A. the option.

B. A SWOT analysis can be used to determine the Strengths, Weaknesses, Opportunities, and Threats
for each option.
1. A step in decision-making process which involves a manager uncover the risks involved or
difficulties which need to be overcome when implementing the options.
A. Step 7: Select the options to pursue
B. Step 8: Analyze the risks
C. Step 5: Establish decision-making criteria
A. but a fall in price and an increase in the quantity supplied.
A. a movement up and along the supply curve, resulting in both a higher equilibrium price and
quantity.
2. The method of production that largely determines the capability of producers to operations
C. finance
A. accounting D. strategy
3. It refers to the setting where decisions are made in an organization which will dictate the success or
failure of the said business.
A. decision-making environment C. uncertainty
B. certainty D. risk
4. An aspect of structured decision-making that reflects state that encompasses the decision made by firms.
D. Step 6: Evaluate the options against the criteria
5. Today’s business world is dynamic, being characterized by the following economic changes that affect
decision making except
A. changes in tastes and preferences of buyers.
B. migration of people.
C. technological progress.
D. making profit.
6. An area of economic theory that examines principal-agent relationship.
7. between a change in demand and a change in quantity demanded is Pa
B. a change in demand is a movement along the demand curve and a change in quantity demanded is a
shift in the demand curve.
A. a change in quantity demanded is a movement along the demand curve and a criteria
C. context
B. options D. objectives
8. The following are parts of Step 4 (Explore promising options) in decision-making process except
C. Interpretive Structural Modeling or Concept Mapping can be used to analyze the inter-relationships
of the options.
D. Review objectives while developing the set of criteria that will be used to rate the options.
E. Implementation analysis can provide a clear view of resource requirements, people and groups
affected, and any cautions to exercise when implementing
A. allocate the good efficiently.
B. the price is at equilibrium.
C. the price must fall.
9. It is at this point that the agreeable price for both buyers and sellers are the same, and their respective
quantity demanded and supply are also the same
A. demand gap. C. intersection point.
B. supply gap. D. equilibrium.
10. In equilibrium analysis, this simply means a distance or difference between two quantities, given the
same price
A. space. C. inequality.
B. void. D. gap.
11. A leftward movement along the demand curve for peanuts might be caused by any of the following
except
A. A decrease in average household income
B. An increase in the price of farm labor
C. A decrease in the acreage devoted to peanut production
 D. An increase in the price of fertilizer
12. Last week, the Shrinkets Shop sold 1,000 shrinkets at a price of P3 each. This week the shop finds it can
sell only 600 shrinkets at that price. What has mostly likely happened?
A. demand has increased C. supply has decreased
B. supply has increased D. the quantity supplied has decreased
13. Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the
firm's managers can expect total revenue to:
A. decrease.
B. Increase.
C. remain constant.
D. either increase or remain constant, depending upon the size of the price increase.
14. A price elasticity of zero corresponds to a demand curve that is:
A. horizontal.
A. agency theory C. property rights theory
B. motivation theory D. transaction theory
15. Methods or techniques applied in maximizing of minimizing an objective function.
A. decision science tools C. optimization techniques
B. mathematical economics D. econometrics
16. In produce and make products available in the market for sale at various prices
A. technology. C. expectations of future prices.
B. costs of inputs. D. legal factors and considerations.
17. Equilibrium exists when
A. there is no government intervention in the market.
B. the demand curve intersects the quantity axis.
C. the supply curve intersects the price axis.
D. the quantity demanded equals the quantity supplied.
18. If, at the prevailing price, more of a good is desired than is available for sale,
D. the price is below equilibrium
A. the price system cannot C. demand analysis
B. theory of the firm D. production function
19. Managerial economics bridges the gap between
A. theory and math.
B. economic theory, math and statistics.
C. economics and reality.
D. economic theory and managerial practice.
20. Decision sciences involve
A. mathematical economics and econometrics.
B. econometrics.
C. macroeconomics and microeconomics.
D. mathematics and operations management.
21. The theory of the firm mostly assumes that the goal of the firm is to maximize
A. sales. C. profits.
B. revenues. D. future profits.
22. A business management area where a managers need to be concerned with business competition,
creation of competitive advantage and adapting changing business environment.
23. the same as the demand for clothing
A. neither more elastic, less elastic, nor the same elasticity as that of the demand for clothing.
24. If the cross-price elasticity between ketchup and hamburgers is –1.2, a 4% increase in the price of
ketchup will lead to a 4.8%
A. drop in quantity demanded of ketchup.
B. drop in quantity demanded of hamburgers.
A. D. Buy 9.8% less peanut butter.
25. When total revenue of the seller decreased caused by an increase in price, the demand for the product is
said to be _______________.
A. Inelastic C. elastic
B. unit elastic D. perfectly elastic
26. Supply is said to be inelastic when the quantity supplied changes
A. more than the change in its price. C. equal to the change in its price
B. less than the change in it price. D. none of the above
27. This good is more elastic in supply.
A. milk C. corn
B. hamburger D. housing
28. Elasticity of supply tends to be greater when
A. inputs are specialized.
B. time period allowed for adjustment is fairly long.
C. degree of advertising is great.
D. demand for the product is inelastic.
29. The supply curve overtime is more elastic than the supply curve over the short period of time because,
given sufficient time
A. production techniques become more expensive.
B. new firms can enter the industry and old firms can increase their plant size.
C. producers become more competitive.
D. consumers become more demanding.
30. A price elasticity determinant common for both demand and supply is
A. availability of substitutes.
B. proportion of income/budget spent on a good/resource.
C. time.
C. increase in quantity demanded of ketchup.
D. Increase in quantity demanded of hamburgers.
31. If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce
from 100 to 140 jars, what is the cross-price elasticity of apple sauce and pork chops at a pork chop
price of $6?
A. –1.17 C. 0.42
B. 2.71 D. –0.86
32. An income elasticity less than zero tells us that the good is:
A. a normal good. C. an inferior good.
B. a Giffen good. D. an inelastic good.
33. If the income elasticity for lobster is 0.4, a 40% increase in income will lead to a:
A. 10% drop in demand for lobster.
B. 16% increase in demand for lobster.
C. 20% increase in demand for lobster.
D. 4% increase in demand for lobster.
34. You are the manager of a supermarket, and you know that the income elasticity of peanut butter is
exactly –0.7. Due to the economic recession, you expect incomes to drop by 15% next year. How should
you adjust your purchase of peanut butter?
B. Buy 10.5% more peanut butter. C. Buy 6.2% less peanut butter.
Buy 2.14% more peanut butter. 5

