1.Business profit is:

A.the residual of sales revenue minus the explicit accounting costs of doing business.

B.a normal rate of return.

C.economic profit.

D.the return on stockholders' equity.

2.The value of the firm will fall following a rise in:

A.interest rates.

B.profits.

C.the time horizon.

D.revenue.

3.Managers who seek satisfactory rather than optimal results:

A.take actions that benefit parties other than stockholders.

B.are insensitive to social constraints.

C.are insensitive to self-imposed constraints.

D.take actions to meet set goals.

4.Accounting net income divided by the book value of the firm is:

A.return on assets.

B.profit margin.

C.return on stockholders' equity.

D.total asset turnover ratio.

5.Managerial economics cannot be used to identify:

A.how macroeconomic forces affect the organization.

B.goals of organization.

C.ways to efficiently achieve the organization's goals.

D.micro-economic consequences of managerial behavior.

6.Managers display satisficing behavior if they seek:

A.leisure.

B.to maximize community well-being.

C.to maximize employee welfare.

D.an industry-average profit rate.

7.Business profit equals:

A.a normal rate of return before risk adjustment.

B.sales revenue minus explicit costs.

C.sales revenue minus implicit costs.

D.risk adjusted normal rate of return.

8.Economic profit equals:

A.normal profit plus opportunity costs.

B.business profits minus implicit costs.

C.business profits plus explicit costs.

D.normal profit minus opportunity costs.

9.The value of a firm is equal to:

A.the present value of tangible assets.

B.the present value of all future revenues.

C.the present value of all future profits.

D.current revenues less current costs.

10.The value of the firm decreases with a decrease in:

A.total revenue.

B.the discount rate.

C.the cost of capital.

D.total cost.

11.The break-even level of output occurs where:

A.marginal cost equals marginal revenue.

B.marginal profit equals zero.

C.total profit equals zero.

D.marginal cost equals marginal revenue.

12.Incremental profit is:

A.the change in profit that results from unitary change in output.

B.total revenue minus total cost.

C.the change in profit caused by a given managerial decision.

D.the change in profits earned by the firm over a brief period of time.

13.The incremental profit earned from the production and sale of a product will be higher if:

A.the cost of materials needed to produce the new product increase.

B.the excess capacity can be used to produce the new product.

C.existing facilities to be used to produce the new product need to be modified.

D.the revenues earned from existing products decrease.

14.If total revenue increases at a constant rate as output increases, marginal revenue:

A.is greater than average revenue.

B.is less than average revenue.

C.is greater than average revenue at low levels of output and less than average revenue at high levels of output.

D.equals average revenue.

15.Total revenue is maximized at the point where:

A.marginal revenue equals zero.

B.marginal cost equals zero.

C.marginal revenue equals marginal cost.

D.marginal profit equals zero.

16.The slope of a straight line from the origin to total profit curve indicates:

A.marginal profit at that point.

B.an inflection point.

C.average profit at that point.

D.total profit at that point.

17.Marginal profit equals:

A.the change in total profit following a one-unit change in output.

B.the change in total profit following a managerial decision.

C.average revenue minus average cost.

D.total revenue minus total cost.

18.Marginal cost is:

A.the change in output following a one dollar change in cost.

B.the change in cost following a one unit change in output.

C.the change in average cost following a one unit change in output.

D.the change in cost following a managerial decision.

19.Total revenue increases at a constant rate as output increases when average revenue:

A.increases as output increases.

B.increases and then decreases as output increases.

C.exceeds price.

D.is constant.

20.Marginal profit equals average profit when:

A.marginal profit is maximized.

B.average profit is maximized.

C.marginal profit equals marginal cost.

D.the profit maximizing output is produced.

21.If average profit increases with output marginal profit must be:

A.decreasing.

B.greater than average profit.

C.less than average profit.

D.increasing.

22.An increase in output reduces total profit if:

A.marginal profit is less than average profit.

B.marginal profit is greater than average profit.

C.average profit is decreasing.

D.marginal profit is negative.

23.At the profit maximizing level of output:

A.marginal revenue equals marginal cost.

B.marginal cost equals zero.

