MBA 701 Exam prep Questions and Answers

MBA 701 Exam prep Questions and Answers A manager is evaluating the true economic cost of operating a small manufacturing business. The firm uses its own funds to finance operations instead of depositing them in a bank earning interest. Which of the following best describes this cost? Question 1Answer a. An implicit cost because it reflects a foregone return on financial capital. b. An explicit cost because it involves a direct monetary payment. c. A sunk cost because it cannot be recovered once spent. d. A variable cost because it varies with output. a Jacqui opened her own business and reported an accounting profit of $50,000 in her first year. Before starting the business, she turned down job offers paying $30,000, $40,000, and $45,000 annually. What is Jacqui's economic profit from running her business? [Economic Profit = Total revenue - Total costs (including explicit and implicit costs)]. a. −$45,000 b. $50,000 c. $95,000 d. $5,000 d A firm designs a compensation plan where managers receive bonuses based on the firm's profits and sales performance. What is the primary purpose of this type of incentive plan? a. To align managers' interests with the firm's performance b. To ensure managers are monitored continuously c. To guarantee high pay regardless of performance d. To reduce the need for managers to make decisions a A manager is evaluating a payment of $210 to be received one year from now. If the annual interest rate is 0%, what is the present value of this payment, and what does this imply for decision-making? [PV = FV/(1+i)n] a. Less than $210; future cash flows must always be discounted b. $210; future cash flows are worth the same as current cash when there is no time value of money c. More than $210; future cash flows are more valuable than current cash d. $0; future cash flows have no value today b [N(Q) = B(Q) - C(Q)] What are the variables? Q = Quantity in units B = Benefit C = Cost N = Net Benefit A firm currently produces 100 units. Producing the 101st unit increases total cost by $120 and total revenue by $100. What should the manager do? Question 7Answer a. Decrease production because the additional unit reduces profit b. Keep production unchanged because total output is already high c. Increase production because marginal revenue is positive d. Increase production because total revenue is increasing a A manager is deciding the optimal level of output for a product. When production increases from 100 to 101 units, total benefits increase from $10,000 to $10,120, and total costs increase from $9,900 to $10,020. Based on this information, what should the manager do? Question 8Answer a. Increase production because total benefits are rising b. Keep production unchanged because net benefits are maximized at this level c. Increase price to improve profitability d. Decrease production because total costs are increasing b - When marginal benefit equals marginal cost (marginal net benefits = 0), net benefits are maximized At what value of MNB(Q) (Marginal Net Benefit) are net benefits maximized? 0 A manager estimates the demand for a product using the following regression: Qdx = 500 − 8Px + 2Py + 0.05M where: · Px = price of the product · Py = price of a related good M = consumer income Which of the following is the most appropriate managerial interpretation? a. The product follows the law of demand, and the related good is a substitute b. The product violates the law of demand because the coefficient on price is small c. The product is inferior, and demand will decrease as income rises d. The related good is a complement, and demand will decrease when its price increases a