Question 1

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

Accepted Answer

If the extra profit margin made on the units sold covers the profit lost from selling fewer units, then profits will increase if the price is raised.

Question 2

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

Accepted Answer

Because resources are scarce, we face tradeoffs. For example, a baker cannot use a piece of dough she has for both pizza and a croissant, so she has to decide which to make.

Question 3

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.

Accepted Answer

A market allows for interactions between consumers and firms, but it doesn't always involve the personal exchange of goods for money, it doesn't always take place at a physical location, and it certainly has an influence on prices. A market allows for interactions between consumers and firms, whether in person or online. It may involve the exchange of goods or services for money, but it can also involve bartering or other forms of exchange. Markets can exist in physical locations, but they can also be virtual, such as online marketplaces. Prices in a market are influenced by supply and demand, as well as other factors.

Question 4

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

Accepted Answer

The answer of Give an example of a tradeoff a...

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.

Accepted Answer

Profit is defined as the difference between a company's revenues and its costs. Maximized profit occurs when revenues are high and costs are low, but it is not necessarily related to coordination between departments or beating rivals.

Question 6

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.

Accepted Answer

In a market, the primary participants are consumers (who demand goods and services) and firms (who supply goods and services to satisfy the demand). Government policies can have a significant influence on the market through regulations, taxes, and subsidies. Decision makers in the market may not always maximize, as they may have other goals besides profit maximization. The goods sold in a market can be closely or loosely related depending on the industry and market structure.

Question 7

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

Accepted Answer

The answer of Why might raising the price of a...

Question 8

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.

Accepted Answer

All of the options presented are part of a firm's strategy. Production levels, which inputs to use, and sales strategy are all important components of a company's overall strategy. Therefore, the correct answer is D, "None of the above—all are part of a firm's strategy."

Question 9

Most private firms seek to
A)maximize revenue.
B)maximize profit.
C)minimize headcount.
D)maximize employee salaries.

Accepted Answer

The main goal of most private firms is to maximize profit, which means increasing revenue and reducing costs. This is essential for the survival and growth of a business. Minimizing headcount or maximizing employee salaries may be secondary goals, but they are not primary goals for private firms.

Question 10

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.

Accepted Answer

Managerial economics helps managers make decisions in the face of scarcity by analyzing the allocation of resources and predicting the outcomes of different decisions. It is not directly involved in setting pay for managers or explaining consumer preferences. While managerial economics can assist in making good decisions, it cannot guarantee that all decisions made by managers will be good.

Question 11

Managers have to understand the decision making of others.

Accepted Answer

Other entities such as governments and rivals may undertake actions that constrain 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 other entities will behave.

Question 12

A firm's managers are constrained by
A)consumers.
B)workers.
C)government.
D)All of the above.

Accepted Answer

A firm's managers are constrained by all three factors - consumers, workers, and government. Consumers dictate the demand for the firm's products or services, therefore, managers must cater to consumer needs to ensure sales. Workers can also impact a firm's success, as they contribute labor to the company and can potentially unionize or strike if their needs are not met. Lastly, government regulations, taxes, and policies can directly affect a firm's operations and bottom line, leading managers to adapt to various legal and political constraints.

Question 13

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.

Accepted Answer

The impact of raising the price of a good by one dollar on profits is indeterminate without additional information about how quantity demanded changes in response to the price change, cost structures, and other market dynamics.

Question 14

What is profit?

Accepted Answer

The answer of What is profit?...

Question 15

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.

Accepted Answer

Maximizing firm profits should be the top priority of CEOs as it ensures the long-term sustainability and success of the company. Beating competitors, getting the best pay package for the senior management team, and minimizing costs may all contribute to maximizing profits, but should not be the primary focus.

Question 16

Microeconomics studies the allocation of
A)decision makers.
B)scarce resources.
C)models.
D)unlimited resources.

Accepted Answer

Microeconomics focuses on the allocation of scarce resources, such as time, money, and labor, among different uses and individuals. It examines how individuals and firms make decisions and allocate these scarce resources to achieve their goals. Therefore, option B is the correct answer. Option A is too broad and encompasses both micro- and macroeconomic studies, while option C is a method of study, not a focus of study. Option D is incorrect because unlimited resources do not require the allocation of resources as they are abundant. Microeconomics is concerned with the study of how individuals and firms allocate scarce resources to satisfy unlimited wants and needs. Therefore, the correct answer is B - scarce resources.

Question 17

Society faces trade-offs because of
A)government regulations.
B)the profit motive.
C)price setting by firms.
D)scarcity.

Accepted Answer

Society faces trade-offs because of scarcity, which means there are limited resources to fulfill unlimited wants and needs. This requires individuals and society as a whole to make choices, including trade-offs between different options, in order to allocate these scarce resources effectively. Government regulations, the profit motive, and price setting by firms can all be factors that influence these trade-offs, but they are not the primary cause of them.

Question 18

What is the purpose of having a strategy?

Accepted Answer

The answer of What is the purpose of having a...

Question 19

Firms face trade-offs 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.

Accepted Answer

Firms face trade-offs because inputs are scarce. This means that they must make choices about how to allocate their limited resources to produce the goods and services they offer. If they were not faced with scarcity, they could simply use all resources to produce everything, without having to make any trade-offs or choices.

Question 20

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.

Accepted Answer

Assumptions are necessary for model building as they simplify the complexity of the real world while retaining the key components that are critical for understanding the problem under consideration. This leads to greater analytical tractability, allowing economists to isolate specific relationships and draw clearer conclusions. However, assumptions should not be made arbitrarily and must be based on empirical evidence and sound reasoning. Making assumptions in economic model building is necessary to simplify the complex realities of the economy while retaining the important details. This helps to make the model more manageable and easier to understand, analyze, and utilize. However, the assumptions should be realistic and based on empirical evidence to ensure the accuracy and validity of the model. Option A is incorrect since the purpose of assumptions is not to manipulate the model to produce desirable outcomes. Option B is also incorrect as it misconstrues the purpose of assumptions as a means to reduce workload. Option D is only partially correct as expressing the relationship mathematically is important, but it is not the sole purpose of assumptions.

Quiz 1: Introduction

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

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

A market

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

Profit is

In a market,

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

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

Most private firms seek to

Managerial economics

Managers have to understand the decision making of others.

A firm's managers are constrained by

Raising the price of a good by one dollar

What is profit?

CEOs should focus on

Microeconomics studies the allocation of

Society faces trade-offs because of

What is the purpose of having a strategy?

Firms face trade-offs because

The purpose of making assumptions in economic model building is to