Managerial Economic - Written Assessment

Managerial Economic Written Assessment #1 Introduction to 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. 1. 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. 1. 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. 1. 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 1. 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 1. Which of the following are signals to the owners of scarce resources about the best uses of those resources? A. Profits of businesses B. Government regulations C. Economic indicators D. The accounting cost of those resources 1. 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. 1. 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. 1. 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. 1. The opportunity cost of receiving P100 in the future as opposed to getting thatP100 today is: A. the foregone interest that could be earned if you had the money today. B. the taxes paid on any earnings. C. the value of P100 relative to the total income of that person. D. the value of P100 relative to the total income of all persons. 1. When dealing with present value, a higher interest rate: A. does not affect the present value of the future amount. B. increases the present value of a future amount. C. decreases the present value of a future amount. D. None of the statements associated with this question are correct. 1. A firm will maximize the present value of future profits by maximizing current profits when the: A. growth rate in profits is constant. B. growth rate in profits is larger than the interest rate. C. interest rate is larger than the growth rate in profits and both are constant. D. growth rate and interest rate are constant and equal. 1. To maximize profits, a firm should continue to increase production of a good until: A. total revenue equals total cost. B. profits are zero. C. marginal revenue equals marginal cost. D. average cost equals average revenue. 1. The additional benefits that arise by using an additional unit of the managerial control variable is defined as the: A. total benefit. B. opportunity cost. C. marginal benefit. D. present value of benefits. 1. The additional cost incurred by using an additional unit of the managerial control variable is defined as the: A. total cost. B. net cost. C. net benefit. D. marginal cost. 1. The change in net benefits that arises from a one-unit change in quantity is the: A. marginal net benefits. B. total net benefits. C. variable benefits. D. present value benefits. 1. The difference between marginal benefits and marginal costs is the: A. profits. B. marginal net benefits. C. opportunity cost. D. accounting cost. 1. If a producer offers a price that is in excess of a consumer's valuation of the good, the consumer: A. must buy the good at that price. B. will refuse to purchase the good. C. must revalue the good. D. None of the statements associated with this question are correct. 1. Negotiations between the buyer and seller of a new house are an example of: A. consumer−consumer rivalry. B. consumer−producer rivalry. C. producer−producer rivalry. D. monopoly. 1. The behavior of bidders in an auction is an example of: A. consumer−consumer rivalry. B. consumer−producer rivalry. C. producer−producer rivalry. D. None of the statements associated with this question are correct. 1. Other things equal, the greater the interest rate: A. the lower the NPV. B. the higher the NPV. C. the higher the PV. D. None of the statements associated with this question are correct. 1. Economics: A. exists because of scarcity. B. is not related to decision making. C. is the science of the rich. D. has nothing to do with the allocation of resources. 1. Managerial economics: A. has little to say about day-to-day decisions. B. is valuable to the coordinator of a shelter for the homeless. C. is not relevant for managers of not-for-profit groups. D. is the study of how to get rich in the stock market. 1. Basic principles that comprise good management include: A. identifying goals and constraints. B. recognizing the nature and importance of profits. C. understanding incentives. D. All of the statements associated with this question are correct. 1. Which of the following is the main goal of a continuing company? A. To maximize the value of the firm B. To minimize costs C. To improve product quality D. To enhance service to its customers 1. Which of the following is (are) true? A. Accounting costs generally understate economic costs. B. Accounting profits generally overstate economic profits. C. In the absence of any opportunity costs, accounting profits equal economic profits. D. All of the statements associated with this question are correct. 1. Which of the following is incorrect? A. Accounting profits generally overstate economic profits. B. Accounting profits do not take opportunity cost into account. C. Economic costs include not only the accounting costs but also the opportunity costs of the resources used in production. D. Managers should only be interested in accounting profits. 1. What is the main role of economic profits? A. To signal where resources are most highly valued B. To help firms cover their production costs C. To help consumers cover their opportunity cost D. None of the statements associated with this question are correct 1. As the interest rate increases, the opportunity cost of waiting to receive a future amount: A. increases. B. decreases. C. may rise or fall. D. remains the same. 1. To an economist, maximizing profit is: A. maximizing the value of the firm. B. maximizing the current year's profits. C. minimizing the permanent total costs. D. minimizing the future risks. 1. 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. 1. If the interest rate is 5 percent, what is the present value of ₱10 received one year from now? A. ₱9.50 B. ₱10.05 C. ₱9.52 D. ₱9.77 1. If you put ₱1,000 in a savings account at an interest rate of 10 percent, how much money will you have in one year? A. ₱1,200 B. ₱909 C. ₱950 D. ₱1,100 1. If the interest rate is 5 percent, the present value of ₱200 received at the end of five years is: A. ₱121.34. B. ₱156.71. C. ₱176.41. D. ₱132.62. 1. A firm will have constant profits of ₱100,000 per year for the next four years, and the interest rate is 6 percent. Assuming these profits are realized at the end of each year, what is the present value of these future profits? A. ₱325,816 B. ₱376,741 C. ₱$400,000 D. ₱346,511 1. If the annual interest rate is 0 percent, the present value of receiving ₱1.10 in the next year is: A. ₱1.00. B. ₱1.01. C. ₱1.11. D. ₱1.10. 1. If the interest rate is 5 percent, ₱100 received at the end of seven years is worth how much today? A. 100/(0.05)7 B. 100/(1 + 0.05)7 C. 100/(1 + 5)7 D. 100 1. If the interest rate is 5 percent and cash flows are ₱3,000 at the end of year one and ₱5,000 at the end of year two, then the present value of these cash flows is: A. ₱7,392.29. B. ₱8,400.34. C. ₱4,222.50. D. ₱400.74. 1. If the interest rate is 12.5 percent, what is the present value of ₱200 received in one year? A. ₱25 B. ₱177.78 C. ₱197 D. ₱225 1. If you put ₱700 in a savings account at an interest rate of 3 percent, how much money will you have in one year? A. ₱370 B. ₱679.61 C. ₱703.00 D. ₱721