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MGT 449 EXAM 1 || with 100% Verified Solutions.
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1. The basic law of demand says that all other things being the same, _______________________. a) The lower the price of a product, the less of it consumers will purchase b) The higher the price of a product, the less of it consumers will purchase c) The lower the price of a product, the more ...

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  • August 16, 2024
  • 17
  • 2024/2025
  • Exam (elaborations)
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  • 1 the basic law of demand says that all other thi

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MGT 449 EXAM 1 || with 100% Verified Solutions.
1. The basic law of demand says that all other things being the same,
_______________________.

a) The lower the price of a product, the less of it consumers will purchase
b) The higher the price of a product, the less of it consumers will purchase
c) The lower the price of a product, the more of it consumers will purchase
d) The higher the price of a product, the more of it consumers will purchase
e) The greater the number of units of a product sold in the past, the more of it consumers will
purchase that product in the future correct answers c

If a firm is producing as efficiently as it knows how, then how will the total cost function slope?

a) Upward
b) Downward
c) No Slope
d) Downward until an output threshold value, then upward
e) Upward until an output threshold value, then downward correct answers a

3. Which of the following cost line items would be a fixed cost?

a) Commissions to Salespeople
b) Rent
c) Raw Materials
d) Packaging
e) Shipping/Delivery Charges correct answers b

4. Which of the following best describes marginal cost?

a) The per-unit-of-output cost for a product
b) The incremental cost of producing one more unit of output.
c) A cost invariant to the firm's output
d) The sum of all costs associate with the production of a product
e) The cost of fixed items such as general and administrative expenses correct answers b

What is a sunk cost?

a) A cost that can be avoided if certain choices are made
b) A cost that always varies with the output of a factory
c) The average cost of operating a plant
d) The "lower envelope" of short-run average cost functions
e) A cost incurred no matter what the decision is and cannot be avoided correct answers e

,Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time
incurring $1.8M in costs. If the entrepreneur's best outside alternative employment opportunity is
to earn $300K, what are the firms accounting and economic profits?

a) $200K, -$100K
b) $200K, $100K
c) $300K, $100K
d) $300K, -$100K
e) $200K, $200K correct answers a

7. Which of the following variables does not influence the quantity of product that a firm is able
to sell?

a) Price of the product
b) Price of related products
c) Plant production costs
d) Incomes and tastes of consumers
e) Advertising correct answers c

If a firm can sell its product for more than its fixed costs, but not for more than its totals costs:

a) It will shut down
b) It will lower its fixed costs
c) It will stop producing that product
d) It will continue to operate in the short run at a loss
e) It will increase its production quantity correct answers d

Which characteristic does not describe a perfectly competitive market?

a) Firms produce identical or nearly identical products
b) Market price is beyond the control of any individual firm
c) A firm's demand curve is perfectly horizontal at the market price
d) Industry-level price elasticity is finite
e) Firm-level price elasticity of demand facing another perfect competitor is infinite correct
answers d

Suppose a factory is producing 100 units and the price of each unit is $10. If raising the price to
$12 per unit results in a drop in sales of 12 units, what is the price elasticity of demand, η?

a) 6
b) .6
c) 1.67
d) .8
e) .17 correct answers b

In what special situation might the law of demand not hold?

, a) In a perfectly competitive market
b) When there is a high price elasticity of demand
c) When MR=MC
d) At the Nash Equilibrium
e) If high prices confer prestige correct answers e) If high prices confer prestige

Which of the following would not be a characteristic of a good with an elastic demand?

a) The product lacks unique features that differentiate it from competing products
b) The product is a high percentage of a consumer's total expenditures
c) The good is an input used to make a product that is sensitive to changes in price
d) There are many substitutes available for the good
e) The product has high switching costs correct answers e) The product has high switching costs

Which of the following best describes average cost?

a) The per-unit-of-output cost for a product at a given quantity
b) The incremental cost of producing one more unit of output.
c) A cost invariant to the firm's output
d) The sum of all costs associate with the production of a product
e) The cost of fixed items such as general and administrative expenses correct answers a) The
per-unit-of-output cost for a product at a given quantity

Which characteristic is present in a perfectly competitive market?


a) Firms produce identical or nearly identical products
b) Market price is beyond the control of any individual firm
c) A firm's demand curve is perfectly horizontal at the market price
d) Firms can enter and exit the market very easily
e) all of the above correct answers e) all of the above

1) Keeping in mind Apple's competitive advantage, which of the following products was
introduced by Apple in 2007?

A) iPhone
B) iTunes
C) iPod
D) iPad correct answers a

2) ________ is best described as a set of goal-directed actions a firm takes to gain and sustain
superior performance relative to competitors.

A) Credo
B) Competency management

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