Description

TEST BANK Managerial Economics SEVENTH EDITION Robert Brooker GANNON UNIVERSITY

Contents
Chapter 1 Introduction 1
Chapter 2 Demand Theory 13
Chapter 3 Consumer Behavior and Rational Choice 37
Chapter 4 Production Theory 60
Chapter 5 The Analysis of Costs 80
Chapter 6 Perfect Competition 103
Chapter 7 Monopoly and Monopolistic Competition 120
Chapter 8 Managerial Use of Price Discrimination 138
Chapter 9 Bundling and Intrafi rm Pricing 151
Chapter 10 Oligopoly 166
Chapter 11 Game Theory 184
Chapter 12 Auctions 197
Chapter 13 Risk Analysis 209
Chapter 14 Principal– Agent Issues and Managerial Compensation 229
Chapter 15 Adverse Selection 240
Chapter 16 Government and Business 249

Chapter 1: Introduction 1
Chapter 1
Introduction
MULTIPLE CHOICE

1. Managerial economics uses ____________ to help managers solve problems.
a. formal models
b. prescribed behavior
c. quantitative methods
d. microeconomic theory
e. all of the above
ANS: E PTS: 1

2. Managerial economics draws upon all of the following EXCEPT:
a. finance
b. microeconomics
c. accounting
d. marketing
e. sociology
ANS: E PTS: 1

3. The economic theory of the firm assumes that the primary objective of a firm’s owner or owners is to:
a. behave in a socially conscientious manner
b. maximize the firm’s profit
c. maximize the firm’s total sales
d. maximize the value of the firm
e. All of these are primary objectives
ANS: D PTS: 1

Chapter 1: Introduction 2

4. If the annual interest rate is i, the present value of $X to be received at the end of each of the
next n years is:
a. $X/i
b. $X/(1 + i)n
c. 􀂦 =
+
n
t
X i t
1
$ 1/(1 )
d. $X[(1 + i)n] / [ i(1 + i)n – 1]
e. $X / [i(1 + i)n – 1]
ANS: C PTS: 1

5. If the annual interest rate is i, the present value of $X to be received at the end of each future year forever is:
a. $X/(1 + i)
b. $X/i
c. $X/(1 + i)n
d. $X/i n
e. $Xn/i n
ANS: B PTS: 1

6. If the annual interest rate is 25 percent, the present discounted value of $100 to be received in one year is:
a. $75
b. $80
c. $100
d. $120
e. $125
ANS: B PTS: 1

Chapter 1: Introduction 3

7. You’ve just won the $25 million lottery. You are going to receive a check for $1 million today and at the end of every year for the next 24 years. If the interest rate is 10 percent, the present value of your prize is:
a. $8,984,744
b. $9,984,744
c. $12,984,744
d. $20,000,000
e. $25,000,000
ANS: A PTS: 1

8. You borrow money from Fast Eddie’s Fast Cash at 20 percent per year interest and agree to pay $500 at the end of each of the next four years. You must have borrowed approximately:
a. $2,000
b. $1,595
c. $1,295
d. $1,095
e. $895
ANS: C PTS: 1

9. You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10 percent. At maturity the bond will be worth:
a. $228.17
b. $200
c. $259.37
d. $271.17
e. $217.71
ANS: C PTS: 1
Chapter 1: Introduction 4

10. Your mortgage requires that you pay $12,000 at the end of each of the next 30 years. If the annual interest rate is 12 percent, then you must have borrowed approximately:
a. $117,660
b. $96,660
c. $78,660
d. $63,660
e. $133,660
ANS: B PTS: 1