1-1
,Test Bank for Death, Society and Human Experience, 12th
Edition by Kastenbaum All Chapters ||Complete A+ Guide
File: Ch01; CHAPTER 1: Introduction to Economic Decision Making
x x x x x x x x
x MULTIPLE CHOICE x
1. Managerial economics can best be defined as the:
x x x x x x x
a) macroeconomics and microeconomics for managers. x x x x
b) study of economic incentives on consumer behavior and demand.
x x x x x x x x
c) analysis of the labor market through the behavior of workers and managers.
x x x x x x x x x x x
d) analysis of major management decisions using economic tools.
x x x x x x x
e) study of the strategic interaction between firms in a market.
x x x x x x x x x
ANSWER: d x
SECTION REFERENCE: Introduction
x x
DIFFICULTY LEVEL: Easy
x x x
2. Which of the following is not one of the steps in managerial decision making?
x x x x x x x x x x x x x
a) Predicting the consequences of a decision.
x x x x x
b) Exploring the alternatives to the decision.
x x x x x
c) Defining the problem and the objectives of the decision.
x x x x x x x x
d) Negotiating a consensus to implement the decision.x x x x x x
e) Performing sensitivity analysis. x x
ANSWER: d x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
3. Profit maximization is an ambiguous guide to decision making in the private sector because:
x x x x x x x x x x x x x
a) firms in the private sector usually do not aim at profit maximization.
x x x x x x x x x x x
b) the goal of profit maximization contradicts the goal of satisfying the firm‘s shareholders.
x x x x x x x x x x x x
c) of the presence of risk and uncertainty.
x x x x x x
d) profit-maximization ignores social costs and benefits. x x x x x
e) None of the above answers is correct.
x x x x x x
ANSWER: c x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
1-2
,4. Which of the following is true of economic models?
x x x x x x x x
a) Models are too theoretical to be applicable in real world decisions.
x x x x x x x x x x
b) Models are not useful because uncertainty prevents accurate forecasts.
x x x x x x x x
c) Models are simplified descriptions of processes, relationships, or other phenomena.
x x x x x x x x x
d) Models describe real world situations in complete detail.
x x x x x x x
e) Models are not useful because they do not take into account complicating and less
x x x x x x x x x x x x x
important features of a problem.
x x x x x
ANSWER: c x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
5. Which of the following correctly describes a deterministic economic model?
x x x x x x x x x
a) A deterministic model is a model for which the outcome is predicted with certainty.
x x x x x x x x x x x x x
b) A deterministic model can only be used to explain short-run economic phenomena.
x x x x x x x x x x x
c) A deterministic model is most useful in identifying long-term trends.
x x x x x x x x x
d) A deterministic model is used in the study of normative economics.
x x x x x x x x x x
e) The outcome of a deterministic model is random and has probabilities attached.
x x x x x x x x x x x
ANSWER: a x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
6. Which of the following correctly explains a probabilistic model?
x x x x x x x x
a) A probabilistic model gives a description of real world economic phenomena.
x x x x x x x x x x
b) A probabilistic model shows the possibility of a range of outcomes.
x x x x x x x x x x
c) A probabilistic model examines the changes in economic variables over a period of time.
x x x x x x x x x x x x x
d) A probabilistic model is based on value judgments.
x x x x x x x
e) A probabilistic model is used to explain long-run economic phenomena
x x x x x x x x x
ANSWER: b x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
7. Maximizing profit by enumerating the profit outcomes of different courses of action
x x x x x x x x x x x
a) Is only applicable to problems with a small number of alternatives.
x x x x x x x x x x
b) Becomes increasingly costly as the number of choices increase.
x x x x x x x x
c) Always discovers the best possible choice.
x x x x x
1-3
, d) Provides a useful shortcut to finding the optimal choice.
x x x x x x x x
e) Answers b and c are both correct.
x x x x x x
ANSWER: b x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
8. A beverages company wants to launch a new diet soda aimed at diabetics and health-
x x x x x x x x x x x x x x
conscious customers. It will use a
x x economic model to identify its target customers.
x x x x x x x x x x x
a) deterministic
b) dynamic
c) qualitative
d) stochastic
e) probabilistic
ANSWER: a x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
9. Given that the market share of a firm depends on many unpredictable factors, a firm will use a
x x x x x x x x x x x x x x x x x x
economic model to estimate the market share for one of its products.
x x x x x x x x x x x
a) deterministic
b) dynamic
c) qualitative
d) probabilistic
e) comparative statics x
ANSWER: d x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
10. Sensitivityanalysis is used by a firm to:
x x x x x x x
a) analyze the impact of a change in the price of the good on the demand for the good.
x x x x x x x x x x x x x x x x x
b) examine the static effects of an economic decision on the firm‘s profitability.
x x x x x x x x x x x
c) analyze the social costs and benefits of an economic decision.
x x x x x x x x x
d) examine the opportunity costs of an economic decision.
x x x x x x x
e) examine how an optimal decision is affected if key economic facts vary.
