Economics for Managers, 3e (Farnham)
Chapter 1 Managers and Economics
1) Which of the following statements is correct?
A) Managerial decisions are affected primarily by microeconomic forces.
B) Managerial decisions are affected primarily by macroeconomic forces.
C) Managerial decisions are affected by both microeconomic and macroeconomic forces.
D) By and large, managerial decisions are not affected by either microeconomic or
macroeconomic forces.
Answer: C
Diff: 1
Topic: Economic conditions and managerial decision making
2) A strong Japanese yen:
A) induced Japanese auto manufacturers to increase their production of cars in Japan.
B) induced Japanese auto manufacturers to shift their production of cars to the U.S.
C) made Japanese exports more price competitive globally.
D) had no meaningful impact on Japanese auto manufacturers.
Answer: B
Diff: 2
Topic: Macroeconomic issues
3) Which of the following would be considered an example of a macroeconomic
problem?
A) Should Microsoft reduce the price of its Windows operating system?
B) Should the federal government extend the eligibility period for unemployment
,benefits?
C) Should Mitsubishi eliminate one of its production shifts?
D) Should JP Morgan Chase increase the interest rate it charges its credit card customers?
Answer: B
Diff: 2
Topic: Macroeconomic issues
4) Which of the following would be an illustration of a microeconomic issue affecting
U.S. auto manufacturers?
A) An introduction of new, more fuel efficient models by Japanese competitors.
B) A recession in Europe that causes U.S. auto exports to Europe to decline.
C) A decline in the demand for new cars in the U.S. due to an economic downturn.
D) An appreciation of the U.S. dollar relative to the Japanese yen.
Answer: A
Diff: 2
Topic: Microeconomic and macroeconomic influences
,5) Which of the following statements is false?
A) Price determination is the key element in any market system.
B) Input prices influence a firm's costs of production.
C) Output prices influence a firm's revenues.
D) While managers must understand how output prices are determined, determination of
input prices is irrelevant because it is beyond the manager's control.
Answer: D
Diff: 2
Topic: Managerial economics
6) All else constant, the choice of whether to use a labor-intensive production process or
a capital-intensive one is depends on:
A) the absolute prices of capital and labor.
B) the relative prices of capital labor.
C) the type of market in which the firm operates.
D) whether the economy is growing or shrinking.
Answer: B
Diff: 1
Topic: Managerial decision making
7) Which of the following is not a characteristic of a perfectly competitive market?
A) Large number of firms in the industry.
B) Outputs of the firms are perfect substitutes for one another.
C) Limited information is available to all market participants.
D) Ease of entry into the market.
Answer: C
Diff: 1
, Topic: Market structure, perfect competition
8) Firms are considered to be price searchers, as opposed to price takers, in all of the
following market types except:
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
Answer: A
Diff: 1
Topic: Price-taking firms
Chapter 1 Managers and Economics
1) Which of the following statements is correct?
A) Managerial decisions are affected primarily by microeconomic forces.
B) Managerial decisions are affected primarily by macroeconomic forces.
C) Managerial decisions are affected by both microeconomic and macroeconomic forces.
D) By and large, managerial decisions are not affected by either microeconomic or
macroeconomic forces.
Answer: C
Diff: 1
Topic: Economic conditions and managerial decision making
2) A strong Japanese yen:
A) induced Japanese auto manufacturers to increase their production of cars in Japan.
B) induced Japanese auto manufacturers to shift their production of cars to the U.S.
C) made Japanese exports more price competitive globally.
D) had no meaningful impact on Japanese auto manufacturers.
Answer: B
Diff: 2
Topic: Macroeconomic issues
3) Which of the following would be considered an example of a macroeconomic
problem?
A) Should Microsoft reduce the price of its Windows operating system?
B) Should the federal government extend the eligibility period for unemployment
,benefits?
C) Should Mitsubishi eliminate one of its production shifts?
D) Should JP Morgan Chase increase the interest rate it charges its credit card customers?
Answer: B
Diff: 2
Topic: Macroeconomic issues
4) Which of the following would be an illustration of a microeconomic issue affecting
U.S. auto manufacturers?
A) An introduction of new, more fuel efficient models by Japanese competitors.
B) A recession in Europe that causes U.S. auto exports to Europe to decline.
C) A decline in the demand for new cars in the U.S. due to an economic downturn.
D) An appreciation of the U.S. dollar relative to the Japanese yen.
Answer: A
Diff: 2
Topic: Microeconomic and macroeconomic influences
,5) Which of the following statements is false?
A) Price determination is the key element in any market system.
B) Input prices influence a firm's costs of production.
C) Output prices influence a firm's revenues.
D) While managers must understand how output prices are determined, determination of
input prices is irrelevant because it is beyond the manager's control.
Answer: D
Diff: 2
Topic: Managerial economics
6) All else constant, the choice of whether to use a labor-intensive production process or
a capital-intensive one is depends on:
A) the absolute prices of capital and labor.
B) the relative prices of capital labor.
C) the type of market in which the firm operates.
D) whether the economy is growing or shrinking.
Answer: B
Diff: 1
Topic: Managerial decision making
7) Which of the following is not a characteristic of a perfectly competitive market?
A) Large number of firms in the industry.
B) Outputs of the firms are perfect substitutes for one another.
C) Limited information is available to all market participants.
D) Ease of entry into the market.
Answer: C
Diff: 1
, Topic: Market structure, perfect competition
8) Firms are considered to be price searchers, as opposed to price takers, in all of the
following market types except:
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
Answer: A
Diff: 1
Topic: Price-taking firms
