Managerial Economics (NOC20MG67)

Assignment 1

1) Managerial economics can be best described as

a. how manager streamline the process to achieve cost minimization
b. how firm mangers use economic analysis in business decision to best use the firm’s
resource
c. how and when manager decides appropriate to build new plant
d. how firm manager decide about maximization of net worth of firm

2) Government regulation is important because government:

a. uses scarce resources.
b. regulation reduces public-sector employment.
c. produces most of society's services output.
d. produces most of society's material output.

3) If you intentionally did something to make yourself worse off, you would be violating the
a. normative assumption
b. rationality assumption
c. ceteris paribus assumption
d. transitivity assumption
4) You have two things you can do tonight. You can go to the movies with friends or you can
study for your economics quiz. What is the opportunity cost of going to the movies with
your friends?
a. having fun with your friends
b. getting a good grade on your economics quiz
c. both a) and b)
d. neither a) nor b)

5) The Principal–agent problem is quite common in large public corporation due to

a. too little regulation by Government
b. the fact that large corporations generate large sales volumes
c. the fact that people making the operational decision are usually not the owner
d. the fact that large companies employ many people

6) Which of the following is a problem of adverse selection?

a. individuals use more medical services as a result of their purchase of health
 insurance plan
b. a person takes up the hobby of bungee jumping after purchasing health insurance
c. the lender has problem of determining that the proceeds from a loan are being used
as the borrower stated
d. the lender has a problem of distinguishing good risk from bad risk borrowers

7) Economic problem arise because of

a. Abundant resources
b. Resources are scarce
c. Inefficiency of authority
d. Inefficient use of Resources

8) Which of the following is true with reference to opportunity cost?

a. It is the value of the next best use for an economic good.

b. It is the value of a sacrificed alternative.
c. It is useful in decision making.
d. It is useful for valuing non marketed goods.

9) Economic profit is
a. Company's net income as indicated by its accounting statement.
b. the difference between the price of a product and the monetary cost of the raw
materials used to produce it.
c. the difference between the revenue from the sale of a product and the opportunity
cost of the resources used to produce it.
d. income paid by a business to its owners

10) Which type of economy do consumers and producers make their choices based on the
market forces of demand and supply?

a. Open economy
b. Controlled economy
c. Command economy
d. Market economy
 Managerial Economics (NOC20MG67)

Assignment 2

1) Relationships between economic variables can be expressed in the form of

a. a graph.
b. an equation.
c. a table.
d. any of the above.

2) The rate of change in the dependent variables as a result of change in the independent
variable is known as
a. endogenous variable
b. exogenous variable
c. slope
d. regression

3) For a Manager the requirement is to know the exact relationship between advertisement
expenditure and sales for future planning. Which technique will be useful for him?
a. demand analysis
b. correlation analysis
c. demand forecasting
d. regression technique

4) Which one is a quadratic equation?

a. Q = a +bL- cL2
b. Q = a +bL + cL2 – dL3
c. Q = aLb
d. Q = a +aLb + cL2

5) The economic concept that corresponds most closely to a "derivative" in calculus is the
concept of
a. an average value.
b. a total value.
c. a marginal value.
d. economic profit.

6) The optimal amount of pollution to society is where

a. the total cost of pollution is equal to zero.
b. the total benefit of pollution is equal to zero.
c. the marginal benefit of pollution equals the marginal cost of pollution.
d. there is no pollution at all.
 Managerial Economics (NOC20MG67)

Assignment 2

7) If regression analysis is used to estimate the linear relationship between the natural
logarithm of the variable to be forecast and time, then the slope estimate is equal to
a. the linear trend.
b. the natural logarithm of the rate of growth.
c. the natural logarithm of one plus the rate of growth.
d. the natural logarithm of the square root of the rate of growth.

8) The coefficient of correlation is

a. a measure of the strength and direction of the linear relationship between two
variables.
b. equal to the size of the change in the Y variable that is caused by a change in the X
variable.
c. is equal to the proportion of the variation in the Y variable that is due to variations
in the X variable.
d. is maximized by ordinary least squares.

