Managerial Economics

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Econ 301-Managerial Economics

Practice Exam 1

I. Multiple choice questions

1. If the interest rate is five percent, the present value of $200 received at the end of five years is: 

a. $121.34

b. $156.71

c. $176.41

d. $132.62

2. Suppose total benefits and total costs are given by B(Y) = 90Y - 8Y2 and C(Y) = 7Y2. What is the optimal level of Y that maximizes net benefits? 

a. 6

b. 3

c. 4

d. None of the statements associated with this question are correct

3. Which of the following signals to the owners of scarce resources are the best uses of those resources? 

a. Profits of businesses

b. Government regulations

c. Economic indicators

d. The accounting cost of those resources

4. Consumer-consumer rivalry arises because of: 

a. Human nature

b. The limited number of suppliers

c. The scarcity of goods available

d. None of the statements associated with this question are correct

5. Suppose the demand for good X is given by QdX= 10 + (XPX + (YPY + (M M. From the law of demand we know that (X will be: 

a. Less than zero

b. Greater than zero

c. Zero

d. None of the statements associated with this question are correct

6. Other things held constant, the greater the price of a good 

a. The lower the demand

b. The higher the demand

c. The greater the consumer surplus

d. The lower the consumer surplus

7. Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks? 

a. Price and quantity will increase

b. Price will increase but quantity will decrease

c. Price and quantity will decrease

d. Price will decrease but quantity will increase

8. The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded? 

a. It will increase 5%

b. It will fall 4.3%

c. It...

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