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Managerial Economics Flashcards

1
Q

The opportunity cost of a given activity is:

a. The value of material used
b. The value of the next best activity
c. The cost of input used
d. None of the above

A

The opportunity cost of a given activity is:

b. The value of the next best activity

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2
Q

The competitive firm’s long run supply curve is the portion of it’s ……………….. curve that lies above average total cost:

a. Fixed cost
b. Variable cost
c. Marginal cost
d. All of the above

A

The competitive firm’s long run supply curve is the portion of it’s ……………….. curve that lies above average total cost.

c. Marginal cost

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3
Q

In a perfectly competitive market, individual firm:

a. Cannot influence the price of its products
b. Can influence the price of its products
c. Can fix the price of its products
d. Can influence the market force

A

In a perfectly competitive market, individual firm:

a. Cannot influence the price of its products

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4
Q

The market with a single producer is called:

a. Perfect competition
b. Monopolistic competition
c. Oligopoly
d. Monopoly

A

The market with a single producer is called:

d. Monopoly

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5
Q

In the case of ……………….. a small change in price leads to very big change in quantity demanded.

a. Perfectly elastic demand
b. Perfectly inelastic demand
c. Elastic demand
d. Unit elastic demand

A

In the case of ……………….. a small change in price leads to very big change in quantity demanded.

c. Elastic demand

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6
Q

The distinction between variable cost and fixed cost is relevant only in:

a. Sales period
b. Short run
c. Long run
d. Fiscal year

A

The distinction between variable cost and fixed cost is relevant only in:

b. Short run

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7
Q

The proportionate change in the quantity demanded of a commodity in response to change in the price of another related commodity is called:

a. Substitutes elasticity
b. Price elasticity
c. Income elasticity
d. Cross elasticity

A

The proportionate change in the quantity demanded of a commodity in response to change in the price of another related commodity is called:

d. Cross elasticity

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8
Q

Product differentiation is the important feature of:

a. Monopoly
b. Perfect competition
c. Monopolistic competition
d. Monopsony

A

Product differentiation is the important feature of:

c. Monopolistic competition

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9
Q

Oligopoly is a ……………….. type of market. A ……………….. exists in the industry.

a. Perfect, few firms
b. Imperfect, few firms
c. Perfect, many firms
d. Imperfect, many firms

A

Oligopoly is a ……………….. type of market. A ……………….. exists in the industry.

b. Imperfect, few firms

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10
Q

In the long run all input become ………………..

a. Fixed
b. Variable
c. Partially variable
d. Depreciated

A

In the long run all input become ………………..

b. Variable

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11
Q

Which of the following statements about demand curve is TRUE?

a. If price falls and quantity demanded increases, this can be represented by either a movement along a given demand curve, or a shift of the demand curve
b. If price falls and quantity demanded increases, this is represented by a shift of the demand curve
c. None of the above
d. If price falls and quantity demanded increases, this is represented by a movement along a given demand curve

A

Which of the following statements about demand curve is TRUE?

d. If price falls and quantity demanded increases, this is represented by a movement along a given demand curve

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12
Q

Which of the following will result in a DECREASE in demand?

a. None of the above
b. An increase in income, if the good is normal
c. An increase in the price of a substitute for the good
d. A decrease in the price of a complement to the good

A

Which of the following will result in a DECREASE in demand?

a. None of the above

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13
Q

Suppose good X and Y are substitutes. Which of the following is TRUE?

a. An increase in the price of X will result in an increase in the equilibrium quantity of Y
b. More than one of the above is true
c. A decrease in the price of X will result in an increase in the equilibrium quantity of Y
d. An increase in the price of X will result in a decrease in the equilibrium price Y

A

Suppose good X and Y are substitutes. Which of the following is TRUE?

a. An increase in the price of X will result in an increase in the equilibrium quantity of Y

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14
Q

Which of the following CANNOT result in a shift of the demand curve for a good?

a. A change in the price of the good
b. A change in consumers’ income
c. All of the above will shift the demand curve
d. A change in the price of a complement to the good

