater the amount of bananas purchased This statement indicates that A the quantity of bananas purchased determines the price of bananas B all factors other than the price of bananas for example consumer tastes and incomes are assumed to be constant C economists can conduct controlled laboratory experiments D one cannot generalize about the relationship between the price of bananas and the quantity purchased 9 If there is a tradeoff between goals A and B A greater fulfillment of A means lesser fulfillment of B B goals A and B are positively correlated C causation exists between the two goals D greater fulfillment of A means greater fulfillment of B 10 Macroeconomics approaches the study of economics from the viewpoint of A the entire economy B governmental units C D the operation of specific product and resource markets individual firms 11 Which of the following is associated with macroeconomics A an examination of the incomes of USeP graduates B an empirical investigation of the general price level since 2010 C a study of the trend of rice prices since the Marcos Administration D a case study of pricing and production in the electronics industry 12 Which of the following signals to the owners of scarce resources are the best uses of those 13 Scarce resources are ultimately allocated toward the production of goods most wanted by resources A profits of businesses B government regulations C economic indicators D the accounting cost of those resources firms attempt to maximize profits society because A B they are most efficiently utilized in these areas C consumers demand inexpensive goods and services D managers are benevolent 14 Which of the following is incorrect 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 15 If the interest rate is 5 what is the present value of ten dollars received one year from now A 9 50 B 10 05 C 9 52 D 9 77 16 When dealing with present value a higher interest rate 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 not enough information is given 17 A firm will have constant profits of 100 000 per year for the next four years and the interest rate is six percent Assuming these profits are realized at the end of each year what is the present value these future profits A 325 816 B 376 741 C 400 000 D 346 511 18 A firm will maximize the present value of future profits by maximizing current profits when the A growth rate in profits is constant B growth rate in profits is larger than the interest rate C D growth rate and interest rate are constant and equal interest rate is larger than the growth rate in profits and both are constant 19 To an economist maximizing profit is A maximizing the value of the firm B maximizing the current year s profits C minimizing the permanent total costs D minimizing the future risks 20 The value of the firm is the 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 21 Statement 1 Demand curve is down sloping because producers offer less of a product for sale as the price of the product falls Statement 2 Supply curve depicts the collective behavior of buyer in this market A Statement 1 is true statement 2 is false B Statement 1 is false statement 2 is true C Both are true D Both are false 22 Statement 1 A price increase of a commodity would result to a decrease in demand for such commodity Statement 2 An equilibrium in the market is reached when P Q A Statement 1 is true statement 2 is false B Statement 1 is false statement 2 is true C Both are true D Both are false 23 Refer to the

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USM BUSAD 122 - Managerial Economics Exam

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