Eco 550 Week 1
McGuigan Chapter 1—Introduction and Goals of the Firm
Only for this spring quarter 2013, quiz purposes
MULTIPLE CHOICE
1. The form of economics most relevant to managerial decision-making within the firm is:
a.|macroeconomics|
b.|welfare economics|
c.|free-enterprise economics|
d.|microeconomics|
e.|none of the above|
2. If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
a.|it increases revenue more than costs or reduces costs more than revenue|
b.|it decreases some costs more than it increases others (assuming revenues remain constant)|
c.|it increases some revenues more than it decreases others (assuming costs remain constant)|
d.|all of the above|
e.|b and c only|
3. In the shareholder wealth maximization model, the value of a firm 's stock is equal to the present value of all expected future ____ discounted at the stockholders ' required rate of return.
a.|profits (cash flows)|
b.|revenues|
c.|outlays|
d.|costs|
e.|investments|
4. Which of the following statements concerning the shareholder wealth maximization model is (are) true?
a.|The timing of future profits is explicitly considered.|
b.|The model provides a conceptual basis for evaluating differential levels of risk.|
c.|The model is only valid for dividend-paying firms.|
d.|a and b|
e.|a, b, and c|
5. According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits.
a.|true|
b.|false|
6. According to the innovation theory of profit, above-normal profits are necessary to compensate the owners of the firm for the risk they assume when making their investments.
a.|true|
b.|false|
7. According to the managerial efficiency theory of profit, above-normal profits can arise because of
Only for this spring quarter 2013, quiz purposes
MULTIPLE CHOICE
1. The form of economics most relevant to managerial decision-making within the firm is:
a.|macroeconomics|
b.|welfare economics|
c.|free-enterprise economics|
d.|microeconomics|
e.|none of the above|
2. If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
a.|it increases revenue more than costs or reduces costs more than revenue|
b.|it decreases some costs more than it increases others (assuming revenues remain constant)|
c.|it increases some revenues more than it decreases others (assuming costs remain constant)|
d.|all of the above|
e.|b and c only|
3. In the shareholder wealth maximization model, the value of a firm 's stock is equal to the present value of all expected future ____ discounted at the stockholders ' required rate of return.
a.|profits (cash flows)|
b.|revenues|
c.|outlays|
d.|costs|
e.|investments|
4. Which of the following statements concerning the shareholder wealth maximization model is (are) true?
a.|The timing of future profits is explicitly considered.|
b.|The model provides a conceptual basis for evaluating differential levels of risk.|
c.|The model is only valid for dividend-paying firms.|
d.|a and b|
e.|a, b, and c|
5. According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits.
a.|true|
b.|false|
6. According to the innovation theory of profit, above-normal profits are necessary to compensate the owners of the firm for the risk they assume when making their investments.
a.|true|
b.|false|
7. According to the managerial efficiency theory of profit, above-normal profits can arise because of