80 10 X08 Priority: MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan 10000 -urey 18) The suggestion that a seller will try to set price based on "what the market will bear" is explicit recognition of the constraint imposed by: A) the firm's marginal cost of production. B) the price elasticity of demand for that item. C) the firm's competitors. D) the need for most firms to earn positive economic profits over time if they are to remain in business. 19 ) By and large, the price of each item on a restaurant menu is: A) an accurate reflection of the item's marginal cost. B) based strictly on consumer demand . C) a function of cost and the price elasticity of demand for the item. D) a fixed multiple of the item's total cost. 20) Which of the following statements is correct? A) To maximize profit, a firm should apply a uniform markup to each product it sells. B) The profit-maximizing firm's ability to mark up price over average cost is limited by the price elasticity of demand for the product in question. C) It is not possible to maximize profits by using a markup pricing strategy. D) Using markup pricing is more complicated than simply setting price equal to marginal cost. 21) When demand is elastic, the marginal revenue resulting from a decrease in price is: A) positive. B) zero. C) negative. D) cannot be determined without more information. 22) At the profit-maximizing level of output, the amount by which the firm can mark up price is: A) inversely related to the price elasticity of demand for item in question. B) directly related to the price elasticity of demand for item in question. C) totally unrelated to the price elasticity of demand for item in question. D) equal to the ratio of the marginal and average costs of production. 23) Assume there is a decrease in the number of substitutes for a good produced by a profit-maximizing price- setting firm. All else constant, this would cause the firm's ability to markup price above average cost to: A) decrease. B ) stay the same . C) increase. D) cannot be determined with the information given. 24) The practice of charging different prices to various groups of customers that are not based on differences in the costs of production is referred to as: A) predatory pricing. B) markup pricing. C) discretionary pricing. D) price discrimination. pg. 4Q Search MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan LOST 25) Macroeconomics studies the following topics : A) national output, the inflation rate, and the trade deficit. B) the price of Cisco stock and wage differences. C) differences in market structure . D) all of the above. 26) Which of the following statistics is the best single measure of overall economic activity ? A) The labor force participation rate. B) The inflation rate. C) GDP. D) The trade surplus. 27) If GDP rises : A) income and production must both fall . B) income and production must both rise . C) income must rise , but production may rise or fall . D) none of the above. 28 ) The market value of all currently produced final goods and services within a county in a given period of time by domestic and foreign supplied resources is called : A) GNP. B) GDP. C) NNP. D) none of the above. 29) To compute GDP : A) simply sum the number of final goods and services. B) sum the cost of producing final goods and services. C) use a weighted average by a survey regarding how much people value different goods and services. D) sum the market values of final goods and services. 30 ) An economy with both a private and public sector is called : A ) a mixed economy. B) a private economy . C) a command economy. D) none of the above. 31) In an open economy firms sell goods and services to: A) households, government, and foreigners. B) just households. C) just the government. D) none of the above. pg. 5000000902 LOST? CALL MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan 39) Measuring expenditures and income with the price level held constant, so that any changes in these values represent changes in the actual amount of goods, services, and income is denoted in terms. A) nominal B ) real C) constant dollar D ) all of the above 40 ) The vital link between the real and monetary sectors of the economy is the : A) price level. B) interest rate. C) balance of payments. D) budget deficit. 41) The sum of personal consumption expenditure, investment expenditure, government expenditure, and net export expenditure on the total amount of real output in the economy in a given period of time is called: A) potential GDP. B) aggregate expenditure. C) real money balances. D) none of the above. 42) The marginal propensity to save is defined as: A) ACIAYd. B) AS/AY d . C) AY d/AC. D ) AYd/AS 43) Money serves all of the following functions except: A ) medium of exchange. B) store of value. C) unit of account. D) measure of power. 44) A system where goods and services are exchanged directly without a common unit of account is called the: A ) commodity system . B ) fiat system . C) barter system . D) none of the above. 45 ) The function of money that enables money to be used for future purchases is called: A) medium of exchange. B) store of value . C) unit of account. D) measure of power. pg. 7MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan 46) The ability of a financial asset to be used to immediately make transactions is called : A) store of value. B) medium of exchange. 80 10 2 C) illiquidity. X08 D) liquidity. Priority. 47) The banking system in the U.S. is based on : A) 100 percent reserve banking. B) fractional reserve banking. C) 0 percent reserve banking. D) none of the above. A) $900 48) If $1000 was deposited in a bank and the reserve requirement is 0.10, how much is available for loans? B) $910 C) $920 D) $930 49) The currency deposit ratio, c, is 0.10. The reserve requirement, rr, is 0.08. The excess reserve ratio, e, is 0.05. What is the size of the money multiplier? A) 4.70 B) 4.78 C) 4.75 D) 4.00 50) A goal of expansionary monetary policy is to: A) decrease the rate of growth of real GDP. B) increase the rate of growth of real GDP . C) increase inflation. D) none of the above. #514 52 OPTIONAL- REPLACES EARLIER QUESTIONS 51) Open market purchase will result in: A) increase in bank reserves and a decrease in the federal funds rate. NOI EXTRA CREDIT B) increase in bank reserves and an increase in the federal funds rate. C) decrease in bank reserves and a decrease in the federal funds rate. D) decrease in bank reserves and an increase in the federal funds rate. 52) An increase in the discount rate will result in: A) increase in bank reserves and a decrease in the federal funds rate. B) increase in bank reserves and an increase in the federal funds rate. C) decrease in bank reserves and a decrease in the federal funds rate. D) decrease in bank reserves and an increase in the federal funds rate. pg. 80000009027317676 LOST? CALL INSIGHT 63 MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan 02 of 03 32 ) The payments to the factors of production are : X08 A ) wages . B ) rent. C) rent and interest. D) wages, rent, interest, and profits. 