Chapter 1 Managers and Economics

1) Which of the following statements is correct?
A) Managerial decisions are affected primarily by microeconomic
forces.
B) Managerial decisions are affected primarily by macroeconomic
forces.
C) Managerial decisions are affected by both microeconomic and macroeconomic
forces.
D) By and large, managerial decisions are not affected by either
microeconomic or macroeconomic forces.

2) Walmart’s decision in 1994 to continue operating stores in
specific cities in Mexico when other firms were
pulling out would be best classified as:
A) a macroeconomic decision.
B) a microeconomic decision.
C) both a microeconomic and a macroeconomic decision.
D) neither a microeconomic nor a macroeconomic decision.

3) Which of the following would be considered an example of a
macroeconomic problem?
A) Should Microsoft reduce the price of its Windows operating
system?
B) Should the federal government extend the eligibility period for
unemployment benefits?
C) Should Mitsubishi eliminate one of its production shifts?
D) Should JP Morgan Chase increase the interest rate it charges
its credit card customers?

4) Walmart’s entry into the market in Mexico had the effect of:
A) increasing competition and lowering the prices of many of the
goods it sells.
B) reducing competition and lowering the prices of many of the
goods it sells.
C) increasing competition and raising the prices of many of the
goods it sells.
D) reducing competition and raising the prices of many of the
goods it sells.

5) Which of the following statements is false?
A) Price determination is the key element in any market system.
B) Input prices influence a firm’s costs of production.
C) Output prices influence a firm’s revenues.
D) While managers must understand how output prices are
determined, determination of input prices is
irrelevant because it is beyond the manager’s control.

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Copyright©2010 Pearson Education, Inc. 6) All else constant, the choice of whether to use
a labor-intensive production process or a capital-intensive one
is depends on:
A) the absolute prices of capital and labor.
B) the relative prices of capital labor.
C) the type of market in which the firm operates.
D) whether the economy is growing or shrinking.

7) Which of the following isnota characteristic of a
perfectly competitive market?
A) Large number of firms in the industry.
B) Outputs of the firms are perfect substitutes for one another.
C) Limited information is available to all market participants.
D) Ease of entry into the market.

8) Firms are considered to be price searchers, as opposed to price
takers, in all of the following market types
except:
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.