,1. The form of economics most relevant to managerial decision-making within the firm is:
a. macroeconomics
b. welfare economics
c. free-enterprise economics
d. microeconomics
e. none of the above
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: The Decision-Making Model
KEYWORDS: BLOOM’S: Knowledge
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 6/21/2016 8:42 AM
2. If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the
change in total revenue resulting from a decision, any business decision is profitable if:
a. it increases revenue more than costs or reduces costs more than revenue
b. it decreases some costs more than it increases others (assuming revenues remain constant)
c. it increases some revenues more than it decreases others (assuming costs remain constant)
d. all of the above
e. b and c only
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: Implications of Shareholder Wealth Maximization
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 6/21/2016 8:42 AM
3. In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected
future ____ discounted at the stockholders' required rate of return.
a. profits (cash flows)
b. revenues
c. outlays
d. costs
e. investments
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
Copyright Cengage Learning. Powered by Cognero. Page 1
,HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: Implications of Shareholder Wealth Maximization
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 6/21/2016 8:42 AM
4. Which of the following statements concerning the shareholder wealth maximization model is (are) true?
a. The timing of future profits is explicitly considered.
b. The model provides a conceptual basis for evaluating differential levels of risk.
c. The model is only valid for dividend-paying firms.
d. a and b
e. a, b, and c
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: Objective of the Firm
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 7/23/2016 2:36 PM
5. According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too
much uncertainty associated with long-run profits.
a. true
b. false
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: Implications of Shareholder Wealth Maximization
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 7/23/2016 3:35 PM
6. According to the innovation theory of profit, above-normal profits are necessary to compensate the owners of the firm
for the risk they assume when making their investments.
a. true
b. false
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
Copyright Cengage Learning. Powered by Cognero. Page 2
, QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: The Role of Profits
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 7/23/2016 3:35 PM
7. According to the managerial efficiency theory of profit, above-normal profits can arise because of high-quality
managerial skills.
a. true
b. false
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: The Role of Profits
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 7/23/2016 3:36 PM
8. Which of the following (if any) is not a factor affecting the profit performance of firms:
a. differential risk
b. innovation
c. managerial skills
d. existence of monopoly power
e. all of the above are factors
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
NATIONAL STANDARDS: United States - BPROG: Analytic
TOPICS: The Role of Profits
KEYWORDS: BLOOM’S: Comprehension
DATE CREATED: 6/21/2016 8:42 AM
DATE MODIFIED: 6/21/2016 8:42 AM
9. Agency problems and costs are incurred whenever the owners of a firm delegate decision-making authority to
management.
a. true
b. false
ANSWER: a
POINTS: 1
Copyright Cengage Learning. Powered by Cognero. Page 3
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