In Class Checkpoint Quiz Manaecon
In Class Checkpoint Quiz Manaecon
A. The change in average benefits arising from a change in the control variable
C. the additional benefits that arise by using an additional unit of the managerial control variables.
D. the average benefits that arise by using an additional unit of the managerial control variables.
3. Property owners move scarce resources towards the production of goods most value by society
because:
C. Managerial economics is the study of how to get rich in the stock market
Managerial economics involves studying how managers make decisions regarding resource allocation,
pricing, production, and other aspects of running a business or organization
7. Which of the following is not the source of rivalry that exists in economic transactions?
A. consumer-producer rivalry.
C. producer-producer rivalry.
D. government-producer rivalry.
A. a price floor
B. a price ceiling
D. non-pecuniary price
10. The law of supply states that, holding all else constant, as the price of a good falls,
12. When the government imposes a price floor above the market price, the result will be that:
A. a price floor set above the equilibrium price will have no effect on the market equilibrium.
B. surpluses occur.
14. Suppose that supply increases and demand decreases. What effect will this have on price and
quantity?
15. The economic principle that producers are willing to produce more output when price is high is
depicted by the:
B. describes how much of good X will be purchased at the alternative price of good X, given all other
variables being constant.
C. recognizes that the quantity of a good consumed depends on its price and demand shifters.
D. shows the relationship between the quantity demanded of X and variables other than its price.
17. If the demand for a product is said to be relatively inelastic, the “absolute” value of the elasticity
coefficient will be:
B. zero.
D. equal to one.
B. of high quality.
20. If OPEC increases its price of oil, and still the demand for oil decreases by a very small amount, we
can conclude that the demand for oil is:
A. perfectly elastic
B. perfectly inelastic
C. relatively elastic
D. relatively inelastic
21. Assuming mustard and burgers are complements, a decline in the price of burgers will:
22. If a firm decrease the price of a good and total revenue decreases, then:
Tóm lại là khi nào mà price inelastic thì khi mà decrease the price of a good and total revenue decreases
(có nghĩa là cứ price decrease mà total revenue cũng decrease hoặc ngược lại thì lúc đó price inelastic)
23. The derived demand curve for a good component will be more inelastic:
C. the more inelastic is the demand curve for the final good.
D. the more elastic are the supply curves of cooperating factors.
Inelastic demand occurs when demand rises by a lower percentage as compared to the percentage of
the price drop.
Take for instance, if price drops by 10% and then demand only rises by 4%.
Now the derived demand curve for a product component will be more inelastic when there’s more
rises by lower percentages of the final product than price drop. The more inelastic the demand for a
product is, the more inelastic the demand derived curve will be.
Derived demand is an economic term that refers to the demand for a good or service that results from
the demand for a different, or related, good or service. Derived demand is related solely to the
demand placed on a product or service for its ability to acquire or produce another good or service.
24. When total revenue reaches its peak (elasticity equals 1), marginal revenue reaches:
B. 0
C. -1
D. 1
When the elasticity of demand is unity, the marginal revenue is zero. Thus because of marginal revenue
which is zero, the elasticity of demand is one, this means the proportionate change in quantity demand
is equal to the proportionate change in price.
25. You have recently learned that the company where you work is being sold for $400,000. The
company’s income statement indicates current profits of $16,000, which have yet to be paid out as
dividends. Assuming the company will remain a “going concern” indefinitely and the interest rate will
remain constant at 8 percent, at what constant rate does the owner believe that profits will grow?
A. 3.85%
B. 4.17%
C. 7.92%
D. 7.31%
g = 3.68%
26. Suppose demand is D and supply is S0. Use the accompanying graph to determine which of the
following statements is NOT true.
27. Suppose the total benefit delivered from a continuous decision, Q, is B(Q) = 32 + 21Q – 2Q^2 and the
corresponding total cost is C(Q) = 6 + 1.5Q^2. What is the marginal net benefits when Q = 2?