9) Multiple regression analysis is used when

a. there is not enough data to carry out simple linear regression analysis.
b. the dependent variable depends on more than one independent variable.
c. one or more of the assumptions of simple linear regression are not correct.
d. the relationship between the dependent variable and the independent variables
cannot be described by a linear function.

10) Autocorrelation refers to a situation in which

a. successive error terms derived from the application of regression analysis to time
series data are correlated.
b. there is a high degree of correlation between two or more of the independent
variables included in a multiple regression model.
c. the dependent variable is highly correlated with the independent variable(s) in a
regression analysis.
d. the application of a multiple regression model yields estimates that are nonlinear in
form.
 Managerial Economics (NOC20MG67)

Week 3 Assignment

1) Which one of the following would most likely increase the demand for a good?
a. a decrease in consumer income
b. a decrease in the price of the product
c. an increase in the price of a close substitute
d. a decrease in the supply of good

2) If the market has a shortage that persist, economist will look for price

a. ceiling above equilibrium price

b. ceiling below equilibrium price
c. floors above equilibrium price
d. floors below equilibrium price

3) You have planned to spend Rs. 100 per month on browsing the internet. Your demand for
net browsing can be said to be
a. perfectly elastic
b. perfectly inelastic
c. relatively elastic
d. relatively inelastic

4) Continuity in consumption is prerequisite for:

a. Law of diminishing marginal utilities
b. Revealed preference
c. Indifference curve analysis
d. Marginal rate of substitution

5) At a price of Rs.495, a novel is expected to sell 9,000 copies. If the novel is offered for sale
at a price of Rs.395, then the publisher can expect to sell
a. less than 9,000 copies.
b. 9,000 copies.
c. more than 9,000 copies.
d. It is impossible to predict the effect of a lower price on sales.
6) The falling part of a TU curve shows
a. Zero marginal utility
b. Decreasing marginal utility
c. Increasing marginal utility
d. Negative marginal utility

7) Which of the following is not a determinant of a consumer's demand for a commodity?

a. Income
b. Population
c. Price of related goods
d. Tastes

8) If a good is normal, then a decrease in price will cause a substitution effect that is
a. positive and an income effect that is positive.
b. positive and an income effect that is negative.
c. negative and an income effect that is positive.
d. negative and an income effect that is negative.

9) If the price elasticity of demand for a firm's output is elastic, then the firm's marginal
revenue is
a. positive, and an increase in price will cause total revenue to increase.
b. positive, and an increase in price will cause total revenue to decrease.
c. negative, and an increase in price will cause total revenue to increase.
d. negative, and an increase in price will cause total revenue to decrease.

10) If a good is inferior, then

a. the income elasticity of demand will be negative.
b. the income elasticity of demand will be zero.
c. the income elasticity of demand will be positive.
d. a decrease in income will cause demand to decrease.
 Managerial Economics- Assignment 4

1) Income elasticity of demand is negative in case of

a. normal goods
b. luxury goods
c. inferior goods
d. superior goods

2) Demand curve for which following good to be price inelastic?

a. Luxury good.
b. Substitutes good.
c. Necessity good.
d. Inferior good.

3) If butter and margarine have a cross elasticity of demand of 2 and the price of butter rises
from Rs.20 per 100g to Rs.30 per 100g, the percentage change in demand for margarine will
be
a. 20%
b. 25%
c. 75%
d. 100%
e. 150%

4) Consumer surplus is

a. Difference between the maximum price a consumer would be willing to pay and the
actual price.
b. Difference between highest and lowest price
c. Difference between ceiling and floor price
d. Difference between cost of production and market price

5) Maximum consumer surplus is taken by producer in

a. first degree price discrimination
b. second degree price discrimination
c. third degree price discrimination
d. not in any case
6) Which of the following is not a property of indifference curves?

a. Indifference curves are downward sloping.

 b. Indifference curves are bowed outward.
c. Indifference curves do not cross each other.
d. Higher indifference curves are referred to lower ones.

7) 5. At the consumer's optimum consumption bundle,

a. the slope of the indifference curve equals the slope of the budget constraint.
b. the indifference curve is tangent to the budget constraint.
c. the relative prices of the two goods equals the marginal rate of substitution.
d. All of the above

8) The substitution effect explains that when the price of a good decreases, consumers will
consume
a. less of the more expensive good and more of some other good.
b. more of the more expensive good and less of some other good.
c. more of the good because their real incomes are lower after the price increase.
d. less of the good because their real incomes are lower after the price increase.

