Answers to Multiple Choice Nsu

* Answers to MC Problem 1 

Chapter 1: Managers, Profits, and Markets
Chapter 3: Marginal analysis for Optimal Decisions
 
the correct answers are marked red.
 
1. Economic theory is a valuable tool for business decision making because it
  a. identifies for managers the essential information for making a decision.
b. assumes away the problem.
c. creates a realistic, complex model of the business firm.
d. provides an easy solution to complex business problems. 
 
2. Consider a firm that employs some resources that are owned by the firm. When accounting profit is zero, economic profit 

1. must also equal zero.

2. is sure to be positive.

3. must be negative and shareholder wealth is reduced.

4. cannot be computed accurately, but the firm is breaking even nonetheless.

*  
3. Suppose Marv, the owner-manager of Marv’s Hot Dogs, earned $72,000 in revenue last year. Marv’s explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $30,000 annually as mechanical engineer.
 

b. Marv's economic profit is $36,000.
a. Marv's implicit cost of using owner supplied resources is $30,000
c. Marv’s economic profit is $6,000
d. both b. and c.
 
4. Owners of a firm want the managers to make business decisions that will
 

a. maximize the value of the firm.
b.   maximize expected profit in each period of operation.
c. maximize the market share of the firm.
d. both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods.
 
5. When a firm is a price-taking firm,
 

a. the price of the product it sells is determined by the intersection of the market demand and supply curves for the product.
b. raising the price of the product above the market-determined price will cause sales to fall nearly to zero.
c. many other firms produce a product that is identical to the output produced by the rest of the...