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Principles of Managerial Economics

This document provides solutions on key principles of managerial economics.

David Miller
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Principles of Managerial EconomicsMULTIPLE CHOICE1.The form of economicsmostrelevant to managerial decision-making within the firm is:a.macroeconomicsb.welfare economicsc.free-enterprise economicsd.microeconomicse.none of the aboveANS:DPTS:12.If one defines incremental cost as the change in total cost resulting from a decision, and incrementalrevenue 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 revenueb.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 abovee.b and c onlyANS:DPTS:13.In the shareholder wealth maximization model, the value of a firm's stock is equal to the present valueof all expected future ____ discounted at the stockholders' required rate of return.a.profits (cash flows)b.revenuesc.outlaysd.costse.investmentsANS:APTS:14.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 be.a, b, and cANS:DPTS:15.According to the profit-maximization goal, the firm should attempt to maximizeshort-runprofits sincethere is too much uncertainty associated with long-run profits.a.trueb.falseANS:BPTS:1

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