9) The substitution effect works to encourage a consumer to purchase more of a product when
the price of that goods is falling because
a. Other products are now less expensive than before
b. The consumer's real income has decreased
c. The product is now relatively less expensive than before
d. The consumer's real income has increased

10) The total utility is maximum when

a. Marginal Utility is zero
b. Marginal Utility is equal to Average Utility
c. Marginal Utility is the highest
d. Average Utility is the highest
 Managerial Economics- Assignment 5

1) The market supply curve shows

a. the effect on market demand of a change in the supply of a good or service.
b. the quantity of a good that firms would offer for sale at different prices.
c. the quantity of a good that consumers would be willing to buy at different prices.
d. the quantity of a good that consumer demands.
2) If the price of a good increases while the quantity of the good exchanged on markets
increases, then the most likely explanation is that there has been
a. an increase in demand.
b. a decrease in demand.
c. an increase in supply.
d. a decrease in supply.
3) An increase in the supply of a good will cause
a. an increase in equilibrium price and quantity.
b. a decrease in equilibrium price and quantity.
c. an increase in equilibrium price and a decrease in equilibrium quantity.
d. a decrease in equilibrium price and an increase in equilibrium quantity.

4) Which of the following is generally regarded as the most explanatory type of forecast?
a. delphi method
b. economic indicator
c. econometric modelling
d. projections

5) A flatter supply curve is

a. Price elastic.
b. Unit price elastic.
c. Income elastic.
d. Price inelastic.
6) If a rise in supply exceeds a rise in demand, then we should expect
a. the equilibrium price and quantity levels will rise.
b. the equilibrium price will rise while the equilibrium quantity will decline.
c. The equilibrium price will fall while the equilibrium quantity will rise.
d. the equilibrium price and quantity levels will decline.

7) Any supply curve which is a straight line passing through the origin whatever its slopes
will possess
a. An elasticity which is less than one
b. An elasticity which is greater than one
c. Unitary elasticity of supply
d. Unitary elasticity of supply

8) Barometric methods are used to forecast

a. seasonal variation.
b. secular trend.
c. cyclical variation.
d. irregular variation.

9) Econometric forecasts require

a. accurate estimates of the coefficients of structural equations.
b. forecasts of future values of exogenous variables.
c. appropriate theoretical models.

10) A rightwards shift in supply curve indicates

a. An increase in quality supplied

b. The general equilibrium
c. A decrease in supply
d. An increase in supply
 Managerial Economics-Assignment 6

1) Which of the following production functions denotes decreasing return to scale?

a. Q = 2K + 3L + KL
b. Q = 20K0.6L0.5
c. Q = 100 + 3K+ 2L
d. Q = 5Ka + Lb, where a + b = 1

2) Which of the following is not a factor of production?

a. labour
b. land
c. Profit
d. capital

3) If a firm's output increases by 10 percent

a. after an 8 percent increase in a single input, holding the others constant, would indicate
the firm is experiencing decreasing returns to scale
b. after all inputs were increased by 100 units, the firm is experiencing increasing returns to
scale
c. after the firm increased input usage of all inputs by 12 percent to obtain this increase in
output, the firm would be encountering decreasing returns to scale
d. none of the above conclusions can be drawn

4) When a factory is working at 70% capacity, increasing of variable inputs, leads to

a. increasing of output
b. decreasing of output according to law of diminishing return
c. output remains same up to full capacity and later starts decreasing
d. increasing up to full capacity and later decreasing of the marginal product
according to law of diminishing return

5) In short–run production function, a rational producer operates at

a. stage of increasing return
b. stage of decreasing return
c. stage of diminishing return
d. stage of negative return

6) We get straight line expansion path in case of

a. Non- Homogeneous production function

 b. Homogeneous production function
c. Cobb Douglas production function
d. None of the above

7) The shape of isoquants is L shaped in case of

a. Substitute goods
b. Complementary goods
c. Giffen goods
d. Inferior goods

8) Marginal principle is
a. Marginal revenue = marginal cost
b. Marginal revenue is greater than marginal cost
c. Marginal cost is greater than marginal revenue
d. Marginal cost is equal to marginal revenue

9) Comparative advantage is the basis for

a. efficient production.
b. international trade.
c. economies of scale.
d. the capital-labor tradeoff.