C.average profit equals zero.

D.marginal profit equals average profit.

24.When marginal profit equals zero:

A.the firm can increase profits by increasing output.

B.the firm can increase profits by decreasing output.

C.marginal revenue equals average revenue.

D.profit is maximized.

25.Given the price [P] and output [Q] data in the following table, calculate: the related total revenue [TR],

marginal revenue [MR], and average revenue [AR]

[Q][P][TR][MR][AR]

1$30

2$25

3$20

4$15

5$10

6$5

70

At what output level is revenue maximized?

26.Given the price [P] and output [Q] data in the following table calculate: the related total revenue [TR], marginal revenue[MR], and average revenue [AR]

[Q][P][TR][MR][AR]

0$90

1$80

2$70

3$60

4$50

5$40

6$30

7$20

8$10

At what output level is revenue maximized?

27.Complete the missing data for price[P]. total revenue [TR], marginal revenue [MR]. total cost [TC], marginal cost [MC],profit [PRO],and marginal profit [MPRO] in the following table:

[Q][P][TR][MR][TC][MC][PRO][MPRO]

0$160$0.....$0.....$0.....

1$150$150$150$25$25$125$125

2$140.............$55$30....$100

3......$390..........$35$300$75

4............$90$130......$350........

5$110$550.....$175............

6......$600$50....$55$370......

7.....$630.....$290$60.......-$30

8.....$640.....$355.....$285......

9........................$75.....-$85

10...$600....$525..................

At what output [Q] level is profit maximized?

At what output [Q] level is revenue maximized?

Discuss any differences between the two.

28.Complete the missing data for price [P], total revenue [TR], marginal revenue [MR], total cost [TC], marginal cost[MC],profit[PRO], and marginal profit [MPRO] in the following table:

[Q][P][TR][MR][TC][MC][PRO][MPRO]

0$230$0..................$0......

1$210..........$10.................

2......$380...........$20...........

3...........$130..........$450.....

4................$100.........$50

5$130..................$60..........

6......$660..............$430......

7.............-$30..................-$110

8...........-$70......$90.............

At what output [Q] level is profit maximized?

At what output [Q] level is revenue maximized?

Discuss any differences between the two'

29.A measure of inflation that washes out price extremes employs:

A.mean price changes.

B.Weighted average price changes.

C.the standard deviation of price changes.

D.median price changes.

30.A multiple regression model involves two or more:

A.Y variables..

B.X variables.

C.intercept terms.

D.data points.

31,High correlation among X variables leads to:

A.multi co-linearity.

B.high R square.

C.low R squared.

D.high t statistics.

32.The "middle" observation is the:

A.median.

B.average.

C.mean.

D.mode.

33.A relation known with certainty is called a:

A.statistical relation.

B.multiple regression.

C.deterministic relation.

D.simple regression.

34.Statistical analysis of economic relations focuses on the estimation and interpretation of:

A.sample statistics.

B.population parameters.

C.summary measures.

D.descriptive measures.

35.Central tendency is measured by the:

A.range.

B.variance.

C.standard deviation.

D.mode.

36.In a uniform distribution, the mode:

A.equals the median.

B.is less than the mean.

C.is less than the median.

D.is greater than the mean.

37.If a distribution is skewed upward, the median:

A.is greater than the mean.

B.is less than the mean.

C.is greater than the average.

D.the mean.

38.Incorrect rejection of the hypothesis is called:

A.type I error.

B.type II error.

C.z statistical error.

D.t statistical error.

39.A relation known with certainty is a:

A.cross-section relation,

B.deterministic relation.

C.time-series relation.

D.statistical relation.

40.If demand increases while supply decreases for a particular good:

A.the equilibrium price will increase while the quantity of the good produced and sold could increase,

decrease, or remain constant.

B.the quantity of the good produced and sold will decrease while its equilibrium price could increase,

decrease, or remain constant.

C.the quantity of the good produced and sold will increase while its equilibrium price could increase,

decrease.or remain constant.

D.its equilibrium price will decrease while the quantity of the good produced and sold could increase,

decrease, or remain constant.

41.Shortage is a condition of:

A.excess supply.

