MCQS ON APPLICATION OF THEORY OF PRODUCTION IN MANAGERIAL DECISION-MAKING1. Production efficiency: A.

Occurs when consumers derive the greatest utility from the Purchase of goods and services. B. Answers the three basic economic questions of what, how, and for whom. C. Refers to least cost production technology. 2. Which of the following represent scarce productive resources? A. Land, technology, labour, organizational skills. B. Land, labour, investment, managerial ability. C. Land, capital, natural resources, executive skills. D. Land, labour, capital, entrepreneurial ability. 3. The eld of economics that is most relevant to the managerial Decision making process is: A. Macroeconomics. B. Microeconomics. C. Labour economics. D. International economics. 4. The prot motive is important because: A. It is the signalling mechanism for the dynamic reallocation of Societys scarce productive resources. B. It encourages unethical behaviour by shareholders. C. It discourages monopolistic markets. D. It promotes the equitable distribution of income in an economy.

5. Quantitative methods: A. Refer to the tools and techniques of economic analysis. B. Include optimization analysis and statistical methods. C. Include game theory and capital budgeting. D. All of the above. 6. Economic prot is: A. Total revenue minus total cost. B. Total economic revenue minus total economic cost. C. Total revenue minus total economic cost. D. Total revenue minus total explicit cost. 7. Market processes: A. Rely on the intervention of government regulators to answer Three basic economic questions. B. Summarize the interaction of supply and demand to answer the Three basic economic questions. C. Are only possible with barter transactions. D. Use custom and tradition to answer the three basic economic questions. 8. Total economic costs is: A. Total out-of-pocket expenses. B. The sum of all identiable explicit costs. C. Total explicit and total implicit costs. D. Total accounting costs.

9. In the long run, a profit-maximizing firm will choose to exit a market when A. fixed costs exceed sunk costs. B. average fixed cost is rising. C. revenue from production is less than total costs. D. marginal cost exceeds marginal revenue at the current level of production. 10. Which of the following is not a property of isoquants? A. Isoquants never intersect each other. B. Isoquants are concave to the origin. C. Isoquants slope downwards. D. None of the above. 11. The marginal rate of technical substitution is A. the rate at which a producer is able to exchange, without affecting the quantity of output produced, a little bit of one input for a little bit of another input. B. the rate at which a producer is able to exchange, without affecting the total cost of inputs, a little bit of one input for a little bit of another input. C. the rate at which a producer is able to exchange, without affecting the total inputs used, a little bit of one output for a little bit of another output. D. a measure of the ease or difficulty with which a producer can substitute one technique of production for another. 12. A negatively sloped isoquant implies A. products with negative marginal utilities. B. products with positive marginal utilities. C. inputs with negative marginal products.

D. inputs with positive marginal products. 13. If a simultaneous and equal percentage decrease in the use of all physical inputs leads to a larger percentage decrease in physical output, a firms production function is said to exhibit A. decreasing returns to scale. B. constant returns to scale. C. increasing returns to scale. D. diseconomies of scale. 14. Suppose a firm is using two inputs, labour and capital. What will happen if the price of labour falls? A. The firms average cost curve will shift downward. B. The firms marginal cost curve will shift downward. C. To produce an unchanged output, the firm would use more labour. D. All of the above. 15. For a given short-run production function, A. technology is assumed to change as capital stock changes. B. technology is assumed to change as the labour input changes. C. technology is considered to be constant for a given production function relationship. D. technology is assumed to change positively until diminishing returns set in and then it changes in the other direction. 16. An isocost line identifies A. the least costly combination of inputs needed to produce a given level of output. B. the relative prices of inputs.

C. the technological relationships among inputs. D. the rate at which one input can be substituted for another in the production process. 17. Which is not a category of business decision, depending upon the functional areas of the managers? A. Production decision B. Personnel decision C. Environment decision D. Financial decision 18. Which is not a step in decision making process? A. Choosing best alternative B. Defining business problem C. Performing Sensitivity analysis D. None of the above. ANSWERS1. 2. 3. 4. 5. 6. 7. 8. 9. C D B A D C B C C 10. B 11. A 12. D 13. C 14. D 15. C 16. B 17. C 18. D