x x x x x x x x x x x
ANSWER: e x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
1-4
,Test Bank for Death, Society and Human Experience, 12th
Edition by Kastenbaum All Chapters ||Complete A+ Guide
File: Ch01; CHAPTER 1: Introduction to Economic Decision Making
x x x x x x x x
x MULTIPLE CHOICE x
1. Managerial economics can best be defined as the:
x x x x x x x
a) macroeconomics and microeconomics for managers. x x x x
b) study of economic incentives on consumer behavior and demand.
x x x x x x x x
c) analysis of the labor market through the behavior of workers and managers.
x x x x x x x x x x x
d) analysis of major management decisions using economic tools.
x x x x x x x
e) study of the strategic interaction between firms in a market.
x x x x x x x x x
ANSWER: d x
SECTION REFERENCE: Introduction
x x
DIFFICULTY LEVEL: Easy
x x x
2. Which of the following is not one of the steps in managerial decision making?
x x x x x x x x x x x x x
a) Predicting the consequences of a decision.
x x x x x
b) Exploring the alternatives to the decision.
x x x x x
c) Defining the problem and the objectives of the decision.
x x x x x x x x
d) Negotiating a consensus to implement the decision.x x x x x x
e) Performing sensitivity analysis. x x
ANSWER: d x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
3. Profit maximization is an ambiguous guide to decision making in the private sector because:
x x x x x x x x x x x x x
a) firms in the private sector usually do not aim at profit maximization.
x x x x x x x x x x x
b) the goal of profit maximization contradicts the goal of satisfying the firm‘s shareholders.
x x x x x x x x x x x x
c) of the presence of risk and uncertainty.
x x x x x x
d) profit-maximization ignores social costs and benefits. x x x x x
e) None of the above answers is correct.
x x x x x x
ANSWER: c x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
1-2
,4. Which of the following is true of economic models?
x x x x x x x x
a) Models are too theoretical to be applicable in real world decisions.
x x x x x x x x x x
b) Models are not useful because uncertainty prevents accurate forecasts.
x x x x x x x x
c) Models are simplified descriptions of processes, relationships, or other phenomena.
x x x x x x x x x
d) Models describe real world situations in complete detail.
x x x x x x x
e) Models are not useful because they do not take into account complicating and less
x x x x x x x x x x x x x
important features of a problem.
x x x x x
ANSWER: c x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
5. Which of the following correctly describes a deterministic economic model?
x x x x x x x x x
a) A deterministic model is a model for which the outcome is predicted with certainty.
x x x x x x x x x x x x x
b) A deterministic model can only be used to explain short-run economic phenomena.
x x x x x x x x x x x
c) A deterministic model is most useful in identifying long-term trends.
x x x x x x x x x
d) A deterministic model is used in the study of normative economics.
x x x x x x x x x x
e) The outcome of a deterministic model is random and has probabilities attached.
x x x x x x x x x x x
ANSWER: a x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
6. Which of the following correctly explains a probabilistic model?
x x x x x x x x
a) A probabilistic model gives a description of real world economic phenomena.
x x x x x x x x x x
b) A probabilistic model shows the possibility of a range of outcomes.
x x x x x x x x x x
c) A probabilistic model examines the changes in economic variables over a period of time.
x x x x x x x x x x x x x
d) A probabilistic model is based on value judgments.
x x x x x x x
e) A probabilistic model is used to explain long-run economic phenomena
x x x x x x x x x
ANSWER: b x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Easy
x x x
7. Maximizing profit by enumerating the profit outcomes of different courses of action
x x x x x x x x x x x
a) Is only applicable to problems with a small number of alternatives.
x x x x x x x x x x
b) Becomes increasingly costly as the number of choices increase.
x x x x x x x x
c) Always discovers the best possible choice.
x x x x x
1-3
, d) Provides a useful shortcut to finding the optimal choice.
x x x x x x x x
e) Answers b and c are both correct.
x x x x x x
ANSWER: b x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
8. A beverages company wants to launch a new diet soda aimed at diabetics and health-
x x x x x x x x x x x x x x
conscious customers. It will use a
x x economic model to identify its target customers.
x x x x x x x x x x x
a) deterministic
b) dynamic
c) qualitative
d) stochastic
e) probabilistic
ANSWER: a x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
9. Given that the market share of a firm depends on many unpredictable factors, a firm will use a
x x x x x x x x x x x x x x x x x x
economic model to estimate the market share for one of its products.
x x x x x x x x x x x
a) deterministic
b) dynamic
c) qualitative
d) probabilistic
e) comparative statics x
ANSWER: d x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
DIFFICULTY LEVEL: Medium
x x x
10. Sensitivityanalysis is used by a firm to:
x x x x x x x
a) analyze the impact of a change in the price of the good on the demand for the good.
x x x x x x x x x x x x x x x x x
b) examine the static effects of an economic decision on the firm‘s profitability.
x x x x x x x x x x x
c) analyze the social costs and benefits of an economic decision.
x x x x x x x x x
d) examine the opportunity costs of an economic decision.
x x x x x x x
e) examine how an optimal decision is affected if key economic facts vary.
x x x x x x x x x x x
ANSWER: e x
SECTION REFERENCE: Six Steps to Decision Making
x x x x x x
1-4
