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Managerial Economics Assignment

1. What are the fiscal policy tools used to shift aggregate demand?

  • a. Government spending and interest rates
  • b. Taxes and interest rates
  • c. Government spending and taxes
  • d. Taxes and employment rates

2. Which of the following could cause a recession?

  • a. A decline in aggregate demand
  • b. A decline in unemployment
  • c. An increase in aggregate supply
  • d. An increase in government spending

3. Inflation begins when:

  • a. Aggregate demand increases faster than unemployment
  • b. Unemployment increases faster than the labor force
  • c. Aggregate demand increases faster than output
  • d. Output increases faster than unemployment

4. Household Consumption.

  • a. Is typically the largest component of aggregate demand
  • b. Represents household expenditures on goods and services
  • c. Accounts for about 2/3 of total spending in the U. S.
  • d. All of the above

5. Which of the following is not an example of «investment spending»?

  • a. Construction of a new factory
  • b. The government buying goods or services
  • c. Purchasing items for inventory
  • d. New production equipment

6. All of the following represent government spending as part of consumer demand except for

  • a. Federal government spending on roads
  • b. State and local spending on schools
  • c. Social Security checks or other income transfers
  • d. National defense

7. Ceteris paribus, an increase in will cause an increase in .

  • a. Disposable income; government spending
  • b. Consumer confidence; consumer demand
  • c. Taxes; consumption
  • d. Imports; disposable income

8. Net exports for the U. S. GDP are

  • a. Always positive
  • b. Always a greater percentage of GDP than government spending
  • c. Negative if Americans export less goods than they import
  • d. Zero if Americans export more goods than they import

9. Fiscal stimulus includes

  • a. Government spending for highways
  • b. Government purchase of military goods
  • c. A tax cut
  • d. All of the above

10. When the government injects spending into our economy, the spending triggers a «multiplier effect». Which of the following explains why the multiplier effect exists?

  • a. The circular nature of the economy
  • b. The fact that money is spent and re-spent multiple times
  • c. The idea that one person’s spending becomes another person’s income
  • d. All of the above

11. Alternating periods of growth and contraction in real GDP are defined as:

  • a. The business cycle
  • b. Government intervention
  • c. Capitalism
  • d. Macro equilibrium

12. Which of the following is a basic measure of macroeconomic performance?

  • a. Output growth
  • b. Unemployment
  • c. Inflation
  • d. All of the above

13. Which of the following is characteristic of a downturn in the business cycle?

  • a. Less unemployment
  • b. An increase in population
  • c. A decrease in real output
  • d. Lower prices

14. Which of the following is true during the peak phase of a business cycle?

  • a. The unemployment rate is too high
  • b. The inflation rate has rapid changes
  • c. Real GDP is increasing
  • d. None of the above

15. The long-term average growth rate for real GDP in the U. S. on average has been approximately

  • a. 1% per year
  • b. 3% per year
  • c. 4% per year
  • d. 6% per year

16. Which of the following individuals is still part of the labor force?

  • a. The CEO of Bank of America
  • b. A retired school teacher
  • c. A man who stays home, does housework and take care of his children
  • d. A woman serving seven years in prison for selling drugs

17. Which of the following types of unemployment would best characterize a tax preparer’s unemployment after tax returns are due?

  • a. Seasonal unemployment
  • b. Frictional unemployment
  • c. Underemployment
  • d. Cyclical unemployment

18. When the unemployment rate reaches the full-employment level

  • a. There is increased concern about inflation
  • b. There are fewer idle human resources available
  • c. The economy is producing at maximum on the production possibilities curve
  • d. All of the above

19. Our full employment goal is not zero percent because

  • a. Frictional unemployment will always exist
  • b. Unacceptably high rates of inflation would probably result
  • c. There will always be changes in the economy that cause structural unemployment
  • d. All of the above

20. The labor force is smaller than the total population because the labor force does not include:

  • a. People who have jobs
  • b. Very young and elderly citizens
  • c. People looking for a job
  • d. Those who are structurally unemployed

21. Which of the following is an example of perfect competition?

  • a. One large firm supplies all of the product to the market
  • b. Two firms supply the entire market and compete with each other for customers
  • c. Many small firms produce the same good
  • d. Many firms essentially supply the same good, but each has significant brand loyalty

22. Which of the following is true concerning a monopoly

  • a. A single firm sells all the market output
  • b. The firm is a price setter rather than a price taker
  • c. There is significant market power
  • d. All of the above

23. In which of the following competitive markets would a single company have the least market power?

  • a. Perfect competition
  • b. Monopolistic competition
  • c. Oligopoly
  • d. Monopoly

