File: Ch01; CHAPTER 1: Introduction to Economic Decision Making
MULTIPLE CHOICE
b) study of economic incentives on consumer behavior and demand.
c) analysis of the labor market through the behavior of workers and managers.
d) analysis of major management decisions using economic tools.
e) study of the strategic interaction between firms in a market.
ANSWER: d
SECTION REFERENCE: Introduction
DIFFICULTY LEVEL: Easy
b) Exploring the alternatives to the decision.
c) Defining the problem and the objectives of the decision.
d) Negotiating a consensus to implement the decision.
e) Performing sensitivity analysis.
ANSWER: d
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
b) the goal of profit maximization contradicts the goal of satisfying the firm’s shareholders.
c) of the presence of risk and uncertainty.
d) profit-maximization ignores social costs and benefits.
e) None of the above answers is correct.
ANSWER: c
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
b) Models are not useful because uncertainty prevents accurate forecasts.
c) Models are simplified descriptions of processes, relationships, or other phenomena.
d) Models describe real world situations in complete detail.
e) Models are not useful because they do not take into account complicating and less important features of a problem.
ANSWER: c
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium
b) A deterministic model can only be used to explain short-run economic phenomena.
c) A deterministic model is most useful in identifying long-term trends.
d) A deterministic model is used in the study of normative economics.
e) The outcome of a deterministic model is random and has probabilities attached.
ANSWER: a
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
b) A probabilistic model shows the possibility of a range of outcomes.
c) A probabilistic model examines the changes in economic variables over a period of time.
d) A probabilistic model is based on value judgments.
e) A probabilistic model is used to explain long-run economic phenomena
ANSWER: b
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
b) Becomes increasingly costly as the number of choices increase.
c) Always discovers the best possible choice.
d) Provides a useful shortcut to finding the optimal choice.
e) Answers b and c are both correct.
ANSWER: b
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium
b) dynamic
c) qualitative
d) stochastic
e) probabilistic
ANSWER: a
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium
MULTIPLE CHOICE
- Managerial economics can best be defined as the:
b) study of economic incentives on consumer behavior and demand.
c) analysis of the labor market through the behavior of workers and managers.
d) analysis of major management decisions using economic tools.
e) study of the strategic interaction between firms in a market.
ANSWER: d
SECTION REFERENCE: Introduction
DIFFICULTY LEVEL: Easy
- Which of the following is not one of the steps in managerial decision making?
b) Exploring the alternatives to the decision.
c) Defining the problem and the objectives of the decision.
d) Negotiating a consensus to implement the decision.
e) Performing sensitivity analysis.
ANSWER: d
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
- Profit maximization is an ambiguous guide to decision making in the private sector because:
b) the goal of profit maximization contradicts the goal of satisfying the firm’s shareholders.
c) of the presence of risk and uncertainty.
d) profit-maximization ignores social costs and benefits.
e) None of the above answers is correct.
ANSWER: c
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
- Which of the following is true of economic models?
b) Models are not useful because uncertainty prevents accurate forecasts.
c) Models are simplified descriptions of processes, relationships, or other phenomena.
d) Models describe real world situations in complete detail.
e) Models are not useful because they do not take into account complicating and less important features of a problem.
ANSWER: c
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium
- Which of the following correctly describes a deterministic economic model?
b) A deterministic model can only be used to explain short-run economic phenomena.
c) A deterministic model is most useful in identifying long-term trends.
d) A deterministic model is used in the study of normative economics.
e) The outcome of a deterministic model is random and has probabilities attached.
ANSWER: a
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
- Which of the following correctly explains a probabilistic model?
b) A probabilistic model shows the possibility of a range of outcomes.
c) A probabilistic model examines the changes in economic variables over a period of time.
d) A probabilistic model is based on value judgments.
e) A probabilistic model is used to explain long-run economic phenomena
ANSWER: b
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Easy
- Maximizing profit by enumerating the profit outcomes of different courses of action
b) Becomes increasingly costly as the number of choices increase.
c) Always discovers the best possible choice.
d) Provides a useful shortcut to finding the optimal choice.
e) Answers b and c are both correct.
ANSWER: b
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium
- A beverages company wants to launch a new diet soda aimed at diabetics and health-conscious customers. It will use a _____ economic model to identify its target customers.
b) dynamic
c) qualitative
d) stochastic
e) probabilistic
ANSWER: a
SECTION REFERENCE: Six Steps to Decision Making
DIFFICULTY LEVEL: Medium