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Test Bank for Managerial Economics And Strategy, 3rd Edition

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    Managerial Economics and Strategy Third Edition Jeff Perloff James Brander Test Bank (Downl oad only) for Managerial Economics and Strategy Todd Fitch

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    1 Managerial Economics and Strategy, 3e (Perloff/Brander) Chapter 1 Introduction 1.1 Managerial Decision Making 1) Microeconomics studies the allocation of A) decision makers. B) scarce resources. C) models. D) unlimited resources. Answer: B Skill: D efinition AACSB: Analytical Thinking Status: Old 2) Society faces trade - offs because of A) government regulations. B) the profit motive. C) price setting by firms. D) scarcity. Answer: D Skill: Conceptual AACSB: Analytical Thinking Status: New 3) M anagerial 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: C Skill: Conceptual AACSB: Ana lytical Th inking Status: Old 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. Answer: B Skill: Conceptual AACSB: Analytical Thinking Status: Old

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    2 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 rev enues and its costs. Answer : D Skill: Definition AACSB: Analytical Thinking Status: Old 6) 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. Answe r: B Skill: Conceptual AACSB: Analytical Thinking Status: Old 7) A firm's managers are constrained by A) consumers. B) workers. C) government. D) All of the above. Answer: D Skill: Conceptual AACSB: A nalytical Thinking Status: Old 8) 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. Answer: B Skill: Co nceptual AACSB: Analytical Thinking Status: Ol d

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    3 9) 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: A Skill: Conceptual AACSB: Analytical Thinking Status: New 10) 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. Answer: D Skill: Conceptual AACSB: Analyti cal Thinking Status: Old 11) 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 : Conceptual AACSB: Written and Oral Communication Status: Old 12) Explain what the statement "We can't have everything we want" means. 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. Skill: Conc eptual AACSB: Reflective Thinking Status: Old 13) What is profit? Answer: Profit is the difference between a firm's revenue or income and its costs or expenses. Skill: Def inition AACSB: Written and Oral Communication Status: Old 14) Give an exampl e of a tradeoff a pizza restaurant might face. Answer: Whether to make pepperoni or combination pizzas. Skill: Definition AACSB: Analytical Thinking Status: Old

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    4 15) Why might raising the price of a good by a dollar lead to lower profits? Answer: If the extra profit margin made on the units sold does not cover the lost profit from selling fewer units, then profits will act ually decrease if the price is raised. Skill: Analytical AACSB: Analytical Thinking Status: Old 16) Why might raising the price of a good by a dollar lead to higher profits? Answer: If the extra profit margin made on the units sold covers the profit l ost from selling fewer units, then profits will increase if the price is raised. Skill: Analytical AACSB: Analytical Thinking Sta tus: Old 17) Raising the price of a good by one dollar A) increases profits. B) decreases profits. C) leaves profits unchan ged. D) leads to an indeterminant change in profits. Answer: D Skill: Analytical AACSB: Analytical Thinking Status: Old 18) Mo st private firms seek to A) maximize revenue. B) maximize profit. C) minimize headcount. D) maximize employee salaries. Answer: B Skill: Conceptual AACSB: Analytical Thinking Status: Old For the following, please answer "True" or "False" and explain why. 19) Managers have to understand the decision making of others. Answer: True. 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, suc h as budgets and time. To maximize profits, the manager must understand how these other en tities will behave. Skill: Conceptual AACSB: Analytical Thinking Status: Old

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    5 1.2 Economic Models 1) The purpose of making assumptions in economic model buildi ng 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. Answer: C Skill: Conceptual AACSB: Analytica l Thinking Status: Old 2) 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 sho uld have a level of abstract ion appropriate to the topic investigated. D) All of the above. Answer: D Skill: Analytical AACSB: Analytical Thinking Status: Old 3) 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. Answer: D Skill: Conceptual AACSB: Analytical Thinking Status: Old 4) Economists tend to judge a model based upon A) the reality of its assumptions. B) the accuracy of its predic tions. C) its simplicity. D) its complexity. Answer: B Skill: Conceptual AACSB: Analytical Thinking Status: Old