A. 13
B. 7
D. 54
E. 48.
= (32+21Q-2Q^2)’ - (6+1.5Q^2)’
= 21 – 4Q – 3Q
= 21 – 7Q
28.
A. $937.5
B. $312.5
D. $1,250
E. $625
We have Px =$25
We also have Px = 40 – (1/5) Qdx => Therefore, the vertical intercept of the inverse demand equation
is 40.
29.
A. X is a normal good.
D. X is inelastic at Px = $100.
30. You are a manager in charge of monitoring cash flow at a major publisher. You recently received a
preliminary report that suggests the growth rate in e-book reading has leveled off and that the cross-
price elasticity of demand between paper books and e-books is −0.6. In 2019, your company earned
about $700 million from sales of e-books and about $300 million from sales of paper books. If your data
analytics team estimates the own price elasticity of demand for paper books is −2, how will a 4 percent
decrease in the price of paper books affect your overall revenues from both paper book and e-book
sales?
First, let’s calculate the percentage change in the price of paper books:
Percentage change in price of paper books: -4%
Now let’s calculate the percentage change in demand for paper books using the own price elasticity of
demand:
Percentage change in demand for paper books = Own price elasticity x Percentage change in price
= (-2) x (-4)% = 8%
Next, we can calculate the percentage change in demand for ebooks using the cross-price elasticity of
demand:
Percentage change in demand for ebooks = Cross-price Elasticity x Percentage Change in Price of Paper
books
To calculate the effect on revenues, we multiply the percentage change in demand by the initial revenues
for each product:
Revenue change for paper books = Percentage Change in Demand for Paper Books x Revenues from
paper books
Revenue change for Ebooks = Percentage Change in Demand for Ebooks x Revenues from Ebooks
Finally, we can determine the overall effect on revenues by summing up the revenue changes for both
products:
Overall Revenue Change = Revenue Change for Paper Books + Revenue Change for Ebooks
Therefore, a 4 percent decrease in the price of paper books would result in an overall revenue decrease
of approximately $40.8 million from both paper book and ebook sales.
31. You have money saving from your parent that promises to pay $2,000 annually, starting from year 1
and continuing indefinitely. Assuming an interest rate of 8%, calculate the present value of this
perpetuity.
When we consider a stream of payments of $2,000 paid each year forever at a discount rate of 8%, this
constitutes a perpetuity. A perpetuity is an infinite series of equal payments at a regular intervals. The
formula for the present value of a perpetuity is the cash flow divided by the interest rate. In your case,
the cash flow is $2,000 payment and the interest rate is 8%
32. You are a division manager at Toyota. If your data analytics department estimates that the
semiannual demand for the Highlander is Q = 300,000 – 5P, what price should you charge in order to
maximize revenues from sales of the Highlander?
=> P = 30,000
33. A firm’s current profits are $750,000. These profits are expected to grow indefinitely at a constant
annual rate of 3 percent. If the firm’s opportunity cost of funds is 6 percent, determine the value of the
firm the instant BEFORE it pays out current profits as dividends.
Value of the firm before it pays out current profits as dividends >< Value of the firm after it pays out
the current profits as dividends.
Value of the firm BEFORE it pays out the current profits as dividends = [Current profits x (1 + opportunity
cost)] / (opportunity cost – annual rate) = [750,000 x (1+0.06)]/(0,06 – 0,03) = 26500000
Value of the firm AFTER it pays out the current profits as dividends = [Current profits x (1 + annual rate)]
(opportunity cost – annual rate)
34. The manager of Automated Products is contemplating the purchase of a new machine that will cost
$250,000 and has a useful life of five years. The machine will yield (year-end) cost reductions to
Automated Products of $50,000 in year 1, $60,000 in year 2, $80,000 in year 3, $90,000 in year 4 and
$100,000 in year 5. What is the net present value of the cost savings of the machine if the interest rate is
7 percent?