0900 :WOW 33) Over time Americans have chosen to cook less at home and dine out more. This change in behavior: A) increases GDP. B) reduces GDP. C) does not affect GDP. D) none of the above 34) Potential GDP is : A) minimum amount of output that can be produced given the labor force, capital stock, and technology. B) maximum amount of output that can be produced given the labor force, capital stock, and technology. C) varies over the business cycle. D) none of the above. 35) Potential GDP focuses on the : A) long-run supply side of the economy. B ) long-run demand side of the economy. C) short-run supply side of the economy. D) short-run demand side of the economy. 36 ) Short-run macroeconomic policies concentrate on : A) minimizing fluctuations around potential GDP. B) maximizing fluctuations around potential GDP. C) incentives for increasing productivity and the potential output of the economy. D) none of the above. 37) Long-run macroeconomic policies concentrate on: A) minimizing fluctuations around potential GDP. B) maximizing fluctuations around potential GDP. C) incentives for increasing productivity and the potential output of the economy. D) none of the above. 38) Measuring expenditures and income with the price level allowed to vary, so that changes in these values represent changes in either the actual amount of goods, services, and income or changes in the price level or a combination of both factors is denoted in terms. A) nominal B) real C) constant dollar D) all of the above pg. 6LOST7 MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan 1 1 ) An industry characterized by a small number of dominant firms that face downward-sloping demand curves is best described as: A) a monopoly. B) monopolistically competitive. C) an oligopoly. D) perfectly competitive. 12) The fact that the firms in an oligopoly are mutually interdependent means that each firm: A) must consider the reactions of its competitors when it sets the price for its output. B) produces a product that is similar, but not identical, to the products of its competitors. C) produces a product that is identical to the products of its competitors. D) faces a perfectly elastic demand curve for its product. 13) Which of the following would not be classified as an oligopolistic industry? A) Defense contractors. B) The recorded music industry. C) The tobacco industry D) The women's clothing industry. 14) The airline industry is best classified as: A) an oligopoly. B) a monopoly. C) perfectly competitive. D) monopolistically competitive 15) Assume the production of a particular good is characterized by significant economies of scale. In addition, three different versions of the good can be produced, and large segments of the population prefer different versions of the good. In this case, the preferred market structure for this good would be: A) perfect competition. B) monopoly. C) monopolistic competition. D) oligopoly. 16) Which of the following best illustrates the mutual interdependence among firms in the airline industry? A) The considerable efforts made by the various competitors to coordinate fare increases. B) The unwillingness of individual firms to match increased amenities offered by other firms. C) The substantial profits airlines have earned over the past several years. D) The virtual absence of control over costs by any of the firms operating in the industry. 17) A common theme in the discussions of the airline, soft drink, doughnut, and express delivery industries is that oligopolistic firms tend to compete: A) strictly on the basis of price and nothing else. B) strictly on the basis of cost minimization. C) primarily on the basis of product differentiation and price. D) primarily by erecting barriers into the market. pg. 30000 MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan Use Figure 8.1, which represents the situation faced by a monopolist, to answer the following questions. MC 01090 ATC 202 - 030 - 21 MR Q1 Q2 Figure 8.1 7) For the firm in Figure 8.1, the profit-maximizing (loss-minimizing) price and level of output are: A) P2 and Q2. B) P1 and Q1. C) P4 and Q1. D) P3 and Q1. 8) The firm depicted in Figure 8.1 is: A) earning a positive economic profit. B) incurring an economic loss and should shut down. C) incurring an economic loss but it should continue to operate in the short run so long as price exceeds average variable costs. D) earning a zero economic profit. 9) Which of the following is not a characteristic of an oligopolistic industry? A) Substantial barriers to entry. B) The output produced by the firms in the industry may be homogeneous or differentiated. C) A small number of large firms. D) One dominant firm and low entry barriers. 10) The key distinguishing characteristic of an oligopoly is the: A) presence of long-run economic profits. B) fact that in all cases firms produce a standardized product. C) mutual interdependence of the firms in the market. D) near total absence of advertising. pg. 2000000901 LOST? CALL ING MBA 644 Managerial Economics Final Exam CH 8-13 Spr 24 Brennan Name: I completed this exam without comparing answers or giving or receiving help with any other person or persons. 1) All of the following are strategies a firm with market power can adopt to increase it profits over time except: A) mergers with, and acquisitions of, competing firms. B) erecting barriers to entry. C) setting price equal to the marginal costs of production. D) influencing the regulatory process. 2) All of the following are possible characteristics of a monopoly except: A) there is a single firm. B) the firm is a price taker. C) the firm produces a unique product. D) the existence of some advertising. 3) In its effort to maximize economic profit, a firm characterized as a price setter must determine: A) only the price it should charge. B) only the quantity it should produce. C) both the price it should charge and the quantity it should produce. D) neither the price it should charge and the quantity it should produce as these are both determined by forces beyond the firm's control. 4) Which of the following statements regarding a monopolist is false? A) The marginal revenue curve lies below the demand curve for the monopolist's output. B) Unlike a perfectly competitive firm, a monopolist faces little or no competition. C) The monopolist sets price equal to marginal cost to maximize profits. D) The monopolist may or may not earn positive economic profits. 5) Assume that when price is $20, quantity demanded is 9 units, and when price is $19, quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units? A) $20 B) $19 C) $10 D) $1 6) Suppose a monopolist is producing a level of output such that MR > MC. What should the firm do to maximize its profits? A) The firm should do nothing - it wants to maximize the difference between MR and MC in order to maximize its profits. B) The firm should hire less labor. C) The firm should increase price. D) The firm should increase output. pg. 1