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Managerial Economics > EXAMINATION REVIEWER FOR FINALS > Flashcards

EXAMINATION REVIEWER FOR FINALS Flashcards

Theoretical Questions from Prelims to Prefinals

1
Q

This market structure is characterized by a small number of large firms.

A

Oligopoly

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2
Q

This type of good includes items that have a positive cross-price elasticity.

A

Substitute

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3
Q

This theory explains that a low supply and high demand for products increase prices, while a high supply and low demand tend to make prices fall.

A

Law of Supply and Demand

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4
Q

It is a basic economic hypothesis which states that there is a negative relationship between quantity demanded and price.

A

Law of Demand

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5
Q

This classification of normal goods refers to the items that people desire but can live without.

A

Luxuries

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6
Q

It is the change in cost associated with one unit change in output.

A

Marginal Cost

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7
Q

This optimization technique examines every component of the waiting line, such as the arrival process, service process, and number of servers, among others.

A

Queuing Theory

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8
Q

This market structure has a large number of firms producing differentiated goods.

A

Monopolistic Competition

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9
Q

This disequilibrium profit theory explains that some firms have above-normal profits because they are protected from competition by high barriers to entry.

A

Monopoly Profit

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10
Q

This is a fundamental principle of economic theory that states that when all things are equal, an increase in price results in an increase in quantity supplied.

A

Law of Supply

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11
Q

This type of good has a direct relationship between income and demand.

A

Normal

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12
Q

This pertains to the minimum price the government permits sellers to charge for a good.

A

Floor Price

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13
Q

This optimization technique seeks to achieve the best possible solution under certain restraining conditions.

A

Linear Programming

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14
Q

This type of good includes items with a negative cross-price elasticity

A

Complementary

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15
Q

This disequilibrium profit theory states that markets are sometimes in disequilibrium because of unanticipated changes in demand or cost conditions.

A

Frictional Profit

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16
Q

Which of these is NOT an example of market-supplied resources?

A. Rented buildings
B. Labor from workers
C. Raw materials
D. Owner’s land

A

D. Owner’s land

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17
Q

Which of these is NOT included in the three basic economic questions?

A. What commodities should be produced?
B. How should those commodities be produced?
C. Why are those commodities produced?
D. For whom are those commodities produced?

A

C. Why are those commodities produced?

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18
Q

Machina Industries produces equipment for manufacturing businesses. One of its products, Machine A, sells for 10,000. Fixed cost for making this product is 4,000 while variable cost is 2,500. What would be the total costs, assuming Q=15?

A

97,500

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19
Q

Machina Industries produces equipment for manufacturing businesses. One of its products, Machine A, sells for 10,000. Fixed cost for making this product is 4,000 while variable cost is 2,500. What would be the total profit, assuming Q=15?

A

52,500

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20
Q

The price of raw cotton suddenly increases. Which of the following businesses would then have a decrease in supply?

A. A restaurant
B. A hotel
C. A doll manufacturer
D. A bakery

A

C. A doll manufacturer

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21
Q

The government of Bellarmine has set a ceiling price below the equilibrium. How will this affect the market?

A. There will be a shortage.
B. There will be a surplus.
C. There will be more taxes.
D. There will be less taxes.

A

A. There will be a shortage.

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22
Q

Which of the following statements describes the present value of money?

A. It is the residual of sales revenue minus the explicit costs of doing business.
B. It is the present value of the income stream generated by a project minus the current cost of a project.
C. It is the value of a future stream of revenue or costs in terms of their current value.
D. It is the excess of revenue over costs.

A

C. It is the value of a future stream of revenue or costs in terms of their current value.

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23
Q

Service A and Service B have +0.81 and +1.12 income elasticity, consecutively. Which between the two is most likely a normal good?

A. Service A
B. Service B
C. Both Service A and Service B
D. Neither Service A and Service B

A

C. Both Service A and Service B

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24
Q

Lockout Inc. is a company that provides online security to other companies. The increase in the number of hackers and the subsequent increase in their customers have caused their profits to increase. Which disequilibrium profit theory is being described?

