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Midterm Long Exam 1 1.Managerial economics can best be defined as the: D. analysis of major management decisions economic tools 2. Profit maximization is an ambiguous guide to decision making in the private sector because: C. of the presence of risk and uncertainty 3. An incentive C. could be either a reward or a penalty 4. Ivana spends P20,000 per year on painting supplies and storage space. She recently received a job offers from a corn processing firm, Cornhub Co., for P100,000 per year and apparel giant company, Red Tube & Pants, for P90,000 per year. However, she turned both jobs down to continue her painting career. If Ivana sells 20 paintings per year at a price of P10,000 each, how much is her Economic Profit? E. None of the above 10,000 5. The most fundamental economic problem is D. Scarcity 6. MAS can relate to the following areas, except. C. improvement of policies, procedures, systems, methods and personal relationships 7. Following are possible end-products of a MAS engagement, except B. Blue print of a construction project 8. In determining the scope or type of service to be rendered, the consultant C. Both A and B 9. It refers to the ability of the practitioner to maintain his role as an objective adviser or consultant without making any attempt to make decisions for the management D. Independence in mental attitude 10. Final written reports in MS engagements may be classified as either long form or short form report. The latter report C. Is usually issued when, during the execution stage of the engagement, interim reporting was extensively used, and there was a close and continuous coordination between the consultant/team members and the client. 11. The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.

Midterm Long Exam 1 C. price, quantity demanded 12. The term "ceteris paribus" means C. all other things remaining constant or equal 13. But nearly all supply curves share a basic similarity: they slope _______________. B. up from left to right 14. The ___________ is the only price where quantity demanded is equal to quantity supplied A. equilibrium price 15. A decline in input prices will cause the quantity demanded in the output market to increase a. True 16. An upward slopped supply curve is consistent with the law of supply. a. True 17. During a recession, economies experience increased unemployment and a reduced level of activity. How would a recession be likely to affect the market demand for new cars? b. Demand will shift to the left. 18. If automobile manufacturers are producing cars faster than people want to buy them, a. there is an excess supply and price can be expected to decrease. 19. If a computer software company introduces a new program and finds that orders from wholesalers far exceed the number of units that are being produced, d. there is an excess demand and price can be expected to increase. 20. Which of the following is an example of an implicit cost? b. The uncompensated services of the spouse of a firm's owner 21. The value of an economic theory in practice is determined by c. how well the theory can predict or explain. 22. Management decision problems are comprised of three elements. Which of the following is not one of them? a. Profitability 23. Which of the following is an example of a resource constraint? d. Inadequate financial capital

Midterm Long Exam 1 24. Some reasons for hiring management consultants are as follows, except a. to help define specific problems and implement solutions. 25. Which of the following statements is incorrect? d. In performing MAS, a practitioner must act with maturity and objectivity and be independent in mental attitude. 26. It refers to the practitioner's ability to identify and define client needs, select and supervise appropriate staff, apply an analytical approach and process appropriate to the engagement, apply knowledge of the technical subject matter under consideration, communicate recommendations effectively, and when required, assist in implementing recommendations. c. Professional competence 27. This stage of MAS engagement involves various activities which may generally be classified as gathering of information and analysis/evaluation of information gathered. c. Conducting the engagement 28. Which of the following will not impair the independence of a CPA in the rendition of MAS? b. The CPA does not extend his services beyond the presentation of recommendations or giving of advice. 29. Which of the following is the best definition of managerial economics? Managerial economics is b. a field that applies economic theory and the tools of decision science. 30. Suppose demand and supply are as shown below. Determine the equilibrium quantity.

B. 2.00...