A

Which of the following CANNOT result in a shift of the demand curve for a good?

a. A change in the price of the good

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15
Q

Which of the following will NOT shift the market supply curve of good X?

a. A change in the cost of inputs used to produce good X
b. A change in the price of good X
c. A change number of sellers of good X
d. A change in the technology used to produce X

A

Which of the following will NOT shift the market supply curve of good X?

b. A change in the price of good X

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16
Q

Which of the following statements about consumer surplus and producer surplus is TRUE?

a. None of the statements are true
b. Consumer surplus is equal to the area under the demand curve
c. Producer surplus is equal to the area under the supply curve
d. Both producer and consumer surplus are equal to price multiplied by quantity

A

Which of the following statements about consumer surplus and producer surplus is TRUE?

a. None of the above statements are true

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17
Q

Suppose you are told that the own-price elasticity of supply equals 0,5. Which of the following is the correct interpretation of this number?

a. A 1% increase in price will result in a 0,5% increase in quantity supplied
b. A 1% increase in price will result in a 50% increase in quantity supplied
c. A 1% increase in price will result in a 2% increase in quantity supplied

d, A 1% increase in price will result in a 5% increase in quantity supplied

A

Suppose you are told that the own-price elasticity of supply equals 0,5. Which of the following is the correct interpretation of this number?

a. A 1% increase in price will result in a 0,5% increase in quantity supplied

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18
Q

If goods X and Y are COMPLEMENTS, the which of the following could be the value of cross price elasticity of demand?

a. All of the above
b. 1
c. 0
d. -1

A

If goods X and Y are COMPLEMENTS, the which of the following could be the value of cross price elasticity of demand?

d. -1

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19
Q

If a demand curve is VERTICAL, then own-price elasticity of demand for this good is equal to:

a. Zero
b. None of the above
c. One
d. Infinity

A

If a demand curve is VERTICAL, then own-price elasticity of demand for this good is equal to:

a. Zero

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20
Q

Which of the following is NOT a determinant of the demand for good X?

a. The income of consumers who buy good X
b. The cost of labor used to produce good X
c. The number of buyers of good X
d. The price of good Y, a complement of good X

A

Which of the following is NOT a determinant of the demand for good X?

b. The cost of labor used to produce good X

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21
Q

Which of the following IS a determinant of the demand for good X?

a. The number of sellers of good X
b. The income of consumers who buy good X
c. The supply of good X
d. The cost of labor used to produce good X

A

Which of the following IS a determinant of the demand for good X?

b. The income of consumers who buy good X

22
Q

If cookies are a normal good and incomes increase, we would expect:

a. A decrease in equilibrium price and an increase in equilibrium quantity
b. An increase in equilibrium price and equilibrium quantity
c. A decrease in equilibrium price and equilibrium quantity
d. An increase in equilibrium price and a decrease in equilibrium quantity

A

If cookies are a normal good and incomes increase, we would expect:

b. An increase in equilibrium price and equilibrium quantity

23
Q

Simon is selling his used truck. The minimum amount he needs to be paid for the truck is $5,000. He advertises the truck online for $8,000, and eventually sells the truck for $6,000. His producer surplus is equal to________

a. $2,000
b. $6,000
c. $1,000
d. $3,000

A

Simon is selling his used truck. The minimum amount he needs to be paid for the truck is $5,000. He advertises the truck online for $8,000, and eventually sells the truck for $6,000. His producer surplus is equal to________

c. $1,000

24
Q

A decrease in supply is, graphically, represented by:

a. A movement up and to the right along a supply curve
b. A movement down and to the left along a supply curve
c. A rightward shift in the supply curve
d. A leftward shift in the supply curve

A

A decrease in supply is, graphically, represented by:

d. A leftward shift in the supply curve

25
Q

In recent years there have been a couple of high profile cases of contamination of baby formula produced in China. As a result, many Chinese parents buy baby formula that is produced outside China. Which of the following accurately describes the likely effect of this on baby formula prices?

