Q7. Which of the following statements is correct? Moral hazard: a. exists when people behave differently when they are not subject to the risk associated with their behaviour and decisions b. exists when the agent acts in the interest of the principal c. can be mitigated by having bonuses linked to profits d. a and c e. b and cQ8. The price of computers has fallen, while the quantity purchased has remained constant. This implies that the demand for computers has: a. decreased, while the supply of computers has increased. b. increased. c. decreased, while the supply of computers has decreased. d. increased, while the supply of computers has increased. e. become more volatile.Q9. A big management consulting firm praises the reliability of Dell computers; this causes the: a. demand for Dell computers to increase. b. supply of Dell computers to increase. c. quantity supplied of Dell computers to increase. d. quantity supplied of Dell computers to decrease. e. demand and supply of Dell computers to remain unchanged.Q10. Managerial economics draws upon all of the following EXCEPT: a. finance. b. microeconomics. c. accounting. d. marketing. e. sociology.

Q1. What tools do managerial economists use to help managers solve problems? a. formal models b. prescribed behaviour c. quantitative methods d. microeconomic theory e. all of the above 02. The economic theory of the firm assumes that the primary objective of a firm's owner or owners is to: a. behave in a socially conscientious manner. b. maximize the firm's profit. c. maximize the rm's total sales. d. maximize the value of the firm. e. all of these are primary objectives. 03. Economic profits may result from: a. innovation. b. risk taking. c. exploiting market inefciencies. d. innovation and risk taking. e. all of these. 04. The difference between accounting and economic profit is: a. caused by confusion over tax laws. b. the value of owned resources in their next best alternative use. c. the result of superior training received by accountants. d. proportionately very small for owner- managed rms. e. a decreasing function of interest rates. 05. Managers make decisions that contribute to the profitability of a rm by: a. exploiting market efficiencies. b. taking on risks. c. engaging in illegal behaviour. d. maximizing sales. e. manipulating the share price of the firm's stock. 06. The principalagent problem refers to: a. the threat from foreign competition. b. the need to manage inventory more effectively. c. double-entry bookkeeping. d. the potential costs of separation of ownership and control. e. the time value of money