Deck 1: Introduction

Question 1

Managers have to understand the decision making of others.

Answer 1

True

Question 2

Managerial economics

A)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 2

helps managers make decisions in the face of scarcity.

Question 3

Raising the price of a good by one dollar

A)increases profits.
B)decreases profits.
C)leaves profits unchanged.
D)leads to an indeterminant change in profits.

Answer 3

leads to an indeterminant change in profits.

Question 4

CEOs should focus on

A)beating their competitors.
B)maximizing firm profits.
C)getting the best pay package for the senior management team.
D)minimizing costs.

Question 5

Profit is

A)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.

Question 6

A market

A)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.

Question 7

Explain what the statement "We can't have everything we want" means.

Question 8

Most private firms seek to

A)maximize revenue.
B)maximize profit.
C)minimize headcount.
D)maximize employee salaries.

Question 9

Microeconomics studies the allocation of

A)decision makers.
B)scarce resources.
C)models.
D)unlimited resources.

Question 10

Give an example of a tradeoff a pizza restaurant might face.

Question 11

What is the purpose of having a strategy?

Question 12

Society faces trade-offs because of

A)government regulations.
B)profit motive.
C)price setting by firms.
D)scarcity.

Question 13

A firm's managers are constrained by

A)consumers.
B)workers.
C)government.
D)All of the above.

Question 14

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 always closely related.

Question 15

Which of the following would NOT be considered part of a firm's strategy?

A)production levels
B)which inputs to use
C)sales strategy
D)None of the above-all are part of a firm's strategy.

Question 16

Firms face tradeoffs because

A)managers don't know which inputs to use.
B)inputs are scarce.
C)markets set prices of goods they sell.
D)marginal reasoning leads to uncertainty.

Question 17

Behavioral economics

A)studies why people choose not to optimize.
B)studies why people optimize.
C)studies why people sometimes don't optimize.
D)studies why people behave badly when buying and selling.

Question 18

Why might raising the price of a good by a dollar lead to lower profits?

Question 19

Why might raising the price of a good by a dollar lead to higher profits?

Question 20

What is profit?

Question 21

A microeconomic model CANNOT be used to

A)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)evaluate the 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.

Question 22

Legislators argue that a minimum wage law is instituted to help poor people. Economists can attack the minimum wage law on two fronts. First, some argue that government should not help the poor. Second, some argue that minimum wage laws actually hurt the poor because it creates unemployment. Which argument is normative and which is positive?

Question 23

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.

Question 24

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 be set.
D)If you consume this good, you will be better off.

Question 25

If actual experience supports two competing theories, then both theories are proven to be true.

Question 26

Economic models are most useful in

A)explaining outcomes resulting from management decisions.
B)predicting the direction of the stock market.
C)explaining the future with the past.
D)generating untestable hypotheses.

Question 27

Einstein was quoted saying "Everything should be made as simple as possible, but not simpler." When it comes to economic models this means that

A)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.

Question 28

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 sick after consuming this food.

Question 29

The purpose of making assumptions in economic model building is to

A)force the model to yield the correct answer.
B)minimize the amount of work an economist must do.
C)simplify the model while keeping important details.
D)express the relationship mathematically.

Question 30

Explain why economists might disagree on the content of a model.

Question 31

If a model fits reality but doesn't generate testable predictions, it is of little value to economists.

Question 32

Economic models are most often tested

A)using computer simulations.
B)using data from the distant past.
C)using data from the real world.
D)using logic alone.

Question 33

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.

Question 34

Microeconomic models are used to

A)make predictions.
B)explain real-life phenomena.
C)evaluate production alternatives.
D)All of the above.

Question 35

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.

Question 36

Economists tend to judge a model based upon

A)the reality of its assumptions.
B)the accuracy of its predictions.
C)its simplicity.
D)its complexity.

Question 37

Normative analysis offers decision makers the most valuable information when choosing among alternatives.

Question 38

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.

Question 39

If a model's predictions are correct, then

A)its assumptions must have been correct.
B)it is proven to be correct.
C)Both A and B above.
D)None of the above.

Question 40

Explain why a model that delivers good enough approximations is a good model.