a. An increase in the price of both baby formula produced in China and baby formula produced outside China
b. An increase in the price of baby formula produced in China and a decrease in the price of baby formula produced outside China
c. A decrease in the price of both baby formula produced in China and baby formula produced outside China
d. A decrease in the price of baby formula produced in China and an increase in the price of baby formula produced outside China

A

In recent years there have been a couple of high profile cases of contamination of baby formula produced in China. As a result, many Chinese parents buy baby formula that is produced outside China. Which of the following accurately describes the likely effect of this on baby formula prices?

d. A decrease in the price of baby formula produced in China and an increase in the price of baby formula produced outside China

26
Q

If pizza is a normal good, then which of the following could be the value of income elasticity of demand?

a. All of the above
b. 1,4
c. 0,8
d. 0,2

A

If pizza is a normal good, then which of the following could be the value of income elasticity of demand?

a. All of the above
b. 1,4
c. 0,8
d. 0,2

27
Q

Which of the following statements about the relationship between the price elasticity of demand and revenue is TRUE?

a. If demand is price elastic, then decreasing price will increase revenue
b. If demand is perfectly inelastic, then revenue is the same at any price
c. If demand is price inelastic, then increasing price will decrease revenue
d. Elasticity is constant along a linear demand curve and so too is revenue

A

Which of the following statements about the relationship between the price elasticity of demand and revenue is TRUE?

a. If demand is price elastic, then decreasing price will increase revenue

28
Q

Suppose Tallink Ferries is considering an increase in ferry fares. If doing so results in an increase in revenues raised, which of the following could be the value of the own-price elasticity of demand for ferry rides?

a. 0,5
b. 1
c. 1,5
d. All of the above

A

Suppose Tallink Ferries is considering an increase in ferry fares. If doing so results in an increase in revenues raised, which of the following could be the value of the own-price elasticity of demand for ferry rides?

a. 0,5

29
Q

If the price of the good is $1 per unit, what will be the quantity demanded?

a. 5
b. 10
c. 20
d. 15

A

If the price of the good is $1 per unit, what will be the quantity demanded?

d. 15

30
Q

If the price of the good is $20, what will consumer surplus equal?

a. $100
b. $400
c. $300
d. $200

A

If the price of the good is $20, what will consumer surplus equal?

a. $100

31
Q

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called:

a. An isocost function
b. A production function
c. A production possibility curve
d. An isoquant

A

A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called:

b. A production function

32
Q

Which of the following inputs are variable in the long run?

a. Labor
b. All of these
b. Capital and equipment
c. Plant size

A

Which of the following inputs are variable in the long run?

b. All of these

33
Q

The short run is:

a. Three years
b. However long it takes to produce the planned output
c. Less than a year
d. A time period in which at least one input is fixed

A

The short run is:

d. A time period in which at least one input is fixed

34
Q

Anna owns a small bakery, and her production function is q=3KL where q is the total output in cakes per hour, K is the number of ovens (capital), and L is the number of employees hired per hour (labor). If Anna’s capital is currently fixed at K=3 ovens, what is her short-run production function?

a. q=6KL
b. q= 9L
c. q=3K
d. q=3L

A

Anna owns a small bakery, and her production function is q=3KL where q is the total output in cakes per hour, K is the number of ovens (capital), and L is the number of employees hired per hour (labor). If Anna’s capital is currently fixed at K=3 ovens, what is her short-run production function?

b. q= 9L

35
Q

According to the law of diminishing returns:

a. The total product of an input will eventually be negative
b. The marginal product of an input will eventually be negative
c. The marginal product of an input will eventually decline
d. The total product of an input will eventually decline

A

According to the law of diminishing returns:

c. The marginal product of an input will eventually decline

36
Q

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of:

a. A fixed cost
b. An implicit cost
c. A variable cost
d. An opportunity cost

A

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of:

a. A fixed cost

37
Q

Which of the following costs always declines as output increases?

a. Average fixed cost
b. Marginal cost
c. Fixed cost
d. Average cost

A

Which of the following costs always declines as output increases?

