Test Bank for Managerial Economics And Strategy, 3rd Edition

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Managerial Economicsand StrategyThird EditionJeff PerloffJames BranderTest Bank (Download only)forManagerial Economicsand StrategyTodd Fitch

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1Managerial Economics and Strategy, 3e(Perloff/Brander)Chapter 1Introduction1.1Managerial Decision Making1) Microeconomics studies the allocation ofA) decision makers.B) scarce resources.C) models.D) unlimited resources.Answer: BSkill: DefinitionAACSB: Analytical ThinkingStatus: Old2) Society faces trade-offs because ofA) government regulations.B) the profit motive.C) price setting by firms.D) scarcity.Answer: DSkill: ConceptualAACSB: Analytical ThinkingStatus: New3) ManagerialeconomicsA) describes how pay for managers is set.B) ensures managers always make good decisions.C) helps managers make decisions in the face of scarcity.D) explains which products consumers will buy.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: Old4) CEOs should focus onA) beating their competitors.B) maximizing firm profits.C) getting the best pay package for the senior management team.D) minimizing costs.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old

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25) Profit isA) maximized when the marketing department coordinates with the production department.B) maximized when revenue is maximized.C) used to beat a company's rivals.D) the difference between a firm's revenues and its costs.Answer: DSkill: DefinitionAACSB: Analytical ThinkingStatus: Old6) Firms face trade-offs becauseA) managers don't know which inputs to use.B) inputs are scarce.C) markets set prices of goods they sell.D) marginal reasoningleads to uncertainty.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old7) A firm's managers are constrained byA) consumers.B) workers.C) government.D) All of the above.Answer: DSkill: ConceptualAACSB: Analytical ThinkingStatus: Old8) A marketA)always involves the personal exchange of goods for money.B) allows interactions between consumers and firms.C) always takes place at a physical location.D) has no influence on prices.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old

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39) In a market,A) the primary participants are consumers and firms.B) government policies play a very small part.C) decision makers always maximize.D) the goods sold are not closely related.Answer: ASkill: ConceptualAACSB: Analytical ThinkingStatus: New10) Which of the following would NOT be considered part of a firm's strategy?A) production levelsB) which inputs to useC) sales strategyD) None of the above—all are part of a firm's strategy.Answer: DSkill: ConceptualAACSB: Analytical ThinkingStatus: Old11) What is the purpose of having a strategy?Answer: A strategy defines for a manager the actions to be taken to maximize the firm's profits.Skill: ConceptualAACSB: Written and Oral CommunicationStatus: Old12) Explainwhat the statement "We can't have everything we want" means.Answer: Because resources are scarce, we face tradeoffs. For example, a baker cannot use apiece of dough she hasfor both pizza and a croissant, so she has to decide which to make.Skill: ConceptualAACSB: Reflective ThinkingStatus: Old13) What is profit?Answer: Profit is the difference between a firm's revenue or income and its costs or expenses.Skill: DefinitionAACSB: Written and Oral CommunicationStatus: Old14) Give an example of a tradeoff a pizza restaurant might face.Answer: Whether to make pepperoni or combination pizzas.Skill: DefinitionAACSB: Analytical ThinkingStatus: Old

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415) Why might raising the price of a good by a dollar lead to lower profits?Answer: Ifthe extra profit margin made on the units sold does not cover the lost profit fromselling fewer units, then profits will actually decrease if the price is raised.Skill: AnalyticalAACSB: Analytical ThinkingStatus: Old16) Why might raising the priceof a good by a dollar lead to higher profits?Answer: If the extra profit margin made on the units sold covers the profit lost from sellingfewer units, then profits will increase if the price is raised.Skill: AnalyticalAACSB: Analytical ThinkingStatus: Old17) Raising the price of a good by one dollarA) increases profits.B) decreases profits.C) leaves profits unchanged.D) leads to an indeterminant change in profits.Answer: DSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old18) Most private firms seek toA) maximize revenue.B) maximize profit.C) minimize headcount.D) maximize employee salaries.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: OldFor the following, please answer "True" or "False" and explainwhy.19) Managers have to understand the decision making of others.Answer: True. Otherentities such as governments and rivals may undertake actions thatconstrain a firm. Consumers and workers make decisions on how to spend their scarce resources,such as budgets and time. To maximize profits, the manager must understand how these otherentities will behave.Skill: ConceptualAACSB: Analytical ThinkingStatus: Old