24. Which of the following is an example of monopolistic competition?

  • a. One large firm supplies all of the product to the market
  • b. One firm supplies supplies 60% of the product to the market, and there are 3 other rival firms
  • c. Many firms essentially supply the same good, but each has significant brand loyalty
  • d. Two firms supply the entire market

25. The equilibrium price for a perfectly competitive firm occurs:

  • a. Where price equals minimum average total cost
  • b. At the intersection of market supply and market demand
  • c. Where a firm’s marginal cost equals total revenue
  • d. None of the above

26. In making a production decision, a business owner:

  • a. Decides whether to enter or exit the market
  • b. Makes a long-run decision about output and revenues
  • c. Decides whether to buy or lease new plant and equipment
  • d. Decides the short-run rate of output

27. Suppose a perfectly competitive firm increases its output. In order to sell this additional output the firm:

  • a. Should price it at market price first
  • b. Should raise its price to sell the additional output
  • c. Will not be able to sell the additional output at any price because of the many competitors
  • d. Is forced to lower price to sell the additional output

28. Marginal costs:

  • a. Are the additional costs incurred in producing one more unit of output
  • b. Increase as the rate of output increases
  • c. Are used to make the production decision
  • d. All of the above

29. If marginal cost equals price, then _ is at a maximum.

  • a. Total cost
  • b. Profit
  • c. Total revenue
  • d. Marginal cost

30. Which of the following firms is likely to have the greatest market power?

  • a. A farmer who can sell as much lettuce as he can grow
  • b. A single soft drink company serving a campus with no barriers to entry
  • c. The only producer of the latest computer microchip technology
  • d. A regulated natural monopoly selling natural gas service

31. In order to demand a product, in economic terms, a consumer must

  • a. Just be willing to purchase the product
  • b. Only be able to purchase the product
  • c. Be both willing and able to purchase the product
  • d. Find the product somewhere

32. If quantity demanded rises significantly following a price cut, then demand is

  • a. Elastic
  • b. Inelastic
  • c. Unitary elastic
  • d. Unusual

33. Match the following types of demand to their respective price & revenue outcomes:

  • a. Price increases, Total revenue decreases _ Inelastic demand (E 1)
  • b. Price decreases, Total revenue does not change _ Inelastic demand (E<1)
  • c. Price decreases, Total revenue decreases _ Unitary elastic (E=1)
  • d. Price decreases, Total revenue increases

40. Adam Smith’s concept of the «invisible hand» refers to

  • a. The market mechanism
  • b. Central planning
  • c. Oppression of workers by the wealthy business owners
  • d. Government regulations

41. The study of economics focuses on

  • a. Only successful businesses
  • b. Value of the dollar
  • c. How best to allocate scarce resources
  • d. Elimination of opportunity costs

42. Limited resources, or «factors of production»

  • a. Act as a constraint on what can be produced
  • b. Require economic choices to be made
  • c. May cause tradeoffs when the mix of output changes
  • d. All of the above

43. Which of the following is the best example of the «WHAT» economic question?

  • a. Should we substitute labor with more capital in the production process?
  • b. Who gets the goods we are producing?
  • c. Is there a more efficient way to produce goods?
  • d. What is the optimal or best mix of output?

44. The economy of the United States is important because it

  • a. Produces exactly the same output as China, Japan, and Western Europe combined
  • b. Produces over 20% of the total world output
  • c. Exceeds the combined production of all other countries in the world together
  • d. Contains over 30% of the world population

45.Which of the following are available in limited quantity and contributes to the problem of scarcity?

  • a. Production, pricing, and purchasing
  • b. Land, labor, capital, and entrepreneurship
  • c. Net exports d. Full employment, price stability, and growth in output

46. Which of the following is a reason why government intervenes in the economy?

  • a. To ensure safe products
  • b. To reduce pollution
  • c. To improve the mix of output
  • d. All of the above

47. The opportunity cost of going to a concert is

  • a. Zero, because concerts rock!
  • b. Negative, since other activities cost more time and money
  • c. All the other activities that you gave up to go
  • d. The price of your concert ticket

48. GDP is

  • a. A measure of the per capita income of the economy
  • b. The sum of physical inventories of goods and services in the economy
  • c. A physical measure of the capital purchases in an economy
  • d. A measure of the output produced within a nation’s borders during a given time period

49. When economists talk about a tradeoff between «guns and iPhones» they mean.

  • a. Society is able to produce more military goods without giving up any consumer goods
  • b. Military goods are not the best use of resources
  • c. Producing more military goods may mean fewer consumer goods
  • d. Consumer goods are more costly than military goods

50. Total output (GDP) includes which consumers?

  • a. Household consumption
  • b. Business investment
  • c. Government purchases
  • d. All of the above

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