10) An isocost line will be shifted further away from the origin
a. if the prices of both inputs increase.
b. if total cost increases.
c. if there is an advance in technology.
d. All of the above are correct.
 Managerial Economics (NOC20MG67)

Week 7 Assignment

1) Which of the following would shift a firm's short-run cost curves upward?
a. an advance in technology
b. an increase in employees' wages
c. a decrease in the demand for the firm's product
d. a reduction in excise taxes levied on the firm's product

2) Which of the following describes the point at which the firm moves from the planning
horizon (long-run) to the operating horizon (short-run)?
a. the firm has determined the appropriate plant size to build
b. the firm begins construction on a new plant
c. the firm begins production at a new plant
d. the firm consider increasing its productive capital (production equipment and machinery)

3) Which of the following items is most likely to be an implicit cost of production?

a. property taxes on a building owned by the firm
b. transportation costs paid to a trucking supplier
c. rental payments for a building utilized by the company and rented from another
party
d. interest income foregone on funds invested in the firm by the owners

4) Average fixed cost

a. always decline as the output increases
b. is u-shaped, if there are increasing returns to scale
c. is u-shaped, if there are decreasing return to scale
d. is intersected by mc at its minimum points
e. none of the above

5) What kinds of costs are irrelevant when making decisions?

a. Sunk costs
b. Marginal costs
c. Fixed costs
d. Variable costs
6) Which cost does not change with the level of output and is calculated by divided by the
output level, you have calculated

a. Total cost
b. Average fixed cost
c. Average variable cost
d. Marginal cost

7) Which of the following cost curve is not a U shape curve?

a. Average fixed cost
b. Total fixed cost
c. Average variable cost
d. Total variable cost

8) The decreasing average cost of production in the long run is due to

a. Efficiency of inputs
b. Economies of scale
c. Efficiency of technology
d. Economies of scope

9) Which of the following is an implicit cost?

a. The salary earned by a corporate executive
b. Depreciation in the value of a company-owned car as it wears out
c. Property taxes
d. Interest payments

10) If a firm has a downward sloping long-run average cost curve, then

a. it is experiencing decreasing returns to scale.

b. it is experiencing decreasing returns.
c. it is a natural monopoly.
d. marginal cost is greater than average cost.
 Managerial Economics (NOC20MG67)

Week 8 Assignment

- cost and perfect competition

1) For firms in perfectly competitive industries

a. profit maximization occurs at Q where MR = ATC
b. the firms TR function will rise and attain a maximum
c. profit maximization occurs at Q where P = MC
d. none of the above are true

2) The total cost function of a firm is estimated to be TC = 1000 + 10Q. If the price of the
good is Rs.14 per unit, the break-even sales revenue for the firm is
a. Rs. 2,450
b. Rs. 3,500
c. Rs. 3,750
d. Rs. 2,750
e. Rs. 4,000

3) A perfectly competitive firm will always expand output as long as

a. Rising marginal cost is less than the average cost
b. Rising marginal cost is less than the marginal revenue
c. Rising marginal cost is less than price
d. None of the above

4) Expanding output till the rising marginal cost is less than price, is the nature of
a. Perfectly competitive industry
b. Perfectly competitive market
c. Perfectly competitive firm
d. Imperfectly competitive market

5) Under perfect competition, a firm will be in equilibrium when its AC is

a. Covering only prime costs of production
b. At a minimum
c. At a maximum
d. Covering wages and salaries only
6) In all forms of imperfect competition the average revenue curve facing the individual
slopes
a. Horizontally
b. Downward
c. Upward
d. Vertically

7) Under perfect competition, price is determined by the interaction of total demand and
________.
a. Total supply
b. Total cost
c. Total utility
d. Total production

8) If one perfectly competitive firm increases its level of output, market supply
a. will increase and market price will fall.
b. will increase and market price will rise.
c. and market price will both remain constant.
d. will decrease and market price will rise.

