Question 1: The economic concept of "opportunity cost" is most closely associated with which of the following management considerations?

• market structure
• resource scarcity
• product demand
• technology

Question 2: Scarcity is a condition that exists when

• there is a fixed supply of resources relative to the demand for the product.
• there is a large demand for a product.
• resources are not able to meet the entire demand for a product.
• All of these

Question 3: A critical element of entrepreneurship (as opposed to managerial skills) is

• leadership skills.
• risk taking.
• technology.
• political skills.

Question 4: A large corporation's profit objective may not be profit or wealth maximization, because stockholders have little power in corporate decision making.

• management is more interested in maximizing its own income.
• managers are overly concerned with their own survival and may not take all prudent risks.
• All of these

Question 5: Unlike an accountant, an economist measures costs on a(n) ________ basis.

• explicit
• replacement
• historical
• conservative

Question 6: A firm's "normal profit" is best characterized by the

• average of a firm's profits over the past five years.
• amount of profit necessary to keep the price of a firm's stock from changing.
• amount of profit a firm could earn in its next best alternative activity.
• the average amount of profit earned in the firm's industry.

Question 7: If the price of a substitute increases, which of the following is most likely to happen in the market for the product under consideration in the short run?

• Supply will increase.
• Firms will leave the market.
• Firms will devote more variable inputs in the production of this good.
• Firms will devote less variable inputs in the production of this good.

Question 8: Which of the following best applies to the distinction between the "long run" and the "short run"?

• The short run is a period of approximately 1-6 months while the long run is any time frame which is longer.
• In the short run, only new firms may enter, while in the long-run firms may either enter or exit the market.
• The rationing function of price is a short-run phenomenon whereas the guiding function is a long-run phenomenon.
• All of these statements are correct.

Question 9: A market is in equilibrium when

• supply is equal to demand.
• the price is adjusting upward.
• the quantity supplied is equal to the quantity demanded.
• tastes and preference remain constant.

Question 10: If government imposes a price ceiling on a good that is below the market equilibrium price

• a surplus will develop.
• a shortage will develop.
• producers will reduce their sales price.
• consumers will reduce their demand for the good.

Question 11: If an item has several good substitutes, the demand curve for that item is likely to be

• relatively inelastic.
• relatively elastic.
• perfectly inelastic.
• unit elastic.

Question 12: If a firm decreases the price of a good and total revenue decreases, then

• the demand for this good is price elastic.
• the demand for this good is price inelastic.
• the cross elasticity is negative.
• the income elasticity is less than 1.

Question 13: When a regression coefficient is significant at the .05 level, it means that

• there is only a five percent chance that there will be an error in a forecast.
• there is 95 percent chance that the regression coefficient is the true population coefficient.
• there is a five percent chance or less that the estimated coefficient is zero.
• there is a five percent chance or less that the regression coefficient is not the true population coefficient.

Question 14: A major problem in projecting with a trend line is that

• only straight-line projections can be accommodated.
• it is valid only if the trend is upward.
• it will not forecast turning points in activity.
• it is a very complex method of forecasting.

Question 15: When the R2 of a regression equation is very high, it indicates that

• all the coefficients are statistically significant.
• the intercept term has no economic meaning.
• a high proportion of the variation in the dependent variable can be accounted for by the variation in the independent variables.
• there is a good chance of serial correlation and so the equation must be discarded.

Question 16: When is it not in the best interest of a company to hire additional workers in the short run?

• when the average product of labor is decreasing
• when the firm is in Stage II of the production process
• when the marginal revenue product equals zero
• when the wage rate is equal to or greater than labor's marginal revenue product

Question 17: The production period in which at least one input is fixed in quantity is the

• production run.
• long run.
• short run.
• planning horizon.

Question 18: Answer the questions based on the following information.The marginal product of the fourth worker is

• 150 units of output.
• 24 units of output.
• negative.
• 36 units of output.

Question 19: Which of the following statements best represents a difference between short-run and long-run cost?

• Less than one year is considered the short run; more than one year the long run.
• There are no fixed costs in the long run.
• In the short-run labor must always be considered the variable input and capital the fixed input.
• All of these are true.

Question 20: Which level indicates the point of maximum economic efficiency?

• lowest point on AC curve
• lowest point on AVC curve
• lowest point on MC curve
• None of these

Question 21: When a firm increased its output by one unit, its AFC decreased. This is an indication that

• the law of diminishing returns has taken effect.
• MC < AFC.
• AVC < AFC.
• the firm is spreading out its total fixed cost.

Question 22: If an industry could be organized either perfectly competitively or as monopoly, a monopoly would

• produce less output.
• produce where P > MC.
• charge higher prices.
• All of these

Question 23: If a perfectly competitive firm incurs an economic loss, it should

• shut down immediately.
• try to raise its price.
• shut down in the long run.
• shut down if this loss exceeds fixed cost.

Question 24: Monopoly is characterized by

• unique products.
• market entry and exit are difficult or impossible.
• non-price competition not necessary.
• All of these

Question 25: In perfect competition, if firms enter the market in the long run

• total supply will increase causing market price to increase.
• total supply will decrease causing market price to decrease.
• total supply will decrease causing market price to increase.
• total supply will increase causing market price to decrease.