Republic of the Philippines

State University of Northern Negros

Sagay City, Negros Occidental

Bachelor of Science in Information System

First Semester AY 2024-2025
Final Examination
MANAGERIAL ECONOMICS
Instructor: Ana B. Lim, DPA

NAME:_____________________________________ Year & Section _______________ SCORE:_________________

TEST I: MULTIPLE CHOICE (80 Points)

Instruction: Encircle the letter of the correct answer.

1. What does managerial economics mainly deal with?

a. International trade
b. Analysis of business problems and decision-making
c. Government policies
d. Consumer behavior

2. What are the two broad categories of issues in managerial economics?

a. Domestic and international issues
b. Financial and operational issues
c. Operational or internal issues and environment or external issues
d. Policy and regulatory issues

3. Why is demand analysis essential in managerial economics?

a. It helps increase production costs
b. It provides guidelines to manipulating demand
c. It decreases the need for resources
d. It eliminates competition

4. What is one of the chief topics covered under demand analysis?

a. Cost control
b. Demand determinants
c. Supply schedule
d. Price determination

5. What does cost analysis in managerial economics involve?

a. Increasing market demand
b. A study of economic costs combined with accounting data
c. Decreasing production output
d. Establishing government policies

6. Which of the following is included in cost analysis?

a. A. Production functions
b. Demand determinants
c. Cost-output relationships
d. Price forecasting

7. What is the focus of production analysis in managerial economics?

a. Monetary terms only
b. Physical terms
c. Cost reduction
d. Demand forecasting
8. What does supply analysis deal with?
a. Factors influencing supply
b. Cost classifications
c. Production functions
d. Demand determinants

9. Why is pricing important in managerial economics?

a. It determines the level of government taxes
b. It is the genesis of the revenue of a firm
c. It decreases production costs
d. It eliminates market competition
10. Which aspect is NOT covered under pricing decisions?
a. Differential pricing
b. Product line pricing
c. Cost classifications
d. Price forecasting

11. What is the main objective of profit management?

a. To increase government revenue
b. To provide the chief measure of success for business firms
c. To reduce production costs
d. To eliminate competition

12. Which technique is commonly used in profit management?

a. Supply curve analysis
b. Demand forecasting
c. Break-even analysis
d. Elasticity of supply

13. What is the focus of capital management in managerial economics?

a. Increasing demand
b. Planning and control of capital expenditure
c. Reducing production costs
d. Establishing price forecasts

14. Which topic is NOT associated with capital management? A

a. Cost of capital
b. Rate of return
c. Selection of projects
d. Supply determinants

15. Why is demand forecasting important for business planning?

a. It helps to reduce production costs
b. It identifies factors influencing demand and provides guidelines for manipulating demand
c. It establishes government policies
d. It eliminates market competition

16. What is the primary concern of the science of economics?

a. Distribution of wealth
b. Allocation of resources to alternative uses
c. Production of goods
d. Consumption of services

17. According to Adam Smith, what is economics?

a. A science of scarcity
b. A science of wealth
c. A science of material welfare
d. A study of human behavior

18. How did Marshall define economics?

a. A science of scarcity
b. A science of wealth
c. A science of material welfare
d. A study of markets

19. What is the essence of economics according to the given text?

a. Maximizing wealth
b. Achieving political stability
c. Acknowledging scarcity and organizing resources efficiently
d. Developing new technologies

20. What does scarcity refer to in economics?

a. Unlimited availability of goods
b. Limited resources relative to desires
c. Abundance of resources
d. Government regulation

21. What is the ultimate goal of economic science?

a. Increase government revenue
b. Improve living conditions of people C
c. Achieve political power
d. Expand global trade
22. According to Robbins, what is economics?
a. A study of markets
b. A science of wealth
c. A science of scarcity
d. A science of production

23. What denotes the most effective use of society's resources in satisfying people’s wants and needs?
a. Scarcity
b. Efficiency
c. Consumption
d. Distribution

