Pointers For Prelim Exam Managerial Economics 2021

1.
Fill in the blank According to ____________, when price decreases, demand

rises, and when price increases, demand falls.
A. The Law of Diminishing Marginal Utility

B. Adam Smith
C. The Law of Demand
D. The elasticity of demand
2. Fill in the blank______________ is the willingness to buy a product and the

ability to pay for it.
A. Quantity
B. Demand
C. The Law of Demand
D. Elasticity
3. If the graph of the demand shifted to the right it means that
A. An increase in demand
B. A decrease in demand
4. If the graph of the demand shifted to the left it means that
A. An increase in demand
B. A decrease in demand
5. Jen has just received a raise at her job, and as a result, she has stopped
purchasing discounted clothing and has begun to shop at designer clothing
stores. The discounted clothing that Jen has stopped purchasing is an example
of what kind of good?
A. An inferior good
B. A normal good
C. A complementary good
D. A neutral good
6. Tom was recently laid off from his job. His shortage of income has restricted him
from buying jewelry for his wife. The jewelry that Tom can no longer afford is an
example of what kind of good?
A. An inferior good
B. A normal good
C. A complementary good
D. A neutral good
7. PlayStation 3 and XBOX 360 are substitutes. If the price of PlayStation 3

increases what will happen to the quantity demanded for XBOX 360?
A. The quantity demand for XBOX 360 will decrease

B. The quantity demand for XBOX 360 will not change
C. The quantity demand for XBOX 360 will increase
8. Milk and chocolate chip cookies are complementary goods. If the price of milk
decreases what will happen to the quantity demanded for chocolate chip
cookies?
A. The quantity demand for cookies will decrease

B. The quantity demand for cookies will not change
C. The quantity demand for cookies will increase
9. Demand is ________ when a change in price leads to a relatively larger change

in the quantity demanded. On the other hand, demand is __________ when a
change in price leads to a relatively smaller change in the quantity demanded.
A. Increasing; decreasing
B. Decreasing; increasing
C. Elastic; inelastic
D. Inelastic; elastic
10. Managerial Economics can be defined as amalgamation of economic theory with

business practices so as to ease decision-making and future planning by
management.
A. TRUE
B. FALSE
11. Managerial Economics assists the managers of a firm in a rational solution of
obstacles faced in the firm’s activities. It makes use of economic theory and
concepts. It helps in formulating logical managerial decisions.
A. TRUE
B. FALSE
12. Econometrics is defined as use of statistical tools for assessing economic

theories by empirically measuring relationship between economic variables. It
uses factual data for solution of economic problems.
A. TRUE
B. FALSE
13. Theory of firm states that the primary aim of the firm is to maximize wealth.
A. TRUE
B. FALSE
14. Discounting can be defined as a process used to transform future dollars into an
equivalent number of present dollars. For instance, P1 invested today at 10%
interest is equivalent to P1.10 next year.
A. TRUE
B. FALSE
15. The formula for future value is FV = PV*(1+r)t
A. TRUE
B. FALSE
16. Managerial economics used both economic theory/concepts quantitative

approach to make managerial decision making.
A. True
B. False
17.A graphical representation of the demand schedule function is called a:

A. Demand schedule
B. Demand curve
C. Demand function
D. Marginal revenue schedule
18.A market demand curve is likely to shift to the when:

A. Average income falls
B. Price falls
C. Prices rises
D. Population increases
19. Managerial economics draws upon all of the following EXCEPT:
A. Microeconomics
B. Marketing
C. Accounting
D. Sociology
20.The primary objectives of the firm assume that the primary objective of the firm’s
owner or owners is to:
A, Behave in a socially conscientious manner
C. Maximize the firm’s profit

D. Maximize the firm’s total sales
E. Maximize the value of the firm
21.Which of the following is the best definition of managerial economics? Managerial

economics is
A. a distinct field of economic theory.
B. a field that applies economic theory and the tools of decision science.
C. a field that combines economic theory and mathematics.
D. none of the above.
23.The value of an economic theory in practice is determined by
A. how accurate the assumptions are.

B. how well the theory can be represented by a graph.
C. how well the theory can predict or explain.
D. how parsimonious the model is.
24. Management decision problems are comprised of three elements. Which of the
following is not one of them?
A. Profitability
B. Alternatives
C. Constraints
D. Objectives
25. Which of the following areas of economic theory is the single most important
element of managerial economics?
A. Mathematical economics
B. Econometrics
D. Macroeconomics
C. Microeconomics
26.Which of the following is defined as the study of the aggregate economy studied as a
whole?
B. Econometrics
C. Macroeconomics
D. Microeconomics
27.Which of the following is the discipline that studies the use of statistical tools to
estimate economic models?
B. Econometrics
C. Macroeconomics
D.Microeconomics
28. Firms do not continue to grow without limit because of
A. managerial limitations.
B. government regulation.
C. income taxes.
D. antitrust laws.
29. The modern theory of the firm holds that firms behave in a way that is designed to
maximize
A. profit.
B. the value of the firm.
C. monopoly power.
D. total revenue.
30.Which of the following functional areas of business has primary responsibility for a
firm's total revenue?
A. Accounting
B. Finance
C. Marketing
D. Personnel

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1.

Fill in the blank According to ____________, when price decreases, demand

A. The Law of Diminishing Marginal Utility

2. Fill in the blank______________ is the willingness to buy a product and the

3. If the graph of the demand shifted to the right it means that

4. If the graph of the demand shifted to the left it means that

7. PlayStation 3 and XBOX 360 are substitutes. If the price of PlayStation 3

A. The quantity demand for XBOX 360 will decrease

A. The quantity demand for cookies will decrease

9. Demand is ________ when a change in price leads to a relatively larger change

10. Managerial Economics can be defined as amalgamation of economic theory with

12. Econometrics is defined as use of statistical tools for assessing economic

15. The formula for future value is FV = PV*(1+r)t

16. Managerial economics used both economic theory/concepts quantitative

17.A graphical representation of the demand schedule function is called a:

18.A market demand curve is likely to shift to the when:

19. Managerial economics draws upon all of the following EXCEPT:

A, Behave in a socially conscientious manner

C. Maximize the firm’s profit

21.Which of the following is the best definition of managerial economics? Managerial

23.The value of an economic theory in practice is determined by

A. how accurate the assumptions are.

D. how parsimonious the model is.

28. Firms do not continue to grow without limit because of

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