Managerial Economics – Multiple Choice Questions

1. For a linear (inverse) demand function, increases in output will cause total revenue to increase whenmarginal revenue is:a. Positiveb. Negativec. Unit Elasticd. Elastic2. Competitive market equilibrium is determined by:a. Only the most influential buyers and sellersb. Only the demand curvec. Only the supply curved. The intersection of the demand and supply curves3. As a rule of thumb, a parameter estimate is statistically different from zero when the absolute value of the tstatistic is:a. Zerob. Less than onec. Greater than or equal to 1d. Greater than or equal to 24. Incentive plans mean that:a. Managers are paid the same amount regardless of how much effort they put forthb. Mangers are paid less (more) if they put forth less (more) effortc. Managers have the interests of the owner in mind regardless of how they are paidd. Managers need to be monitored constantly5. When the growth rate is less than the interest rate:a. Maximizing the present value of all future profits is the same as maximizing current profitsb. Maximizing the present value of all future profits is greater than maximizing current profits.c. Current profits equal the sum of future profits.d. None of the above statements are correct.6. Suppose the demand for good X is given by Qxd = 10 – 2Px + Py + M. The price of good X is $1, the price of good Y is $10, and income is $200. Given these prices and income, how much of good X will be purchased?a. 1b. 210c. 218d. None of the statements associated with this question are correct.7. If the income elasticity for lobster is 0.5, a 20 percent increase in income will lead to a:a. 10 percent increase in demand for lobster.b. 10 percent decrease in demand for lobster.c. 20 percent increase in demand for lobster.d. 20 percent decrease in demand for lobster.8. Other things held constant, consumer surplus decreases as:a. The price of a good decreases.b. The price of a good increases.c. The supply curve shifts to the right.d. None of the above.