A

Frictional

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25
Q

Clarisse’s income has just decreased. How will this affect her purchase of a service with income elasticity of +1.12?

A. She will buy more of the service.
B. She will buy less of the service.
C. She will buy almost the same amount.
D. She will not buy the service anymore.

A

B. She will buy less of the service.

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26
Q

Which of the following equations would maximize a firm’s revenue?

A. Marginal Revenue = Price
B. Average Cost = Marginal Revenue
C. Marginal Revenue = Average Revenue
D. Marginal Revenue = 0

A

D. Marginal Revenue = 0

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27
Q

How will an expectation of a price increase in the future affect the market now?

A. Consumers will buy less and firms would sell less.
B. Consumers will buy more and firms would sell more.
C. Consumers will buy less and firms would sell more.
D. Consumers will buy more and firms would sell less.

A

D. Consumers will buy more and firms would sell less.

28
Q

Blueridge Manufacturing wants to know the best possible way to bundle their products with regard to cost constraints. Which optimization technique must be applied in the given situation?

A

Linear Programming

29
Q

Burger King’s slogan, “Have it your way,” signifies that they are willing to accommodate all of their customer’s request. As a result, they obtain above-average profits. Which disequilibrium profit thoery is being described?

A

Compensatory

30
Q

Good X is an inferior good. What would happen to the demand for this good if consumers’ income rises?

A. Demand will decrease.
B. Demand will increase.
C. Demand will be zero.
D. Demand will not be affected.

A

A. Demand will decrease.

31
Q

This is a measure of the number of units of Y that must be given up per unit of X added to maintain a constant level of utility.

A

Marginal Rate of Substitution

32
Q

These are the basis of marginal costs.

A

Fixed Costs

33
Q

This assumption of consumer theory seeks to explain how consumers make their purchasing decisions when they are completely informed about essential matters.

A

Information

34
Q

This assumption of consumption bundles states that consumers must be able to rank the bundles according to the level of satisfaction they would enjoy from consuming them.

A

Complete

35
Q

This is a set of points representing different combinations of goods and services which provide an individual with the same level of utility.

A

Indifference Curve

36
Q

These refer to the different input combinations used to produce a specified output efficiently.

A

Isoquants

37
Q

This is the sum of variable and fixed costs.

A

Total Costs

38
Q

These are the inputs whose quantities can be readily changed in response to changes in market conditions.

A

Variable Costs

39
Q

It is the short-run total cost divided by output.

A

Average Total Costs (ATC)

40
Q

These show all the different costs that can arise from different levels of inputs.

A

Isocosts

41
Q

This assumption of consumer theory states that all individuals make consumption decisions to maximize their total satisfaction form consuming various goods and servces.

A

Optimization

42
Q

It is obtained using the equation, TFC/Q.

A

Average Fixed Costs (AFC)

43
Q

This is the line showing all bundles of goods that can be purchased at given prices if the entire income is spent.

A

Budget Line

44
Q

It is the total variable cost divided by output.

A

Average variable cost (AVC)

45
Q

It happens when a firm produces the maximum output possible for a given combination of inputs and existing technology.

A

Technical Efficiency

46
Q

Simon’s rate of substitution for a slice of pizza (Good Y) and a soda (Good X) is two. What does this mean?

A. He prefers to consume two slices of pizza and two cans of soda.
B. He is willing to give up two slices of pizza for an additional soda.
C. He is willing to give up two cans of soda for an additional pizza.
D. He is limited to consuming two slices of pizza OR two cans of soda because of his budget.

A

B. He is willing to give up two slices of pizza for an additional soda.

47
Q

Why are indifference curves bowed toward the origin?

A. People prefer to have a bit of everything rather than a lot of a single product.
B. There are many goods in the market.
C. The buyer’s budget is limited.
D. Demand and supply affect market forces.

A

A. People prefer to have a bit of everything rather than a lot of a single product.

48
Q

Allison wants to buy some school supplies. Her budget is 150.00. She thinks she needs two products for school: pens, which cost 25.00 each, and notebooks, which cost 50.00 each. If Allison chooses to spend all her money on the notebooks, how many can she buy?