a. Average fixed cost

38
Q

The total cost (TC) of producing computer software diskettes (Q) is given as TC= 200 + 5Q. What is the average total cost?

a. 5+(200/Q)
b. 500
c. 5
d. 5Q

A

The total cost (TC) of producing computer software diskettes (Q) is given as TC= 200 + 5Q. What is the average total cost?

a. 5+(200/Q)

39
Q

Anna knows the average total cost and average variable cost for a given number of cakes. Which of the following costs can she not determine given this information?

a. Anna can determine all of the above costs with the information provided
b. Total cost
c. Variable cost
d. Fixed cost

A

Anna knows the average total cost and average variable cost for a given number of cakes. Which of the following costs can she not determine given this information?

a. Anna can determine all of the above costs with the information provided

40
Q

We typically think of labor as a variable cost, even in the very short run. However, some labor costs may be fixed. Which of the following items represents an example of a fixed labor cost?

a. An hourly employee
b. A salaried manager who has a three-year employment contract
c. A temporary worker who is paid by the hour
d. None of the above

A

We typically think of labor as a variable cost, even in the very short run. However, some labor costs may be fixed. Which of the following items represents an example of a fixed labor cost?

b. A salaried manager who has a three-year employment contract

41
Q

A price taker is:

a. A firm that cannot influence the market price
b. A firm that accepts different prices from different customers
c. A consumer who accepts different prices from different firms
d. A firm that is the only producer in the market

A

A price taker is:

a. A firm that cannot influence the market price

42
Q

A firm maximizes profit by operating at the level of output where:

a. Average revenue equals average variable cost
b. Total costs are minimized
c. Marginal revenue equals marginal cost
d. Average revenue equals average cost
e. Marginal revenue is higher than marginal cost

A

A firm maximizes profit by operating at the level of output where:

c. Marginal revenue equals marginal cost

43
Q

The demand curve facing a perfectly competitive firm is:

a. Perfectly horizontal
b. Perfectly vertical
c. The same as the market demand curve
d. Downward-sloping and less flat than the market demand curve

A

The demand curve facing a perfectly competitive firm is:

a. Perfectly horizontal

44
Q

The supply curve for a competitive firm is:

a. The upward-sloping portion of its MC curve
b. Its entire MC curve
c. Its MC curve above the minimum point of the AVC curve
d. It is the MR curve

A

The supply curve for a competitive firm is:

c. Its MC curve above the minimum point of the AVC curve

45
Q

For the monopolist shown below, the profit maximizing level of output is:

a. Q4
b. Q5
c. Q1
d. Q2
e. Q3

A

For the monopolist shown below, the profit maximizing level of output is:

c. Q1

46
Q

Which of the following is NOT true regarding monopoly?

a. Monopoly demand curve is downward sloping
b. Monopoly is the sole producer in the market
c. Monopolist can charge as high a price as it likes
d. Monopoly price is determined from the demand curve

A

Which of the following is NOT true regarding monopoly?

c. Monopolist can charge as high a price as it likes

47
Q

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________________ price and sell a ______________ quantity.

a. Higher, larger
b. None of these
c. Higher, smaller
d. Lower, smaller
e. Lower, large

A

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________________ price and sell a ______________ quantity.

c. Higher, smaller

48
Q

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should:

a. Do nothing without information about your fixed costs
b. Expand output
c. Expand output until marginal revenue equals zero
d. Reduce output until marginal revenue equals marginal cost

A

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should:

d. Reduce output until marginal revenue equals marginal cost

49
Q

For a monopolist, changes in demand will lead to changes in:

a. Any of the above can be true
b. Output with no change in price
c. Both price and quantity
d. Price with no change in output

A

For a monopolist, changes in demand will lead to changes in:

c. Both price and quantity

50
Q

The____________elastic a firm’s demand curve, the greater its______________.

a. More, costs
b. Less, output
c. Less, monopoly power
d. More, monopoly power

A

The____________elastic a firm’s demand curve, the greater its______________.

c. Less, monopoly power

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