80 Qd –10 Qs

Answer the following questions and show supporting computations. (2 points each)
35. The demand function is expressed as
A. P = 40 – 2Q. C. Q = 80 – P.
B. Q = 80 – 2P. D. P = 40 – 5Q.
36. If price increased by P10, quantity demanded is expected to decrease by
A. 200 units B. 5 units C. 20 units D. 10 units.
37. The total revenue function is expressed as
A. TR = 40Q – 2Q2. C. TR = 40Q – 0.5Q2.
2
B. TR = 40Q – 5Q . D. TR = 80Q – Q2.
38. The marginal revenue function is expressed as
A. MR = 40 – 4Q. C. MR = 40 – Q.
B. MR = 40 – 10Q. D. MR = 80 – 2Q.
39. The supply function is expressed as
A. Q = –10 + 0.5P. C. P = 10 + 0.5Q.
B. Q = –10 + 2P. D. Q = 4 + 0.4P.
40. A change in quantity supplied by 5 units, price changes by
A. P200 B. P2.50 C. P25 D. P0.25
41. The equilibrium price and equilibrium quantity are valued at
A. 20 pesos and 60 units respectively.
B. 22.50 pesos and 35 units respectively.
C. 60 pesos and 20 units
D. 25 pesos and 30 units respectively.
42. If the price is set at P50 per unit, the market condition is _____________ the gap is __________ units.
A. shortage; –20 C. shortage; –110
B. surplus; 90 D. surplus; 110
43. If price increases from P10 to P15, demand for good X is considered to be _________ and the price
elasticity coefficient is valued at
A. perfectly inelastic; 0. C. unit elastic; 1.
B. inelastic; 0.45. D. elastic; 1.45.
44. With an increase in the price from P10 to P15, total revenue will
A. decrease. C. not change.
B. increase. D. indeterminate.
45. Assuming the elasticity of demand for the good described in problem 54 applies, we would expect the
demand curve to be
A. steep. C. vertical.
B. flat. D. horizontal.
46. The price elasticity of supply coefficient is ________ at the price range of P10 and P15.
A. 16.67 B. 0.66 C. 166 D. 1.67

I. PROBLEMS: Show all necessary computations.

1. The manager of a sole distributorship for a famous brand of automobiles was discussing with the
assistant manager the planned introduction by mid-year of a new model, the XP-60. It was decided
earlier that the price be set at P400,000, at which level the total number of units sold was estimated at
500 units annually. The assistant manager has suggested that the price should be set at a somewhat
lower level, say, at P360,000 in order to attract a major segment of the non-targeted market. At this
lower price, 1,000 units are expected to be sold.

A. Formulate the firm’s linear demand equation for the product given the estimates and projections
made.
B. Determine the total revenue (TR) function and the marginal revenue (MR) function.
C. Calculate marginal revenue at the originally proposed price and at the recommended lower price.
What do these values mean to the firm?
D. Will total revenue increase as a result of the decision to reduce the price? If so, by how much?
E. What is the (point) price elasticity of demand at price P400,000? At P360,000?
F. What is the arc price elasticity of demand between these two prices?
Present your answer in this manner: (encoded or handwritten)
Test I

1 16 31
2 17 32 46
3 18 33 47
4 19 34 48
5 20 35 49
50
6 21 36
7 22 37 51
8 23 38 52
9 24 39 53
10 25 40 54
55
11 26 41
12 27 42 56
13 28 43 57
14 29 44
15 30 45

Test II. (you can use more than 1 page if necessary)