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51.2Economic Models1) The purpose of making assumptions in economic model building is toA) force the model to yield the correct answer.B) minimize the amount of work aneconomist must do.C) simplify the model while keeping important details.D) express the relationship mathematically.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: Old2) Einstein was quoted saying "Everything should be made as simpleas possible, but notsimpler." When it comes to economic models this means thatA) models shouldn't be too complex.B) models shouldn't be too simple.C) models should have a level of abstraction appropriate to the topic investigated.D) All of the above.Answer: DSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old3) If a model's predictions are correct, thenA) its assumptions must have been correct.B)it is proven to be correct.C) Both A and B above.D) None of the above.Answer: DSkill: ConceptualAACSB: Analytical ThinkingStatus: Old4) Economists tend to judge a model based uponA) the reality of its assumptions.B) the accuracy of its predictions.C) its simplicity.D)its complexity.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old

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65) Economic models are most useful inA) explaining outcomes resulting from management decisions.B) predicting the direction of the stockmarket.C) explaining the future with the past.D) generating untestable hypotheses.Answer: ASkill: ConceptualAACSB: Analytical ThinkingStatus: Old6) If an important assumption is omitted from an economic model,A) the model's predictions will only be accurate 50% of the time.B) the model's predictions may be inaccurate.C) the model will not predict anything.D) the model is not simple enough.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old7) Economic models are most often testedA) using computer simulations.B) using data from the distant past.C) using data from the real world.D) using logic alone.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: Old8) A microeconomic model CANNOT be used toA) evaluate the impact of a price change on a firm's revenue.B) predict the impact of an increase in the minimum wage on unemployment.C) evaluatethe fairness of a proposal to nationalize health insurance.D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets.Answer: CSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old

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79) Economic models are only useful in analyzing government policy.A) True, individuals are irrational and therefore economic models are useless.B) False, economic models can be used to predict individual and firm behavior.C) True, economists only model those questions for which they are hired.D) False, economic models are not even useful in analyzing government policy.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old10) Microeconomic models are used toA) make predictions.B) explain real-life phenomena.C)evaluate production alternatives.D) All of the above.Answer: DSkill: ConceptualAACSB: Analytical ThinkingStatus: Old11) If a theory's predictions are incorrect,A) then economists always reject it.B) then the data used was clearly faulty.C) then economists will likely reduce their confidence in the theory.D) then the model must be too simple.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: Old12) Which of the following is an example of a normative statement?A) A higher price for a good causes people to want to buy less of that good.B) A lower price for a good causes people to want to buy more of that good.C) To make the good available to more people, a lower price should beset.D) If you decrease the amount of sugar in soda drinks, sales to children will decrease.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: New

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813) Which of the following is an example of a normative statement?A) Since this food is bad for you, you should not consume it.B) This food has negative health effects.C) If you consume this food, you will get sick.D) People usually get sickafter consuming this food.Answer: ASkill: ConceptualAACSB: Analytical ThinkingStatus: Old14) Which of the following is an example of a positive statement?A) Since this food is bad for you, you should not consume it.B) If this food is bad for you, you should not consume it.C) If you consume this food, you will get sick.D) None of the above.Answer: CSkill: ConceptualAACSB: Analytical ThinkingStatus: Old15) Behavioral economics is the study of why peopleA) choose not to optimize.B) optimize.C) sometimes don't optimize.D) behave badly when buying and selling.Answer: CSkill: DefinitionAACSB: Analytical ThinkingStatus: New16) Legislators argue that a minimum wage law is instituted to help poor people. Economists canattack theminimum wage law on two fronts. First, some argue that government should not helpthe poor. Second, some argue that minimum wage laws actually hurt the poor because it createsunemployment. Which argument is normative and which is positive?Answer: An opinion about the role of government is a normative statement. An observationabout the impact of a law is a positive statement.Skill: AnalyticalAACSB: Analytical ThinkingStatus: Old