B.excess demand.

C.a deficiency in demand.

D.market equilibrium.

42.Derived demand is directly determined by:

A.utility.

B.the profitability of using inputs to produce the given output.

C.the ability to create and then satisfy consumer desires.

D.personal consumption.

43.A demand curve expresses the relation between the quantity demanded and:

A.income.

B.advertising.

C.price.

D.all of the above.

44.Change in the quantity demanded is:

A.a movement along a single demand curve,

B.an upward shift from one demand curve to another.

C.a reflection of change in one or more of the non-price variables in the product demand function.

D.a downward shift from one demand curve to another.

45.A supply curve expresses the relation between the quantity supplied and:

A.technology.

B.wage rates.

C.price.

D.all of the above.

46.Change in the quantity supplied reflects a:

A.change in price.

B.switch from one supply curve to another.

C.change in one or more non-price variables.

D.shift in supply.

47.Demand for consumption goods and services is:

A.derived demand.

B.direct demand.

C.product demand.

D.utility.

48.Derived demand is the:

A.demand for inputs used in the production of the good sold.

B.demand for products other than raw materials.

C.first derivative of the demand function.

D.demand for consumption products.

49.If the production of two goods is complementary a decrease in the price of one will:

A.increase supply of the other.

B.increase the quantity supplied of the other.

C.decrease the price of the other.

D.decrease supply of the other.

50.The following relations describe demand and supply conditions in the lumber products industry:

Quantity Demanded = 75,000 - 10,000P

Quantity Supplied = -15,000 + 50,000P

Quantity [Q] is measuredin thousands of board feet [one square foot of lumber, one inch thick] and

price [P] is in dollars. Please complete the following:

[P]Quantity SuppliedQuantity DemandedSurplus or Shortage

$3.00........................

$2.50..................................

$2.00.................................

$1.50...................................

$1.00..................................

51.The following relations describe demand and supply conditions in the wheat industry:

Quantity Demanded = 5,500 - 1,000P

Quantity Supplied = -4,500 + 1,500P

Quantity [Q] is measured in millions of bushels and price [P] is in dollars.Please, complete the following:

[P]Quantity SuppliedQuantity DemandedSurplus or Shortage

$4.50.........................................

$4.25..................

$4.00............................................

$3.75....................................

$3.50..........................................

52.The increase in overall consumption made possible by a price cut is the:

A.income effect.

B.substitution effect.

C.income and substitution effect.

D.consumption effect.

53.The point advertising elasticity reveals is the:

A.percentage change in demand following a change in advertising.

B.percentage change in the quantity demanded following a change in advertising.

C.percentage change in advertising following a change in the quantity demanded.

D.percentage change in advertising following a change in demand.

54.If marginal cost is $25 and price elasticity of demand is -2.5, the profit maximizing price equals:

A.$25

B.$17.86

C.$41.67

D.$35

55.If marginal revenue [MR] is $25,000- $300Qand

marginal cost [MC] is $5000 + $100Qthe profit maximizing price is:

A.$50

B.$25,000

C.$17,500

D.$10.000

56.Elasticity is:

A.percentage change in a dependent variable [Y] resulting from a one-percent change in the value of

an independent variable [X].

B.change in a dependent variable [Y], resulting from a change in the value of an independent

variable [X].

C.change in an independent variable [X]. resulting from a change in the value of a dependent variable [Y].

D.percentage change in an independent variable [X], resulting from a one-percent change in the value

of a dependent variable [Y].

57.According to the law of diminishing marginal utility:

A.as the consumption of a given product rises, the added benefit eventually diminishes.

B.as the production cost for a given product rises, the added benefit eventually diminishes.

C.the demand curve for some products is upward sloping.

D.as the price of a given product rises, the added benefit eventually diminishes.

58.An indifference curve is a set of market baskets that:

A.contain the same goods.

B.provide the same utility.

C.have identical marginal rates of substitution.

D.can be obtained for the same cost.

59.The change to a new indifference curve following a rise in aggregate consumption caused by a price cut is:

A.a price effect.

B.an income effect.

C.a substitution effect.

D.a consumption effect.

