Managerial Economics Christopher Thomas 13th Edition – Test bank

Managerial Economics Christopher Thomas 13th Edition – Test bank

Chapter 3: MARGINAL ANALYSIS FOR OPTIMAL DECISIONS

Multiple Choice

3-1 A firm will maximize profit by producing that level of output at which

a. the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount.

b. the additional revenue from the last unit sold equals the additional cost of the last unit.

c. total revenue exceeds total cost by the largest amount.

d. total revenue equals total cost.

e. both b and c

Answer: e

Difficulty: 02 Medium

Topic: Concepts and Terminology

AACSB: Reflective Thinking

Blooms: Understand

Learning Objective: 03-02

3-2 The function a decision maker seeks to maximize or minimize is the ________ function.

a. optimal

b. decision-making

c. objective

d. marginal

e. none of the above

Answer: c

Difficulty: 01 Easy

Topic: Concepts and Terminology

AACSB: Reflective Thinking

Blooms: Remember

Learning Objective: 03-01

3-3 Choice variables

a. determine the value of the objective function

b. determine the constraint

c. can only take on integer values

d. cannot be continuous

e. both c and d

Answer: a

Difficulty: 01 Easy

Topic: Concepts and Terminology

AACSB: Reflective Thinking

Blooms: Remember

Learning Objective: 03-01

3-4 For an unconstrained maximization problem

a. the decision maker seeks to maximize net benefits.

b. the decision maker seeks to maximize total benefits.

c. the decision maker does not take cost into account because there is no constraint.

d. the decision maker does not take the objective function into account because there is no constraint.

e. none of the above

Answer: a

Difficulty: 02 Medium

Topic: Concepts and Terminology

AACSB: Reflective Thinking

Blooms: Understand

Learning Objective: 03-01

3-5 When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because

a. total benefit will rise by more than total cost will rise.

b. marginal cost is rising faster than marginal benefit is falling.

c. net benefit is upward sloping at this point.

d. total cost will fall by more than total benefit will fall.

Answer: d

Difficulty: 02 Medium

Topic: Constrained Optimization

AACSB: Analytical Thinking

Blooms: Apply

Learning Objective: 03-02

3-6 For a constrained minimization problem, the decision-maker

a. is constrained by the specific amount of total benefits.

b. is constrained by the choice set of values for the activities.

c. seeks to minimize the cost of achieving a specific goal.

d. all of the above

e. none of the above

Answer: d

Difficulty: 02 Medium

Topic: Unconstrained Maximization

AACSB: Reflective Thinking

Blooms: Understand

Learning Objective: 03-03

3-7 A continuous choice variable

a. must be continuously varied to attain the goal.

b. can take on only special values between two endpoints.

c. is in unconstrained but not constrained problems.

d. all of the above

e. none of the above

Answer: e

Difficulty: 01 Easy

Topic: Concepts and Terminology

AACSB: Reflective Thinking

Blooms: Remember

Learning Objective: 03-01