24. What aspect does managerial economics primarily focus on?

a. Government policies
b. Decision making by managers
c. Consumer behavior
d. International trade

25. To Koontz and O’Donell, what is management?

a. Production of goods
b. Consumption of services
c. Creation and maintenance of an internal environment in an enterprise
d. Regulation of markets

26. How is management related to economics according to the provided MODULE?

a. It involves only the production of goods
b. It has no relation to economics
c. It is closely related and has led to managerial economics
d. It focuses only on human resources

27. What is managerial economics according to Mansfield?

a. The study of international trade policies
b. The application of economic concepts to rational decision making
c. The science of consumer behavior
d. The study of market trends

28. According to Spencer and Seigelman, what is managerial economics?

a. The integration of economic theory and practices for decision making and planning
b. The regulation of market prices
c. The study of government policies
d. The analysis of consumer behavior

29. Which of the following is a key idea in economics?

a. Unlimited resources
b. Goods are abundant
c. Scarcity of goods
d. Political stability

30. What does efficiency in economics aim to achieve?

a. Increase government control
b. Use society's resources in the most effective way
c. Expand global markets
d. Enhance political

31. Which market structure is characterized by a single seller and no close substitutes for the product?
a. Perfect competition
b. Monopolistic competition
c. Oligopoly
d. Monopoly

32. Which of the following factors increases competitive rivalry within an industry?
a. High industry growth
b. Low fixed costs
c. Numerous competitors
d. High product differentiation

33. What is a common barrier to entry that can protect existing companies from new competitors?
a. High customer loyalty
b. Low capital requirements
c. Easy access to distribution channels
d. Low economies of scale
34. When suppliers are limited or inputs are scarce, which of Porter’s Five Forces is at play?
a. Competitive rivalry
b. Threat of new entrants
c. Bargaining power of suppliers
d. Threat of substitute products

35. Which of the following scenarios increases the bargaining power of buyers?
a. Few alternative products available
b. High switching costs
c. Many small buyers
d. Buyers purchasing in large volumes

36. What is a market?

a. A. An institution where only sellers interact
b. An arrangement where buyers and sellers interact through a medium for a pre-defined transaction
c. An arrangement where only buyers interact
d. An institution where goods are produced

37. How can a market be defined in a simple sense?

a. Interaction between sellers at a fixed price
b. Interaction between buyers and sellers of a good or service at a mutually agreed upon price
c. Exchange of services without any interaction
d. Government-regulated pricing system

38. What is another term for market morphology?

a. Market segmentation
b. Market analysis
c. Market structure
d. Market trends

39. Why is the knowledge of market structure important?

a. To study the behavior of consumers in an economy
b. To study the behavior of firms in an economy
c. To set government policies
d. To determine international trade agreements

40. What does market structure help to understand?

a. Economic policies
b. The behavior of consumers in the short run and long run
c. The type of decisions a firm makes and its potential to earn profits in the short run and long run
d. Pricing mechanisms

41. What are the broad categories of market structure?

a. Perfect competition, monopoly, and imperfect competition
b. Oligopoly, monopoly, and duopoly
c. Monopsony, oligopsony, and perfect competition
d. Free market, command market, and mixed market

42. What is perfect competition?

a. A market structure where one firm controls the market
b. A market structure with few large firms dominating the market
c. A market structure with many firms selling identical products
d. A market structure with only one buyer

43. Which market structure is characterized by a single seller?

a. Perfect competition
b. Monopoly
c. Imperfect competition
d. Oligopoly

44. What defines imperfect competition?

a. Markets where firms sell identical products
b. Markets with no competition
c. Markets with many firms selling differentiated products
d. Markets controlled by the government