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    6 5) Economic models are most useful in A) explaining outcomes resulting from management decisions. B) predicting t he direction of the stock market. C) explaining the future with the past. D) generating untestable hypotheses. Answer: A Skill: Conceptual AACSB: Analytical Thinking Status: Old 6) If an important assumption is omitted from an economic model, A) the m odel's predictions will o nly 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: B Skill: Conceptual AACSB: Analytical Thinking Status: Old 7) Ec onomic models are most of ten tested A) using computer simulations. B) using data from the distant past. C) using data from the real world. D) using logic alone. Answer: C Skill: Conceptual AACSB: Analytical Thinking Status: Old 8) A microeconomic mode l CANNOT be used to A) e valuate 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 siz e on the price of a sport team's tickets. Answer: C Skill: Analytical AACSB: Analytical Thinking Status: Old

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    7 9) Economic models are only us eful in analyzing government policy. A) True, individuals are irrational and therefore economic models are usel ess. B) False, economic models can be used to predict individual and firm behavior. C) True, economists only model those questions for which the y are hired. D) False, economic models are not even useful in analyzing government policy. Answer: B Skill: C onceptual AACSB: Analytical Thinking Status: Old 10) Microeconomic models are used to A) make predictions. B) explain real - life phenomena. C) evaluate production alternatives. D) All of the above. Answer: D Skill: Conceptual AACSB: Analytical Think ing Status: Old 11) 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 : C Skill: Conceptual AACSB: Analytical Thinking Status: Old 12) Which of the following is an e xample 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 w ant to buy more of that good. C) To make the good available to more people, a lower price should be set. D) If you decrease the amount of sugar in soda drinks, sales to children will decrease. Answer: C Skill: Conceptual AACSB: Analytical Thinking Statu s: New

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    8 13) Which of the following is an example of a normative statement? A) Since this food is ba d 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. Answer: A Skill: Conceptual AACSB: Analytical Thinking Status: Old 14) 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 yo u, you should not consume it. C) If you consume this food, you will get sick. D) None of the above. Answer: C Skill: Conceptual AACSB: Analytical Thinking Status: Old 15) Behavioral economics is the study of why people A) choose not to optimize. B) op timize. C) sometimes don't optimize. D) behave badly when buying and selling. Answer: C Skill: De finition AACSB: Analytical Thinking Status: New 16) 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? Answer: An op inion about the role of government is a normative statement. An observation about the impact of a l aw is a positive statement. Skill: Analytical AACSB: Analytical Thinking Status: Old

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    9 17) Explain why a model that delivers good enough approximations is a good model. Answer: Models make simplifying assumptions in order to make them less complex and c omplicated and therefore usable. But when we simplify, we do leave out parts of the real world that have an impact on the results. If a model gives predicti ons or approximations that are close to reality, then the model is useful. Skill: Analytical AACSB: Analytical Thinking Status: New 18) Explain why economists might disagree on the content of a model. Answer: Economists might have different theories o r might make different simplifying assumptions. Skill: Conceptual AACSB: Analytical Thinking Status: New For the following, please answer "True" or "False" and explain why. 19) Normative analysis offers decision makers the most valuable information wh en choosing among alternatives. Answer: False. Normative analysis states s ubjective goals but not how those goals can be achieved. To choose among alternatives a decision maker uses positive analysis. Skill: Analytical AACSB: Analytical Thinking Status: Old 20) If a model fits reality but doesn't generate testable prediction s, it is of little value to economists. Answer: True. If the model doesn't deliver testable predictions it cannot be tested against competing models. Skill: Analytical AACSB: Ana lytical Thinking Status: Old 21) If actual experience supports two compet ing theories, then both theories are proven to be true. Answer: False. Neither theory can be rejected but if they are competing, then the test is inconclusive. Skill: Analytical A ACSB: A n alytical Thinking Status: Old