9) A perfectly competitive firm should reduce output or shut down in the short run if market
price is equal to marginal cost and price is
a. greater than average total cost.
b. less than average total cost.
c. greater than average variable cost.
d. less than average variable cost.

10) The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The market
supply curve is QS = 3 + P. The market will be in equilibrium if
a. P = 6 and Q = 9.
b. P = 5 and Q = 2.
c. P = 4 and Q = 4.
d. P = 3 and Q = 6.
 Managerial Economics (NOC20MG67)

Week 9 Assignment

–monopoly

1) In monopoly, the relationship between average revenue and marginal revenue curves is as
follows :
a. Average revenue curve lies above the MR-curve
b. AR curve lies below the MR-curve
c. AR curve coincides with the MR-curve
d. AR curve is below MR-curve and parallel to the MR curve

2) The Lerner index is used to measure

a. Elasticity
b. Price fluctuation
c. Market power
d. Profit maximization

3) Excess capacity is a feature of

a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly

4) A natural monopoly is a market in which:

a. there is only one producer because the entire market's output can be produced most
efficiently by that one firm.
b. there is only one producer because there are significant barriers to entry that keep
other firms out of the market.
c. there are only a couple of firms.
d. none of the above.

5) A circumstance in which it might pay a monopolist to cut the price of his product is where
a. Marginal Cost is falling
b. Marginal Revenue is greater than Marginal Cost
c. Advertising costs are increasing
 d. Average costs seem about to fall
6) A monopoly producer has
a. Control over production but not price
b. Control over production, price and consumers
c. Control neither on production nor on price
d. Control over production as well as price

7) Bilateral monopoly means

a. A monopoly seller buying his input from many suppliers
b. Two rival buyers only
c. Two rival sellers only
d. A monopolist facing a monopsonist

8) The equilibrium level of output for the pure monopolist is where

a. MR = MC
b. P < AC
c. MR < MC
d. MR > MC

9) The imposition of a ceiling on a monopolist's price will affect his

a. Equilibrium output only

b. Average revenue in the short-run only
c. Profits only
d. Equilibrium output and profits

10) A profit-maximizing monopolist in two separate markets will

a. Always charge a higher price in the market where he sells less

b. Always charge a higher price in the market where he sells more
c. Charge the same price in both markets
d. Adjust his sales in the two markets so that his MR in each market just equals his
aggregate marginal cost
 Managerial Economics (NOC20MG67)

Week 10 Assignment

– oligopoly – cournot, kinked, stackelberg, collusive

1) The kinked demand curve model

a. reflects the interdependence of firm
b. results in rival following price increase
c. results in rival not following the price decrease
d. all the above are results of kinked demand curve model

2) Oligopoly is a type of:

a. cooperative, zero-sum
b. non cooperative, non zero-sum
c. cooperative, non zero sum
d. non cooperative zero sum

3) Which of the following does not likely to lead to the failure of collusive oligopoly?
a. secret price cutting
b. more number of firms
c. undifferentiated goods
d. rapidly changing technology

4) A monopolist has control over the price he charges for his product. He will be able to
maximise his profit by
a. Lowering the price, if the demand curve is elastic
b. Raising the price, if the demand curve is elastic
c. Lowering the price, if the demand curve is inelastic
d. Keep the same price, if the demand curve is inelastic

5) In a monopolistic competition, a business finds its maximum-profit position where

a. MR > MC
b. MR < MC
c. MR = MC
d. MR + MC = 1
6) A monopolist charging high price operates on
a. The constant elastic part of a demand curve
b. The inelastic part of a demand curve
c. The elastic part of a demand curve
d. Ignores elasticity of demand altogether
7) According to the kinked demand curve model, a firm will assume that rival firms will
a. keep their rates of production constant.
b. keep their prices constant.
c. match price cuts but not price increases.
d. match price increases but not price cuts.

8) Oligopolistic firms can earn positive economic profits

a. in the short run, but not in the long run.
b. in the short run and in the long run.
c. in the long run, but not in the short run.
d. in neither the short run nor the long run.

9) The kinked demand curve model assumes that

a. firms match price increases, but not price cuts.
b. demand is more elastic for price cuts than for price increases.
c. changes in marginal cost can never lead to changes in market price.
d. None of the above is correct.

