Test Bank For Economics for Managers International Edition 12th Edition James R. McGuigan
ISBN-10: 0538470380, ISBN-13: 9780538470384
Chapter 1—Introduction and Goals of the Firm
MULTIPLE CHOICE
- 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 |
ANS: D PTS: 1
- 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 |
ANS: D PTS: 1
- 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 |
ANS: A PTS: 1
- 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 |
ANS: D PTS: 1
- 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 |
ANS: B PTS: 1
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