chapter 1

3292 WordsFeb 11, 201414 Pages
Chapter 1: MANAGERS, PROFITS, AND MARKETS Multiple Choice 1-1 Economic theory is a valuable tool for business decision making because it a. identifies for managers the essential information for making a decision. b. assumes away the problem. c. creates a realistic, complex model of the business firm. d. provides an easy solution to complex business problems. 1-2 Economic profit a. is a theoretical measure of a firm’s performance and has little value in real world decision making. b. can be calculated by subtracting implicit costs of using owner-supplied resources from the firm’s total revenue. c. is negative when costs exceed revenues. d. is generally larger than accounting profit. 1-3 Economic profit is a. the…show more content…
b. raising the price of the product above the market-determined price will cause sales to fall nearly to zero. c. many other firms produce a product that is identical to the output produced by the rest of the firms in the industry. d. all of the above 1-16 A price-setting firm a. can lower the price of its product and sell more units. b. can raise the price of its product and sell fewer units but will not lose all of its sales. c. possesses market power. d. sells a product that is somehow differentiated from the product sold by its rivals or sells in a limited geographic market area with only one or a few sellers. e. all of the above 1-17 A market a. lowers the transaction costs of doing business. b. is any arrangement that brings buyers and sellers together to exchange goods or services. c. is an institution used exclusively by capitalist nations. d. both a and b e. both b and c 1-18 Which of the following is NOT one of features characterizing market structures? a. the number and size of firms b. the likelihood of new firm’s entering a market c. the level of capital investment in research and development d. the degree of product differentiation 1-19 In a perfectly competitive market, a. all firms produce and sell a standardized or undifferentiated product. b. the output sold by a particular firm may be quite different from the output sold by the other firms in the market. c. firms are

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