10) The petroleum industry is an example of

a. monopolistic competition.
b. pure oligopoly.
c. duopoly.
d. differentiated oligopoly.
 Managerial Economics (NOC20MG67)

Week 11 Assignment

- game theory /price leader ship

1) A stable equilibrium is prisoners’ dilemma is known as

a. Boumal equilibrium
b. Nash equilibrium
c. Douglas equilibrium
d. Porter equilibrium
2) OPEC is an example of the type of producer's organisation known as a
a. Trust
b. Producer's Cooperative
c. Marketing board
d. Cartel
3) Which one of the following is a part of every game theory model?
a. Players
b. Payoffs
c. Probabilities
d. Strategies
4) In game theory, a choice that is optimal for a firm no matter what its competitors do is
referred to as
a. the dominant strategy.
b. the game-winning choice.
c. super optimal.
d. a gonzo selection.
5) A prisoners' dilemma is a game with all of the following characteristics except one. Which
one is present in a prisoners' dilemma?
a. Players cooperate in arriving at their strategies.
b. Both players have a dominant strategy.
c. Both players would be better off if neither chose their dominant strategy.
d. The payoff from a strategy depends on the choice made by the other player.
6) Which of the following is a nonzero-sum game?
a. Prisoners’ dilemma
b. Chess
c. Competition among duopolists when market share is the payoff
d. A cartel member’s decision regarding whether or not to cheat
7) A game that involves interrelated decisions that are made over time is a
a. sequential game.
b. repeated game.
 c. zero-sum game.
d. nonzero-sum game.
8) Which of the following describes a Nash equilibrium?
a. A firm chooses its dominant strategy, if one exists.
b. Every competing firm in an industry chooses a strategy that is optimal given the
choices of every other firm.
c. Market price results in neither a surplus nor a shortage.
d. All firms in an industry are earning zero economic profits.

9) If a players make their moves in a particular order over time, then the game is
a. Pure form
b. Strategic form
c. Dominant form
d. Dominated form

10) Game theory is concerned with

a. predicting the results of bets placed on games like roulette.
b. the choice of an optimal strategy in conflict situations.
c. utility maximization by firms in perfectly competitive markets.
d. the migration patterns of caribou in Alaska.
 Managerial Economics (NOC20MG67)

Week 12 Assignment

– pricing

1) Penetration pricing is an example of

a. cost based pricing
b. competition based pricing
c. product life cycle based pricing
d. perceived value pricing

2) A firm that is engaging in price discrimination will

a. charge a higher price to consumers with a higher price elasticity of demand.
b. charge a higher price to consumers with a lower price elasticity of demand.
c. earn lower profits than a similar firm that does not engage in price discrimination.
d. generally be a perfectly competitive firm.
3) Setting a high price when a product is first introduced and then gradually lowering its price
over time is referred to as
a. value pricing.
b. skimming.
c. price lining.
d. prestige pricing.
4) Developing a product to sell at a predetermined price is called
a. value pricing.
b. skimming.
c. price lining.
d. prestige pricing.
5) A pricing practice that involves charging a fixed fee plus a per unit price for a good or
service is referred to as
a. bundling.
b. skimming.
c. a two-part tariff.
d. first degree price discrimination.

6) A pricing practice that requires buyers to purchase packages of different goods and does
not make the goods available separately is called
a. value pricing.
b. bundling.
 c. a two-part tariff.
d. skimming.
7) A grocery store that offers one can of soup for $0.35 and three cans for $1.00 is engaging
in
a. first-degree price discrimination.
b. second-degree price discrimination.
c. third-degree price discrimination.
d. The answer cannot be determined without additional information.

8) A firm will realize the highest level of profit if it is able to engage in

a. first-degree price discrimination.
b. second-degree price discrimination.
c. third-degree price discrimination.
d. The answer cannot be determined without additional information.
9) In ____ price discrimination, it is possible for the entire consumer surplus to be captured by
the seller.
a. first-degree
b. second-degree
c. third-degree
d. a and b
10) What is captive product pricing?
a. Setting prices across an entire product line
b. Pricing bundles of products sold together
c. Pricing products that must be used with the main product
d. Pricing low-value by-products, to get rid of them