60.The movement along an indifference curve reflecting the substitution of cheaper products for more

expensive ones is:

A.utility effect.

B.substitution effect.

C.income effect.

D.supply effect.

61.Two products are complements, if the:

A.cross-price elasticity of demand is less than zero.

B.cross-price elasticity of demand equals zero.

C.cross-price elasticity of demand is greater than zero.

D.price elasticity of demand for each good is greater than zero.

62,If the income elasticity of demand for a good is greater than one, the good is:

A.a non-cyclical normal good.

B.a cyclical normal good.

C.neither a normal nor an inferior good.

D.an inferior good.

63.The foregone value associated with the current rather than next-best use of a given asset is called:

A.current cost.

B.replacement cost.

C.historical cost.

D.opportunity cost,

.64.Unlike the marginal cost concept the incremental cost concept:

A.does not focus on individual managerial decisions.

B.is not relevant for optimal output determination.

C.embodies sunk costs.

D.can involve multiple units of output.

65.With the opportunity for beneficial learning, a firm's learning curve is:

A.downward sloping.

B.horizontal.

C.vertical.

D.upward sloping.

66.The percentage change in profit that results from 1% change in units sold equals:

A.the cost elasticity.

B.the returns to scope economics.

C.marginal profit.

D.the degree of operating leverage.

67.Sunk costs:

A.typically involve multiple units of output.

B.do not vary across decision alternatives.

C.come into play when judging the costs of adding a new product line, advertising campaign,

production shift.

D.play an important role in determining the optimal course of action.

68.Learning involves:

A.movements along a single LRAC curve.

B.movements along a single SRAC curve.

C.shifts in SRAC curves over time.

D.shifts in LRAC curves over time.

69.The foregone value is:

A.explicit cost.

B.implicit cost.

C.replacement cost.

D.opportunity cost.

70.Incremental cost is the change in:

A.total cost caused by a given managerial decision.

B.non-cash expenses caused by a given managerial decision.

C,out-of-pocket costs caused by a given managerial decision.

D.variable costs caused by a managerial decision.

71.Non-cash expenses are:

A.explicit costs.

B.implicit costs.

C.sunk costs.

D.incremental costs.

72.In the decision process, management should ignore:

A.implicit costs.

B.historical costs.

C.sunk costs.

D.incremental costs.

73.The long-run is a period of time:

A.during which at least one input is variable.

B.during which at least one input is fixed.

C.sufficient to vary all inputs

D.greater than one year.

74.Fixed costs include:

A.variable labor expenses.

B.output-related energy costs.

C.output-related raw material costs.

D.variable interest costs for borrowed capital.

75.Marginal cost equals:

A.average variable cost at its maximum point.

B.the change in total fixed cost divided by the change in quantity.

C.the change in total variable cost divided by the change in quantity.

D.total cost divided by quantity.

76.If the productivity of variable factors is decreasing in the short-run:

A.marginal cost must increase as output increases.

B.average cost must decrease as output increases.

C.average cost must increase as output increases.

D.marginal cost must decrease as output increases.

77.If the slope of long=run total cost function decreases as output increases,

the firm's underlyingproduction function exhibits:

A.constant returns to scale.

B.decreasing returns to scale.

C.decreasing returns to a factor input.

D.increasing returns to scale.

78.Each point on a long-run average cost curve is the minimum:

A.point on the short-run marginal cost curve.

B.short-run average cost of production.

C.long-run average cost of production.

D.point on the short-run average cost curve.

79.A firm;s capacity is the output:

A.maximum that can be produced in the long-run.

B.level where short-run average costs are minimized.

C.level where long-run average costs are minimized.

D,maximum capacity that can be produced in the short-run.

80.Three University of Florida engineering students are considering operating a mobile car clinic

in Gainesville during their summer break. This is an alternative to summer employment stacking

plastic cups at a local injection molding manufacturer where they would earn $8,000 each over

the three month summer period. A van equipped for such services can be leased from an owner

taking a long vacation in the Bahamas at the cost of $4,500 for the summer.Additional projected

costs are $2,500 for insurance, and $5 per service call for materials and supplies.Their service

calls would be priced at $30 per unit, plus cost of any parts which will be purchased from parts

outlets.

