,Chapter 01 - The Fundamentals of Managerial Economics
Chapter 01
The Fundamentals of Managerial Economics
Multiple Choice Questions
1. The higher the interest rate:
A. the greater the present value of a future amount.
B. the smaller the present value of a future amount.
C. the greater the level of inflation.
D. None of the statements associated with this question are correct.
Answer: B
Learning Objective: 01-05
Topic: The Economics of Effective Management
Blooms: Remember
AACSB: Knowledge Application
Difficulty: 01 Easy
2. If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000
at the end of year two, then the present value of these cash flows is:
A. $2,562.
B. $3,200.
C. $439.
D. $3,000.
Answer: A
Learning Objective: 01-05
Topic: The Economics of Effective Management
Blooms: Apply
AACSB: Analytical Thinking
Difficulty: 1 Easy
3. Accounting profits are:
A. total revenue minus total cost.
B. total cost minus total revenue.
C. marginal revenue minus total cost.
D. total revenue minus marginal cost.
Answer: A
Learning Objective: 01-02
Topic: The Economics of Effective Management
Blooms: Remember
AACSB: Knowledge Application
Difficulty: 01 Easy
,Chapter 01 - The Fundamentals of Managerial Economics
4. Economic profits are:
A. total revenue minus total cost.
B. marginal revenue minus marginal cost.
C. total revenue minus total opportunity cost.
D. total profits of the economy as a whole.
Answer: C
Learning Objective: 01-02
Topic: The Economics of Effective Management
Blooms: Remember
AACSB: Knowledge Application
Difficulty: 01 Easy
5. Which of the following is an implicit cost to a firm that produces a good or service?
A. Labor costs
B. Costs of operating production machinery
C. Foregone profits of producing a different good or service
D. Costs of renting or buying land for a production site
Answer: C
Learning Objective: 01-01
Topic: The Economics of Effective Management
Blooms: Understand
AACSB: Knowledge Application
Difficulty: 02 Medium
6. Which of the following is an implicit cost of going to college?
A. Tuition
B. Cost of books and supplies
C. Room and board
D. Foregone wages
Answer: D
Learning Objective: 01-01
Topic: The Economics of Effective Management
Blooms: Understand
AACSB: Knowledge Application
Difficulty: 02 Medium
, Chapter 01 - The Fundamentals of Managerial Economics
Topic: The Economics of Effective Management
Blooms: Understand
AACSB: Knowledge Application
Difficulty: 02 Medium
8. The primary inducement for new firms to enter an industry is:
A. increased technology.
B. availability of labor.
C. low capital costs.
D. presence of economic profits.
Answer: D
Learning Objective: 01-03
Topic: The Economics of Effective Management
Blooms: Remember
AACSB: Knowledge Application
Difficulty: 01 Easy
9. As more firms enter an industry:
A. accounting profits increase.
B. economic profits decrease.
C. prices rise.
D. None of the statements associated with this question are correct.
Answer: B
Learning Objective: 01-04
Topic: The Economics of Effective Management
Blooms: Remember
AACSB: Knowledge Application
Difficulty: 01 Easy
10. Scarce resources are ultimately allocated toward the production of goods most wanted by
society because:
A. firms attempt to maximize profits.
B. they are most efficiently utilized in these areas.
C. consumers demand inexpensive goods and services.
D. managers are benevolent.
Answer: A
Learning Objective: 01-03
Topic: The Economics of Effective Management
Blooms: Understand
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