45. In which market structure do firms have some control over prices?
a. Perfect competition
b. Monopoly
c. Imperfect competition
d. All of the above
46. What impacts the decisions a firm makes in a given market structure?
a. Government regulations only
b. Consumer preferences only
c. The competitive environment in which it operates
d. International trade policies

47. Which market structure is likely to result in the highest level of consumer choice?
a. Monopoly
b. Perfect competition
c. Imperfect competition
d. Oligopoly

48. What is the main feature of a monopoly?

a. Many sellers in the market
b. Single seller dominates the market
c. Several small firms competing
d. Equal market share among firms

49. Which market structure often leads to the highest prices for consumers?
a. Perfect competition
b. Monopoly
c. Imperfect competition
d. Oligopoly

50. How does market structure affect a firm's ability to earn profits?
a. It has no effect
b. It determines the level of competition and pricing power
c. It only impacts long-term profits
d. It only impacts short-term profits

51. Which measure is taken to reduce the liquidity in the market?

a. Increasing government expenditure
b. Increasing the inflow of cash
c. Decreasing the credit creation capacity of commercial banks
d. Decreasing taxes

52. What does an increase in the rate of interest on borrowings for commercial banks result in?
a. Increased public spending
b. Increased savings by individuals
c. Increased credit supply
d. Reduced government revenue

53. What is one purpose of the central bank issuing government securities to commercial banks?
a. To increase the cash reserve ratio
b. To spend the cash with commercial banks on purchasing government securities
c. To decrease the interest rates
d. To increase the total spending of individuals

54. What happens when the central bank increases the Cash Reserve Ratio (CRR)?
a. A. Commercial banks need to keep a larger amount of cash as reserve
b. The rate of interest on loans for the public decreases
c. The government increases its expenditure
d. Private businesses reduce their spending

55. How does the central bank reduce the credit creation capacity of commercial banks?
a. By increasing direct taxes on profits
b. By decreasing the bank rate
c. By increasing reserve ratios like the CRR
d. By reducing government expenditure

56. What happens to disposable income when direct taxes on profits increase?
a. It increases
b. It decreases
c. It remains unchanged
d. It fluctuates randomly

57. In what phase of the business cycle do economic activities begin to slow down?
a. Prosperity Phase
b. Recession Phase
c. Depression Phase
d. Recovery Phase
58. What characterizes the prosperity phase of the business cycle?
a. High unemployment and low income
b. High level of output and trade
c. Decline in consumption and demand
d. Fall in interest rates

59. What term describes the phase when there is a decline in output, income, employment, prices, and
profits?
a. Prosperity Phase
b. Recovery Phase
c. Recession Phase
d. Depression Phase

60. What happens during the recovery phase of the business cycle?
a. Economic activities continue to decline
b. Output and employment levels decrease
c. There is a steady rise in economic activities
d. Businessmen lose confidence and become pessimistic

61. Which of the following is NOT a feature of the depression phase?

a. Fall in volume of output and trade
b. Contraction of bank credit
c. High level of business optimism
d. Decline in consumption and demand

62. Which phase of the business cycle is also known as the boom period?
a. Recession Phase
b. Depression Phase
c. Prosperity Phase
d. Recovery Phase

63. What is a key effect of high levels of economic activity during the prosperity phase?
a. Decrease in GNP (Gross National Product)
b. Reduction in the standard of living
c. Increase in prices and profits
d. Increase in unemployment

64. What usually happens to stock markets during the recession phase?
a. They expand rapidly
b. They remain stable
c. They fall
d. They show unpredictable fluctuations

65. What does the business cycle's natural rise and fall of economic growth help with?
a. Increasing tax rates
b. Reducing government expenditure
c. Analyzing the economy
d. Decreasing private spending

66. What is the main aim of measures taken to control inflation?

a. Increase cash flow in the economy
b. Increase liquidity in the market
c. Reduce the inflow of cash in the economy
d. Increase government spending

67. Which of the following is a method used to control inflation?

a. Increase in foreign trade
b. Fiscal measures
c. Reduction in employment
d. Lowering interest rates