A.What is the accounting cost function for this business? [ignore costs of parts]

B.What is the economic cost function for this business?

C.What is the break-even number of units for this business? [Assume $30 for price and ignore

interest costs associated with the timing of lease payments]

81.Fisherman's Wharf Cotton Inc.sells souvenir T-shirts at San Francisco's Pier 9 at a price of $10.

Of this amount [$10], $6 is profit contribution.The shop is considering an attempt to

differentiate its product from several other competitors by using a higher quality T-shirts.

Doing so would increase its unit cost by $1 per t-shirt.Current monthly profits are $5,000 on

2,500 unit sales.

A.Assuming average variable costs are constant at all output levels, whatis souvenir

shop's total cost function before the proposed change?

B.What will the total cost function be if higher quality T-shirts are used?

C.Assume T-shirt prices remain stable at $10.What percentage increase in sales

would be necessary to maintain current profit levels?

82.For a firm in a monopollistically competitive market, equilibrium is:

A.MC=AC

B.MR=AR

C.MR=MC

D.AP=AC

83.In oligopoly, equilibrium is:

A.MC=AC

B.MC < AC

C.MR=MC

D.MC > AC

84.A perfect functioning cartel results in a:

A.monopoly equilibrium.

B.oligopoly equilibrium.

C.perfectly competitive equilibrium.

D.monopolistically competitive equilibrium.

85.A successfully exploited niche market involves elements of:

A.perfect competition.

B,monopolistic competition.

C.monopoly.

D.monopsony.

86.In both monopolistic competition and oligopoly market structures:

A.there is easy entry and exit.

B.consumers perceive differences among the products of various competitors.

C.economic profits may be earned in the long-run.

D.there are many sellers.

87.When prices in monopolistically competitive markets exceed those in a perfectly competitive

equilibrium, this difference is the cost of:

A.information.

B.market power.

C.inefficiency.

D.product differentiation.

88.Monopolistic competition always entails:

A.declining LRAC.

B.vigorous price competition.

C.increasing LRAC.

D.constant LRAC.

89.Monopolistic competition is characterized by:

A.homogeneous products.

B.barriers to entry and exit.

C.perfect dissemination of information.

D.few buyers and sellers.

90.Above-normal rates of return in long-run equilibrium require:

A.homogeneous products.

B.barriers to entry and exit.

C.few buyers and sellers.

D.differentiated products.

91.The kinked demand curve theory of oligopoly assumes that rival firms:

A.react to price increases.

B.react to price increases and decreases.

C.do not react to price changes.

Dreact to price decreases.

92.In equilibrium monopolistic competition results in:

A.P > AC and MR=MC.

B.P=MR and AC=MC.

C.P

D.P=AC and MR=MC

93.Equilibrium in oligopoly markets is characterized by:

A.P>AC and MR=MC

B.P=MR and AC=MC

C.P

D.P=AC and MR=MC

94.An example of failure by market structure is given by:

A.inferior product quality.

B.air pollution.

C.false advertising.

D.price regulation.

95.The economic cost of a tax is paid at the point of:

A.tax burden.

B.tax collection.

C.tax incidence.

D.tax assessment.

96.The burden of a per unit tax on a product will fall primarily on producers, when:

A.the tax is collected from customers.

B.demand is highly elastic with respect to price.

C.the demand is highly inelastic with respect to price.

D.the tax is collected from producers.

97.A natural monopoly exists if:

A.marginal revenue is falling as output expands.

B.price equals average cost.

C.average cost falls as output expands.

D.marginal revenue equals marginal cost.

98.Regulatory commissions seek to set a "fair" price that:

A.maximizes producers' output.

B.equals average cost.

C.equals average revenue.

D.maximizes consumer surplus.

99.A per unit tax will cause prices to increase leas, when:

A.marginal cost is constant.

B.marginal cost is falling.

C.marginal cost is rising.

D.average cost is falling.

100.Efficient markets are characterized by:

A. symmetric information.

B.easy entry and exit.

C.symmetric insurance.

D.all of the above.