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    1 Managerial Economics and Strategy, 3e (Perloff/Brander) Chapter 2 Supply and Demand 2.1 Demand 1) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs. B) a movement upward along the demand curve for p lasma TVs. C) a rightward shift of the supply curve for plasma TVs. D) no change of the demand curve for plasma TVs. Answer: A Skill: Analytical AACSB: Analytical Thinking Status: Old 2) If the price of automobiles were to increase substantially, the demand curve for gasoline would most likely A) shift leftward. B) shift rightward. C) remain unchanged. D) become steeper. Answer: A Skill: Analytical AACSB: Analytical Thinking Status: Old 3) If the price of automobiles were to decrease substantially , the demand curve for public transportation would most likely A) shift rightward. B) shift leftward. C) remain unchanged. D) remain unchanged while quantity demanded would change. Answer: B Skill: Analytical AACSB: Analytical Thinking Status: Old 4) If the price of automobiles were to decrease substantially, the demand curve for pizza would most likely A) shift rightward. B) shift leftward. C) remain unchanged. D) remain unchanged whil e quantity demanded would change. Answer: C Skill: Analytical AAC SB: Analytical Thinking Status: Old

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    2 5) Consumers have been buying fewer CDs as downloadable music has become easier to purchase and use. We would represent this as A) a leftward shift of the demand curve for CDs. B) a rightward shift of the demand curve for CDs. C) a change in the price of C Ds. D) a leftward shift of the supply curve for downloadable music. Answer: A Skill: Analytical AACSB: Analytical Thinking Status: Old 6) As people have become more health - conscious and decided to eat food that i s better for them, A) the demand curve for 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: C Skill: Analytica l AACSB: Analytical Thinking Status: Old 7) 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 de mand curve is expected to shift to the left. 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: A Skill: Analytical AACSB: Analytical Thinking Status: Old 8) Which of the following cultural events likely increased the demand for the product highlighted in 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 (SUV s). D) Concerns over "Mad Cow" disease in beef. Answer: B Skill: Analytical AACSB: Analytical Thinking Status: New

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    3 9) Recently, many cities have attempted to pass laws taxing the sale of sugary drinks such as soda pop. If one of these laws passes, we would expect A) 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 to shift to the right. D) the demand curve for soda pop to shift to the left. Answer: D Skill: Analytical AACSB: Analytical Thinking Status: Old 10) If a city were to ban the use of automobiles within its city limits, we would expect A) the demand curve for 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: A Skill: Analytical AACSB: Analytical Thinking Status: Old 11) The CB radio was very popular in the 1970s and 1980s for communicatin g while driving. People bought them because other drivers had them too and they could therefore talk with many others on their trips. This illustrates A) that the demand curve for CB radios was inelastic. B) the network effect. C) that CB radios and gasoli ne are complementary goods. D) the effects of mobile phones on the demand curve for CB radios. Answer: B Skill: Conceptual AACSB: Application of Knowledge Status: Old 12) The qua ntity demanded for a good A) must equal the quantity actually sold. B) ca n 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: C Skill: Conceptual AACSB : Application of Knowledge Status: Old

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    4 13) An individual who is only w illing to pay a relatively low amount for a particular good A) would fall in the upper portion of the demand curve. B) would fall in the middle portion of the demand curve. C) would fall in the lower portion of the demand curve. D) would not be considered part of the demand curve. Answer: C Skill: Conceptual AACSB: Application of Knowledge Status: Old 14) Assume Joe is only willing to pay $5 for a Ferrari sports car. A) Joe is n ot 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: B Skill: Analytical AACSB: Analytical Thin king Sta tus: Old 15) A downward sloping demand curve indicates that A) 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) certa in individuals are uninformed about certain aspects of the product. Answer: B Skill: Conceptual AACSB: Analytical Thinking Status: Old 16) If the price is $5 and the quantity demanded is 100 units, then at a price of $10, the quantity demanded will be A) 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: A Skill: Analytical AACSB: Analytical Thinking Status: Old

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    5 17) According to the Law of Demand, the demand cu rve for a good will A) 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: C Skill: Conceptual AACSB: Application of Knowledge Status: Old 18) The la w of demand A) 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 that supports its logic. D) is considered a "law" in economics in order to force economic models to operate fully. Answer: C Skill: Conceptual AACSB: Application of Knowledge Status: Old 19) 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: A Skill: Conceptual AACSB: Application of Knowl edge Status: New 20) If a demand curve shifts left, it implies A) as a group, consumers are willing and able to pay less for the product. B) as a group, consumers are willing and able to pay more for the product. C) government has regulated how many peop le can purchase the product. D) the profit motive of the firms is making the price too high. Answer: A Skill: Conceptual AACSB: Analytical Thinking Status: Old

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