We have:
The purchase of new machine will cost $250,000 => the value decrease will be -250,000
In the year 1, the value decrease will be: 50,000 x (1/ (1+0.07) ) = 46,729
In the year 2, the value decrease will be: 60,000 x (1/ (1+0.07)^2) = 52,406
In the year 3, the value decrease will be: 80,000 x (1/ (1+0.07)^3) = 65,304
In the year 4, the value decrease will be: 90,000 x (1/ (1+0.07) ^4) = 68,661
In the year 5, the value decrease will be: 100,000 x (1/ (1+0.07) ^5) = 71, 299
Therefore, the new present value of the cost savings of the machine if the interest rate is 7 percent is:
The value = -250,000 + 46,729 + 52,406 + 65,304 + 68,661 + 71,299 = 54,399
35.
36.
Lưu ý: Đối với bài này cần lưu ý xem nó đang ở Economic profits hay Accounting profits
Công thức của present value
Đối với accounting profits = Sum [ (Money lease – Explicit cost)/ (1+r)^n) ] (tương ứng với số
năm để mình cộng quy nạp nó lên)
Ví dụ: Đối với 3 năm sau đó mình sẽ cộng kết quả của 3 cái này
Đối với economic profits = Sum [ (Money lease – Implicit cost)/ (1+r)^n ] (tương ứng với số
năm để mình cộng quy nạp nó lên)
Do đó, we have
Year 1: PV = (200,000 – 60,000 – 75,000) / (1+0.06)^1 = 61320
Year 2: PV = (200,000 – 60,000 – 75,000) / (1+0.06)^2 = 57849
Year 3: PV = (200,000 - 60,000 – 75,000) / (1+0.06)^3 = 54575
Year 4: PV = (200,000 – 60,000 – 75,000) / (1+0.06)^4 = 51486
Therefore, we have the sum of all, which is 225230
38.
39. With milk sales sagging of late, The Milk Processor Education Program (MPEP) decided to move on
from the famous “Got Milk” ad slogan in favor of a new one, “Milk Life.” The new tagline emphasizes
milk’s nutritional benefits, including its protein content. MPEP began collecting data on the number of
gallons of milk households consumed weekly (in millions), weekly price per gallon (P), and weekly
expenditures on milk advertising (A) for the period following the launch of the new campaign. The
output was given as follows:
Suppose that the weekly price of milk is $2.41 per gallon and MPEP decides to ramp up weekly
advertising to $25,000. Estimate and interpret the weekly quantity of milk consumed after this
advertising increase.
We will have the weekly quantity of milk consumed = 6.519839045 + (-1.614382372) x 2.41 + (0.004664382)
x 25,000 = 119.2387275
40.
a. The meaning of own-price elasticity is that the percentage change in the quantity demanded of a
good or service multiplied by the percentage change in the price of that good or service.
I think that the car company in order to achieve higher revenue in electric cars, they need to decrease
the price of that electric car or they can ensure the quality of the whole car to attract a large number of
buyers.
b. The cross-price elasticity makes sense. The aforementioned cross-price elasticity is 0.2, which means a
decrease in the price of the electric car will lead to the decrease in the quantity demanded of the petrol
car.
c. As we can see, the income elasticity is negative. Therefore, when the income rises, the demanded
quantity will decrease. Therefore, I think that the customer target good is an inferior good.
d. We have the own-price elasticity = b2 x (40/20) = -0.8 => b2 = -0.4
We have the cross-price elasticity = b3 x (20/20) = 0.2 => b3 = 0.2
We have the income elasticity = b4 x (50/20) = -1.5 => b4 = -0.6
Therefore, the demand function will be: QdEV = 66 + (-0.4) x PEV + 0.2 x PPC + (-0.6) x M
e.
We have PPC = 20 and M = 50, therefore:
Q = 66 + (-0.4)P + 0,2 x 20 + (-0.6) x 50
= 66 + (-0.4)P + 4 + (-30)
= (-0.4)P + 40
We also have TR = (-0.4)P^2 + 40P
TR’= -0.8P + 40 => P = 50 => Q = 20