WorksheetsManagerial Economics Quiz
Total questions: 40
Worksheet time: 20mins
A firm observes that a 5% increase in price leads to a 15% fall in quantity demanded. From a managerial decision perspective, the firm should:
Increase price further
Reduce price to increase revenue
Maintain price and reduce output
Ignore elasticity in pricing decisions
Which demand forecasting method is most appropriate for a newly launched product with no historical data?
Trend projection
Regression analysis
Consumer survey method
Moving average method
If income elasticity of demand for a product is negative, the product is most likely:
A luxury good
A normal good
An inferior good
A necessity
A firm faces highly elastic demand. If it increases price marginally, total revenue will:
Increase
Decrease
Remain unchanged
First rise then fall
Which situation best reflects managerial relevance of elasticity?
Studying consumer tastes
Forecasting population growth
Deciding advertising budget and pricing strategy
Measuring national income
A demand curve that shifts outward due to increase in income represents:
Extension of demand
Increase in demand
Decrease in demand
Contraction of demand
For a product in the maturity stage of Product Life Cycle, demand forecasting should primarily focus on:
Market penetration
Cost minimization
Demand stabilization and competition
Product innovation only
Which forecasting method is least suitable for short-term managerial decisions?
Moving average
Barometric method
Expert opinion
Market experiment
Cross elasticity of demand is particularly useful for:
Wage fixation
Product diversification decisions
Inventory control
Cost estimation
If price elasticity of demand is equal to 1, then:
MR is zero
TR is maximum
TR is minimum
Demand is perfectly elastic
A firm observes that despite a fall in price, total revenue decreases. This implies demand is:
Elastic
Inelastic
Unitary elastic
Perfectly inelastic
Which demand distinction is most relevant for long-term investment decisions?
Individual demand
Firm demand
Industry demand
Market demand
In regression-based demand forecasting, the dependent variable is usually:
Income
Price
Quantity demanded
Consumer preference
A firm facing derived demand is typically producing:
Consumer goods
Luxury goods
Capital goods or inputs
Inferior goods
Which elasticity concept helps managers decide tax incidence?
Income elasticity
Advertising elasticity
Price elasticity
Cross elasticity
If advertising elasticity is low, the firm should:
Increase advertising aggressively
Reduce advertising expenditure
Maintain advertising and increase price
Stop production
Which forecasting method explicitly considers economic indicators?
Time series
Barometric method
Market survey
Delphi technique
Demand forecasting over the product life cycle helps managers mainly in:
Employee recruitment
Capacity planning
National policy formulation
Price control
A perfectly inelastic demand curve implies:
Consumers are price sensitive
Quantity demanded remains constant at all prices
Price remains constant
Demand is infinite
Which factor does NOT shift the demand curve?
Change in consumer income
Change in tastes
Change in price of the commodity
Change in price of related goods
The law of variable proportions operates in:
Long run only
Short run only
Both short and long run
Very long run
In Stage II of production:
MP is negative
AP is rising
MP is positive but declining
TP is falling
Rational producer will operate in:
Stage I
Stage II
Stage III
Any stage
An isoquant represents:
Same cost combinations
Same output combinations
Same profit combinations
Same revenue combinations
Which property of isoquants reflects diminishing MRTS?
Convex to origin
Concave to origin
Parallel to axes
Intersecting
Producer equilibrium occurs where:
Isoquant touches X-axis
Isoquant touches Y-axis
Isoquant is tangent to isocost
Isocost is vertical
If both inputs are increased proportionately and output increases more than proportionately, it is:
Constant returns to scale
Increasing returns to scale
Decreasing returns to scale
Law of diminishing returns
Cobb-Douglas production function exhibits:
Fixed proportions
Perfect substitutes
Variable proportions
Zero substitutability
Which cost does NOT exist in the long run?
Average cost
Fixed cost
Marginal cost
Total cost
MC curve intersects AC curve at:
Highest point of AC
Lowest point of AC
Any point
Zero output
Economies of scale arise due to:
Rise in variable cost
Managerial inefficiency
Specialization and technology
Scarcity of inputs
Which cost curve is U-shaped due to law of variable proportions?
AFC
AVC
MC
TFC
In short run, AFC:
Is constant
Increases continuously
Declines with output
Is zero
Which cost concept is most relevant for pricing decisions?
Sunk cost
Historical cost
Marginal cost
Fixed cost
If MC is less than AC:
AC is rising
AC is falling
AC is constant
MC is zero
Returns to scale differ from law of variable proportions because:
One applies in short run, other in long run
Both apply in short run
Both are same
One is micro, other macro
Which cost increases due to poor coordination and managerial inefficiency?
Technical economies
Financial economies
Diseconomies of scale
External economies
A linear homogeneous Cobb-Douglas production function implies:
Increasing returns to scale
Constant returns to scale
Decreasing returns to scale
Negative returns to scale
Expansion path shows:
Cost minimization for a given output
Revenue maximization
Output maximization
Profit maximization
Which cost is relevant for shutdown decision?
Fixed cost
Sunk cost
Variable cost
Historical cost
