Techniques of Analysis Optimization

1. The most important technique of analysis in managerial economics is

• optimization analysis

• risk analysis

• estimation techniques

• all of the above

2. Which of the following is false with respect to optimization analysis?

• It refers to the process whereby an organization achieves its objectives most efficiently.

• For a business firm, this usually involves maximizing profits or the value of the firm.

• It relies on the relationship among total, average, and marginal concepts or measures.

• None of the above.

3. The firm maximizes profits when

• the positive difference between total revenue and total cost is at the maximum.

• total revenue is at its maximum,

• total cost is at its minimum.

• all of the above.

4. Which of the following statements is false with respect to risk?

• Most managerial decisions are made in the face of risk.

• Risk and uncertainty arise when there is more than one possible outcome of a decision.

• Risk analysis cannot be incorporated into the optimization calculations of the firm.

• None of the above.

5. If the price of the commodity declines as the firm sells more units of the commodity, the total revenue (TR) curve of the firm

• is negatively sloped.

• is a positively sloped straight line.

• first rises, reaches a maximum, and then declines.

• is convex.

6. Which of the following statements about average revenue (AR) is false?

• If the TR curve is concave, the AR curve declines contnuously.

• When the TR curve begins to decline, AR becomes negative.

• If the TR curve is a positively sloped straight line, the AR curve is horizontal.

• AR is given by the slope of a ray from the origin to the TR curve.

7. Which of the following statements about marginal revenue is false?

• It is positive when total revenue rises.

• It is zero when total revenue is zero.

• It is negative when total revenue declines.

• None of the above.

8. Which of the following statements about the relationship between marginal revenue and average revenue is false?

• When the AR curve is falling, MR is negative.

• When the AR curve is falling, the MR curve is below the AR curve.

• When AR is positive, MR can be positive or negative.

• None of the above.

9. Which of the following statements about the total cost (TC) curve is true?

• The TC curve is always positively sloped.

• The TC curve can be positive at zero output.

• The TC curve can first be concave and then convex to the origin.

• All of the above.

10. At the point of profit maximization

• MR is at its maximum.

• profit per unit is at its maximum.

• MC is at its minimum.

• none of the above.