A

Three notebooks

49
Q

Which of these would be the result of having lower costs in the long run?

A. More inputs used
B. Increased number of competitors
C. Less production
D. Lower prices and higher profits

A

D. Lower prices and higher profits

50
Q

The TFC of Talisman Designs amounts to 120,000. The TVC equals 20,000. For this month, they produced a total output of 1,000 pieces. What is the average fixed cost?

A

AFC = TFC/Q
120

51
Q

The TFC of Talisman Designs amounts to 120,000. The TVC equals 20,000. For this month, they produced a total output of 1,000 pieces. What is the average variable cost?

A

AVC = TVC/Q
20

52
Q

Why would a firm enter the market in the long run?

A. More buyers will enter the market.
B. The average costs of production are low.
C. The production decisions are not fixed.
D. The market price is high enough to result in positive economic profit.

A

D. The market price is high enough to result in positive economic profit.

53
Q

Litho Print Inc. has a high isoquant curve. What does this indicate?

A. They have lower costs.
B. They have more marginal revenue.
C. They have multiple variables of production.
D. They have higher levels of output.

A

D. They have higher levels of output.

54
Q

Allison wants to buy some school supplies. Her budget is 150.00. She thinks she needs two products for school: pens, which cost 25.00 each, and notebooks, which cost 50.00 each. Assume that variable X represents pens, and variable Y represents notebooks. Which of the following combinations is possible for Allison’s budget?

A. 6 pens and 2 notebooks
B. 6 pens and 3 notebooks
C. 4 pens and 3 notebooks
D. 4 pens and 2 notebooks

A

D. 4 pens and 2 notebooks

55
Q

Can the total utility and marginal utility be plotted in the same graph?

A. Yes, as long as they are about the same product bundle.
B. Yes, but price will not be included in the graph.
C. No, because they are measured differently.
D. No, because buyers’ behavior is hard to predict.

A

C. No, because they are measured differently.

56
Q

Why do costs go down in the long run?

A

The firm has economies of scale.A

57
Q

Assume that the prices of sugar have increase due to market inflation. How will the isocost slope of a coffee shop change?

A. The slope will increase.
B. The slope will decrease.
C. The slope will remain the same.
D. There is not enough information.

A

C. The slope will remain the same.

58
Q

Allison wants to buy some school supplies. Her budget is 150.00. She thinks she needs two products for school: pens, which cost 25.00 each, and notebooks, which cost 50.00 each. Assume that variable X represents pens, and variable Y represents notebooks. Which of the following equations shows the relationship between income and the amount of goods that Allison can buy?

A. P150 = P50 + P25 (XY)
B. P150 = (P50) X + (P25) Y
C. P150 = X + Y + (P50 * P25)
D. P150 = (P25) X + (P50) Y

A

D. P150 = (P25) X + (P50) Y

59
Q

As a smart consumer, Adrian makes his purchase decisions based on non-satiation consumer theory. Which of the following would he prefer?

A. Having more bundles
B. Having more of any good
C. Saving more costs
D. Borrowing more finances

A

B. Having more of any good

60
Q

Rachel is a buyer who follows the consumer theory. Under the information assumption, which of the following is NOT expected for her to know?

A. Her own income when she purchases goods.
B. All products and services available
C. Utilities of the products in the market
D. Costs of producing the goods she buys

A

C. Utilities of the products in the market

61
Q

This type of monopoly exists due to government legislation and protection.

A

Legal

62
Q

This oligopoly theory is used when prices change very rarely.

A

Sweezy’s Model

63
Q

This source of monopoly power comes from the value of a good or service, which increases as the number of users or buyers multiply.

A

Network Economics

64
Q

This type of monopoly aims to protect inventions and encourage research and development.

A

Patent

65
Q

This source of monopoly power arises from a firm’s large control over necessary inputs for production.

A

Exclusive control over important inputs

66
Q

This characteristic of perfect competition states that all firms

A

Managerial Economics (15 decks)

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