68. What does the monetary policy aim to do in the context of controlling inflation?
a. Increase money supply in the market
b. Decrease interest rates for the public
c. Increase rate of interest on borrowings for commercial banks
d. Reduce government spending
69. What effect does an increase in the bank rate have?
a. Decreases the rate of interest on loans for the public
b. Increases the total spending of individuals
c. Increases the rate of interest on loans for the public
d. Reduces the cash reserve ratio

70. What are Open Market Operations (OMO)?

a. Central bank purchasing government securities from the public
b. Central bank issuing government securities to commercial banks
c. Central bank reducing reserve ratios
d. Commercial banks increasing credit supply for the public

71. How does the central bank control the credit creation capacity of commercial banks?
a. By increasing government revenue
b. By increasing the Cash Reserve Ratio (CRR)
c. By decreasing taxes
d. By increasing private spending

72. What is the Cash Reserve Ratio (CRR)?

a. A. The rate of interest charged by commercial banks
b. The ratio of government spending to revenue
c. The amount of cash commercial banks must keep in reserve with the central bank
d. The reserve amount of private businesses

73. In fiscal policy, how does the government reduce private spending?
a. By increasing taxes on private businesses
b. By reducing interest rates
c. By increasing government spending
d. By lowering the bank rate

74. What are the two main components of fiscal policy?

a. Government revenue and government expenditure
b. Public savings and private investments
c. Employment and inflation rates
d. Import and export controls

75. What phase of the business cycle is characterized by high output and trade, high income and
employment, and rising interest rates?
a. Recession Phase
b. Depression Phase
c. Prosperity Phase
d. Recovery Phase

76. During which phase do economic activities slow down and investment plans are given up?
a. Prosperity Phase
b. Recession Phase
c. Depression Phase
d. Recovery Phase

77. What is a key feature of the depression phase?

a. High level of effective demand
b. Increase in consumption
c. Fall in volume of output and trade
d. Overall business optimism

78. Which phase involves a steady rise in output, income, employment, prices, and profits?
a. Recession Phase
b. Depression Phase
c. Prosperity Phase
d. Recovery Phase

79. What term describes the natural rise and fall of economic growth over time?
a. Inflation cycle
b. Fiscal cycle
c. Monetary cycle
d. Business cycle
80. What happens to aggregate demand during the recovery phase?
a. It decreases
b. It remains unchanged
c. It increases
d. It fluctuates randomly
TEST II: TRUE OR FALSE ( 20 Points)
Instruction: Write A if you find the statement true, and B if otherwise.

1. Managerial economics is only concerned with theoretical aspects of economics.

2. Managerial economics incorporates ideas from disciplines such as psychology and sociology.
3. Managerial economics has no role in business decision-making in a complicated environment.
4. Managerial economics makes a manager a more competent model builder. (True)
5. Managerial economics only focuses on finance and marketing, excluding HR and production.
6. Managerial economics coordinates different functional areas and their implications on each other.
7. Managerial economics ignores the interaction between firms and society.
8. Managerial economics helps in attaining social and economic welfare.
9. Managerial economics studies the external environment that influences business operations.
10. Managerial economics does not consider government policies in its analysis.
11. Managerial economics estimates future demands to help in production scheduling.
12. Controlling costs is not a significant focus of managerial economics.
13. Setting the right price is an important task for managerial economics.
14. Managerial economics does not bring coordination in business operations.
15. Managerial economics ensures that all business funds are allocated to unprofitable means.
16. A managerial economist supports management in decision-making through analytical skills.
17. Managerial economists are also known as economic advisors or business economists.
18. Managerial economists only analyze internal environmental forces.
19. Managerial economists remain updated with the latest economic developments.
20. Demand analysis and forecasting, capital management, and profit management are key roles of a
managerial economist.

GOD BLESS YOU!