Ann is a manager at a private construction company. David works in the city planning department of the government. Based on this information, which of the following is most likely to be true?
David will make decisions based on benefit-cost analysis.
As a result of historically high gasoline prices in 2008, traffic volume in the United States (measured in terms of billions of miles driven per month) declined significantly. These changes were caused by a _____ of gasoline and _____.
shortage; a decrease in the quantity demanded of gasoline
The price of computers has fallen, while the quantity purchased has remained constant. This implies that the demand for computers has:
decreased, while the supply of computers has increased.
Which of the following correctly explains a probabilistic model?
A probabilistic model shows the possibility of a range of outcomes.
The government is deciding whether it should build a veteran’s hospital in an urban area. It will choose to build the hospital only if:
the total benefits from the hospital exceed total costs.
California imposes strict new regulations on the blending of gasoline that increase production costs. As a result, the:
supply of gasoline will decrease.
Which of the following is true of economic models?
Models are simplified descriptions of processes, relationships, or other phenomena.
Maximizing profit by enumerating the profit outcomes of different courses of action
Becomes increasingly costly as the number of choices increase.
A cosmetics company is conducting a second-year review of one of its newest products. The marketing department expects that the firm will continue to earn profits from the sale of the product in the third year as it did in the past two years. Senior management, however, feels that the profit projections would vary based on other factors such as the price of the competitor's products, the actual level of sales, and the possibility of cost reductions. In other words, the senior management is undertaking
a sensitivity analysis
The market demand curve shows the quantity of a good or service that:
A research study estimates that the direct cost of constructing a bridge connecting two boroughs in a city is $10 million. The revenue from the tolls on the bridge is estimated to be $8 million. The dollar value of pollution from the construction is estimated to be $5 million but the dollar value of the benefit to the city's residents is calculated to be $20 million. The construction of the bridge is most likely to be undertaken by:
the government because the total benefits exceed total costs
J. D. Power, the big management consulting firm, extols the reliability of Dell computers; this causes the:
demand for Dell computers to increase.
A coffee shop decides that it will increase its market share to 55% by the end of the year by lowering the price of a cup of coffee. The price cut will certainly result in an increase in the firm’s share but will lower its profits. Which of the following best explains the firm’s decision?
Revenue maximization
According to the satisficing model of management behavior, the goal of a firm is to:
achieve a satisfactory level of performance against a benchmark.
The economic theory of the firm assumes that the primary objective of a firm’s owner or owners is to:
maximize the value of the firm.
Managerial economics draws upon all of the following EXCEPT:
sociology.
The market supply curve shows the quantity of a good or service that ____, holding other possible influences constant.
firms would sell at various prices
According to the theory of the firm, the management’s ultimate objective is to:
maximize the value of the firm.
Managerial economics can best be defined as the:
analysis of major management decisions using economic tools
The study of behavioral economics shows that decision makers:
are prone to biases, mistakes, and pitfalls.
In evaluating public programs, benefit-cost analysis:
states that a program should be undertaken only if total benefits exceed total costs.
Sensitivity analysis is used by a firm to:
examine how an optimal decision is affected if key economic facts vary.
ConAgra has introduced a lean mixture of cereal and ground beef that is indistinguishable from ground beef but has about the same amount of fat as chicken. As a result, the:
demand for chicken decreases.
Managers make decisions that contribute to the profitability of a firm by:
taking on risks.
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