Test Bank For Managerial Economics 7th Edition By Keat

Test Bank For Managerial Economics 7th Edition By Keat

Managerial Economics, 7e (Keat)

Chapter 2 The Firm and Its Goals

Multiple-Choice Questions

1) Transaction costs include

A) costs of negotiating contracts with other firms.

B) cost of enforcing contracts.

C) the existence of asset-specificity.

D) All of the above

Answer: D

Diff: 1

2) A company will strive to minimize

A) transaction costs.

B) costs of internal operations.

C) total costs of transactions and internal operations combined.

D) variable costs.

Answer: C

Diff: 1

3) The best example of an economic goal of a firm is

A) providing good products/services to its customers.

B) improving its public image.

C) increasing employee morale.

D) increasing shareholder wealth.

Answer: D

Diff: 1

4) A large corporation’s profit objective may not be profit or wealth maximization, because

A) stockholders have little power in corporate decision making.

B) management is more interested in maximizing its own income.

C) managers are overly concerned with their own survival and may not take all prudent risks.

D) All of the above

Answer: D

Diff: 2

5) One of the weaknesses in pursuing the objective of profit maximization is that it ignores

A) the timing of cash flows.

B) the time-value of money concept.

C) the riskiness of cash flows.

D) All of the above

Answer: D

Diff: 1

6) Goals which are concerned with creating and maintaining employee and customer satisfaction and social responsibility are referred to as ________ objectives.

A) social

B) noneconomic

C) welfare

D) public relations

Answer: B

Diff: 1

7) Financial risk occurs due to variations in returns which

A) is induced by leverage.

B) is due to the ups and downs of the economy.

C) is due to changes in government regulations.

D) is a result of changes in exchange rates.

Answer: A

Diff: 2

8) Financial risk is associated with changes in

A) the demand for a firm’s products.

B) a firm’s debt.

C) a firm’s labor costs.

D) government regulations of a firm’s activities.

Answer: B

Diff: 2

9) ________ risk involves variation in returns due to the ups and downs of the economy, the industry and the firm.

A) Structural

B) Fluctuational

C) Business

D) Financial

Answer: C

Diff: 1

10) Unlike an accountant, an economist measures costs on a(n) ________ basis.

A) explicit

B) replacement

C) historical

D) conservative

Answer: B

Diff: 1