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
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