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917) Explain why a model that delivers good enough approximations isa good model.Answer: Models make simplifying assumptions in order to make them less complex andcomplicated and therefore usable. But when we simplify, we do leave out parts of the real worldthat have an impact on the results. If a model gives predictions or approximations that are closeto reality, then the model is useful.Skill: AnalyticalAACSB: Analytical ThinkingStatus: New18) Explain why economists might disagree on the content of a model.Answer: Economists might have different theories or might make different simplifyingassumptions.Skill: ConceptualAACSB:Analytical ThinkingStatus: NewFor the following, please answer "True" or "False" and explain why.19) Normative analysis offers decision makers the most valuable information when choosingamong alternatives.Answer: False. Normative analysis states subjective goals but not how those goals can beachieved. To choose among alternatives a decision maker uses positive analysis.Skill: AnalyticalAACSB: Analytical ThinkingStatus:Old20) If a model fits reality but doesn't generate testable predictions, it is of little value toeconomists.Answer: True. If the model doesn't deliver testable predictions it cannot be tested againstcompeting models.Skill: AnalyticalAACSB: Analytical ThinkingStatus: Old21) If actual experience supports two competing theories, then both theories are proven to betrue.Answer: False. Neither theory can be rejected but if they are competing, then the test isinconclusive.Skill: AnalyticalAACSB: Analytical ThinkingStatus: Old

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1Managerial Economics and Strategy, 3e(Perloff/Brander)Chapter 2Supply and Demand2.1Demand1) An increase in consumer incomes will lead toA) a rightward shift of the demand curve for plasma TVs.B) a movement upward along the demand curve for plasma TVs.C) a rightward shift of the supply curve forplasma TVs.D) no change of the demand curve for plasma TVs.Answer: ASkill: AnalyticalAACSB: Analytical ThinkingStatus: Old2) If the price of automobiles were to increase substantially, thedemand curve for gasolinewould most likelyA) shift leftward.B) shift rightward.C) remain unchanged.D) become steeper.Answer: ASkill: AnalyticalAACSB: Analytical ThinkingStatus:Old3) If the price of automobiles were to decrease substantially, the demand curve for publictransportation would most likelyA) shift rightward.B) shift leftward.C) remain unchanged.D) remain unchanged while quantity demanded would change.Answer:BSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old4)If the price of automobiles were to decrease substantially, the demand curve for pizza wouldmost likelyA) shift rightward.B) shift leftward.C) remain unchanged.D) remain unchanged while quantity demanded would change.Answer: CSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old

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25) Consumers have been buying fewer CDs as downloadable music has become easier topurchase and use. We would represent this asA) a leftward shift of the demand curve for CDs.B) a rightward shift of the demand curvefor CDs.C) a change in the price of CDs.D) a leftward shift of the supply curve for downloadable music.Answer: ASkill: AnalyticalAACSB: Analytical ThinkingStatus: Old6) As people have become more health-conscious and decided to eat food that is better for them,A) the demand curvefor scooters has shifted to the right.B) the demand curve for cupcakes has shifted to the right.C) the demand curve for oranges and apples has shifted to the right.D) None of the above.Answer: CSkill: AnalyticalAACSB: Analytical ThinkingStatus:Old7) If a yet-to-be released video game receives a positive review in a popular gaming magazine,what happens to the demand curve for the video game?A) The demand curve is expected to shift to the right.B) The demand curve is expected to shift to theleft.C) The demand curve is not expected to change.D) For those who read the review, demand shifts to the left. For those who don't read the review,demand shifts to the right.Answer: ASkill: AnalyticalAACSB:Analytical ThinkingStatus: Old8) Which of the following cultural events likely increasedthe demand for the product highlightedin the event?A) The banning of cigarette advertising on television.B) The inclusion of Reese's Pieces in the movie E.T.C)Increased environmental awareness about the negative impacts of sport utility vehicles(SUVs).D) Concerns over "Mad Cow" disease in beef.Answer: BSkill: AnalyticalAACSB: Analytical ThinkingStatus: New

