Managerial economics Exam 2025
Questions and Answers
lower - ✔✔Two models are fit to historical sales data, and used to forecast future sales
values. Over time, each model's forecast is compared against observed values. The
better-performing model will have the _____ mean absolute error.
percent change in quantity demanded to the percent change in price - ✔✔The price
elasticity of demand is defined as the ratio of the _____ other factors held constant.
The short-run is best defined as the time period in which - ✔✔one or more inputs to
production are fixed
A production function represents the - ✔✔maximum possible output the firm can
produce for any combination of inputs
A firm employs capital and labor in its production process. The marginal revenue
product of labor is greater than the marginal cost of labor. In the short run the firm
should: - ✔✔Hire labor until the marginal revenue product of labor equals its marginal
cost
optimal amount of an input occurs - ✔✔when MRPL = MCL.
The marginal revenue product of labor [MRPL] is equal to the - ✔✔marginal revenue
per unit of output times the marginal product of labor
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, marginal product - ✔✔Given a fixed amount of input, to maximize total output from
multiple plants a firm should allocate the input such that the _____ is equal across
plants.
Q = cL0.2K0.5 - ✔✔Which of the following production functions displays decreasing
returns to scale?
equal to average cost. - ✔✔When average cost is minimum, marginal cost is
Given the demand function Q = 30 - 3P, if the current price is $3, what should a profit
maximizing firm do? - ✔✔raise price
response bias - ✔✔When asked, 62% of people disagreed with allowing "public
condemnation of democracy", but only 46% of people agreed that it was right to "forbid
public condemnation of democracy". This is an example of
Suppose that the "goodness of fit" of an equation is nearly perfect. What is the value of
the R2 statistic in this case? - ✔✔very close to +1
For a parking garage of fixed capacity, the owner sets different parking rates for cars
that are parked for less than 24 hours (short-term) and for those that are parked for
more than 24 hours (long-term). To maximize revenue, the operator should set prices
and target the number of places for each segment such that - ✔✔the marginal revenues
from the segments are equal.
Which of the following is second-degree price discrimination? - ✔✔A volume discount
When a firm practices price discrimination between two market segments, the firm: -
✔✔must be able to identify market segments that have different price elasticities.
The price elasticity of demand for a product is -1.2. The firm can increase revenue by -
✔✔lowering price
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
Questions and Answers
lower - ✔✔Two models are fit to historical sales data, and used to forecast future sales
values. Over time, each model's forecast is compared against observed values. The
better-performing model will have the _____ mean absolute error.
percent change in quantity demanded to the percent change in price - ✔✔The price
elasticity of demand is defined as the ratio of the _____ other factors held constant.
The short-run is best defined as the time period in which - ✔✔one or more inputs to
production are fixed
A production function represents the - ✔✔maximum possible output the firm can
produce for any combination of inputs
A firm employs capital and labor in its production process. The marginal revenue
product of labor is greater than the marginal cost of labor. In the short run the firm
should: - ✔✔Hire labor until the marginal revenue product of labor equals its marginal
cost
optimal amount of an input occurs - ✔✔when MRPL = MCL.
The marginal revenue product of labor [MRPL] is equal to the - ✔✔marginal revenue
per unit of output times the marginal product of labor
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, marginal product - ✔✔Given a fixed amount of input, to maximize total output from
multiple plants a firm should allocate the input such that the _____ is equal across
plants.
Q = cL0.2K0.5 - ✔✔Which of the following production functions displays decreasing
returns to scale?
equal to average cost. - ✔✔When average cost is minimum, marginal cost is
Given the demand function Q = 30 - 3P, if the current price is $3, what should a profit
maximizing firm do? - ✔✔raise price
response bias - ✔✔When asked, 62% of people disagreed with allowing "public
condemnation of democracy", but only 46% of people agreed that it was right to "forbid
public condemnation of democracy". This is an example of
Suppose that the "goodness of fit" of an equation is nearly perfect. What is the value of
the R2 statistic in this case? - ✔✔very close to +1
For a parking garage of fixed capacity, the owner sets different parking rates for cars
that are parked for less than 24 hours (short-term) and for those that are parked for
more than 24 hours (long-term). To maximize revenue, the operator should set prices
and target the number of places for each segment such that - ✔✔the marginal revenues
from the segments are equal.
Which of the following is second-degree price discrimination? - ✔✔A volume discount
When a firm practices price discrimination between two market segments, the firm: -
✔✔must be able to identify market segments that have different price elasticities.
The price elasticity of demand for a product is -1.2. The firm can increase revenue by -
✔✔lowering price
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
