kj;j;jSAMPLE TEST QUESTIONS FOR CHAPTERS 1-5
1. If a decision is to be sensible, what must be incorporated? a. A listing of the alternative courses of action.
b. Determining how varying the assumptions affects the problem. c. A statement of goals and objectives.
d. A comparison of the advantages and disadvantages of alternative courses of action. e. All of the above.
2. Sensitivity analysis can best be defined as
a. being sensitive to the wishes of decision-makers.
b. being sensitive to the impacts of decisions on others.
c. measuring results against objectives.
d. examining the reliability of key data used to make a decision. e. examining how a decision would change if key facts were changed. 3. Is benefit-cost analysis an unambiguous guide to decision making in the public sector? a. No, because of the timing of the benefits and costs.
b. No, because public sector managers may disagree about the best means to obtain the benefits and costs. c. Yes. It offers clear results and ease in decision making. d. Yes, although it is not as simple as the rules for profit maximization. 4. Which of the following might cause managers to fail to maximize the value of the firm? a. They have objectives that conflict with value maximization. b. They may have incomplete information upon which to act.
c. They may fail to undertake analysis for value maximization. d. They may fail to implement decisions that lead to value maximization. e. All of the above.
5. In applying benefit-cost analysis to public-sector decisions, which rule is used? a. Undertake a project only if it generates sufficient revenues. b. Undertake a project only if total benefits for all affected groups exceed total costs. c. Undertake a project only if marginal benefits exceed average costs. d. Undertake a project only if total benefits to government exceed total costs to government. e. Undertake a project only if profits of the agency exceed the cost of the project. 6. According to the law of demand, if a firm lowers the price of its goods, a. consumers will demand more units.
b. consumers will demand the same number of units.
c. consumers will demand fewer units.
d. the effect is uncertain (it depends on current consumption). e. the effect is uncertain (it depends on consumer preferences).
7. Demand is given by P = 1750 - 25Q. If a firm wishes to sell 50 units, what price should it charge? a. $500
8. Marginal revenue is the
a. amount of additional revenue from a unit increase in profit. b. amount of additional revenue from a unit increase in price. c. amount of additional revenue from a unit increase in output. d. amount of additional revenue from an increase in demand. 9. Marginal cost is defined as the
a. additional cost of increased overhead.
b. additional cost of producing an extra unit of output.
c. additional cost of an extra unit of profit.
d. additional cost of a marginal increase in quality.
e. variable cost of production.
10. Can a demand equation be used to test effects of changes in explanatory variables? a. No.
b. Yes, but only one of the explanatory variables can be tested. c. Yes, but the useful information from the test diminishes. d. Yes, for one or more of the variables.
e. Yes, but only simultaneously for all of the variables.
11. Which of the following will cause a demand curve to shift? a. A change in the price of the good or service.
b. A change in the amount offered for sale.
c. A change in the profit to the seller of the good or service. d. A change in a non-price variable in the demand function. e. A change in production technology for the good or service. 12. If the price of a good or service changes, what happens to the demand curve? a. The demand curve shifts inward.
b. The demand curve shifts outward.
c. There is a movement along the demand curve.
d. There is a movement along, and a shift of, the demand...
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