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39) Recently, many cities have attempted topass laws taxing the sale of sugary drinks such assoda pop. If one of these laws passes, wewould expectA) the supply curve for soda pop to shift to the right.B) the supply curve for soda pop to become more vertical.C) the demand curve for soda pop toshift to the right.D) the demand curve for soda pop to shift to the left.Answer: DSkill:AnalyticalAACSB: Analytical ThinkingStatus: Old10) If a city were to ban the use of automobiles within its city limits, we would expectA) the demand curvefor automobiles to shift to the left.B) people to move to another city.C) the demand curve for bicycles to shift to the left.D) the demand curve for automobiles to remain the same.Answer: ASkill: AnalyticalAACSB: Analytical ThinkingStatus: Old11) The CB radio was very popular in the 1970s and 1980s for communicating while driving.People bought them because other drivers had them too and they could therefore talk with manyothers on their trips. This illustratesA) that the demand curve for CBradios was inelastic.B) the network effect.C) that CB radios and gasoline are complementary goods.D) the effects of mobile phones on the demand curve for CB radios.Answer: BSkill: ConceptualAACSB: Application of KnowledgeStatus: Old12) The quantity demanded for a goodA) must equal the quantity actually sold.B) can be less than the quantity actually sold.C) can be greater than the quantity actually sold.D) is always greater than the quantity actually sold.Answer: CSkill: ConceptualAACSB: Application of KnowledgeStatus: Old

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413) An individual who is only willing to pay a relatively low amount for a particular goodA) would fall in the upper portion of the demand curve.B) would fall in the middle portion of the demand curve.C) wouldfall in the lower portion of the demand curve.D) would not be considered part of the demand curve.Answer: CSkill: ConceptualAACSB: Application of KnowledgeStatus: Old14) Assume Joe is only willing to pay $5 for a Ferrari sports car.A)Joe is not considered part of the demand for Ferraris.B) Joe won't be sold a Ferrari.C) Joe is not considered rational.D) Joe's willingness to pay is not indicative of how much he values the Ferrari.Answer: BSkill: AnalyticalAACSB: Analytical ThinkingStatus: Old15) A downward sloping demand curve indicates thatA) individuals all have the same valuation of the same product.B) individuals have different valuations of the same product.C) individuals have no valuations of a particular product.D) certain individuals are uninformed about certain aspects of the product.Answer: BSkill: ConceptualAACSB: Analytical ThinkingStatus: Old16) If the price is $5 and the quantity demanded is 100 units, then at a price of $10, the quantitydemandedwill beA) less than or equal to 100 units.B) greater than or equal to 100 units.C) greater than quantity supplied.D) equal to 100 units.Answer: ASkill: AnalyticalAACSB: Analytical ThinkingStatus: Old

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517) According to the Law of Demand, the demand curve for a good willA) shift leftward when the price of the good increases.B) shift rightward when the price of the good increases.C) slope downward.D) slope upward.Answer: CSkill: ConceptualAACSB:Application of KnowledgeStatus: Old18) The law of demandA) was passed by the 102nd U.S. Congress.B) is a natural law, much like the law of gravity.C) is considered a "law" in economics because of the overwhelming empirical evidence thatsupports itslogic.D) is considered a "law" in economics inorder to force economic models to operate fully.Answer: CSkill: ConceptualAACSB: Application of KnowledgeStatus: Old19) Which of the following would NOT change demand?A) The price of the product.B) Information about the product's health effects.C) The income of the consumers.D) The price of related products.Answer: ASkill: ConceptualAACSB: Application of KnowledgeStatus: New20) If a demand curve shifts left, it impliesA) as a group, consumers are willing and able to pay less for theproduct.B) as a group, consumers are willing and able to pay more for the product.C) government has regulated how many people can purchase the product.D) the profit motive of the firms is making the price too high.Answer: ASkill: ConceptualAACSB:Analytical ThinkingStatus: Old

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