ECON 528 Midterm Exam Questions With
Correct Answers
Managerial |economics |is |best |defined |as |the |economic |study |of: |- |CORRECT |ANSWER✔✔-how
|businesses |can |decide |on |the |best |use |of |scarce |resources.
Managerial |economics |helps |managers |- |CORRECT |ANSWER✔✔-make |decisions |in |the |face |of |
scarcity.
Microeconomics |includes |the |study |of |the |- |CORRECT |ANSWER✔✔-choices |made |by |
individuals |and |businesses
The |form |of |economics |most |relevant |to |managerial |decision-making |within |the |firm |- |
CORRECT |ANSWER✔✔-microeconomics
CEOs |should |focus |on |- |CORRECT |ANSWER✔✔-maximizing |firm |profits.
Managerial |economics |generally |refers |to |the |integration |of |economic |theory |with |business |- |
CORRECT |ANSWER✔✔-Practice
A |managerial |decision |is |not |profitable |if |- |CORRECT |ANSWER✔✔-it |increases |costs |more |than
|revenue
According |to |the |profit-maximization |goal, |the |firm |should |attempt |to |maximize |short-run |
profits |since |there |is |too |much |uncertainty |associated |with |long-run |profits. |- |CORRECT |
ANSWER✔✔-. |False
,Why |is |it |useful |to |study |Managerial |Economics? |- |CORRECT |ANSWER✔✔-Studying |and |
understanding |Managerial |Economics |is |important |to |make |crucial |business |decisions |to |
maximize |profit |and |create |value |for |the |product |or |service |one |is |providing. |By |blending |
economic |theory |and |empirical |data, |managers |can |understand |the |"how" |and |"why" |a |certain
|business |decision |will |maximize |wealth. |Once |managers |understand |this |reasoning |behind |
economic |theories, |they |can |use |data |to |refine |the |theory |aspect |of |managerial |economics |to |
better |fit |their |business, |yielding |continuous |improved |decisions |and |ultimately |the |most |
desirable |results. |This |helps |managers |to |create |value. |Consumers, |just |like |firms, |have |scare |
resources. |Consumers |will |invest |their |resources |in |the |product |or |service |that |meets |their |
needs |with |the |greatest |value. |Understanding |managerial |economics |gives |managers |an |edge |
in |creating |value |for |their |products.
Why |can |Managerial |Economics |be |applied |to |any |business |decision |making |process, |
regardless |of |the |industry? |- |CORRECT |ANSWER✔✔-Managerial |Economics |is |applicable |to |
different |types |of |organizations |like |for-profit |firms, |not-for |profit-firms, |and |government |
agencies. |All |of |these |types |of |organizations |provide |goods |and |services, |even |though |they |do |
not |all |have |the |same |objectives |when |it |comes |to |maximizing |wealth. |According |to |the |text,
|"[economic] |models |are |simplified |representations |of |a |real-world |organization |and |its |
environment" |and |managers |can |use |these |models |to |make |decisions |in |a |timely |and |cost |
effective |manner. |The |models |to |do |match |every |detail |of |an |organization |so, |although |the |
over |arching |objectives |may |be |different |from |firm |to |firm, |business |transactions |generally |
conform |to |similar |standards |and |processes. |A |model |can |be |used |to |redirect |the |outcome |of |
a |decision |and |it |does |not |judge |wether |the |outcome |does/does |not |support |the |organizations
|objectives.
Microeconomics |studies |the |allocation |of |- |CORRECT |ANSWER✔✔-scarce |resources
Microeconomic |models |are |used |to |- |CORRECT |ANSWER✔✔-make |predictions.
explain |real-life |phenomena.
evaluate |production |alternatives.
Managerial |Economics |as |a |specialized |branch |of |Economics |- |CORRECT |ANSWER✔✔-Provide |
logic |and |methodology |to |find |solutions |to |business |problems
, Unlike |an |accountant, |an |economist |measures |costs |on |a(n) |________ |basis |- |CORRECT |
ANSWER✔✔-replacement
When |an |economist |uses |the |term |"cost" |referring |to |a |firm, |the |economist |refers |to |the |- |
CORRECT |ANSWER✔✔-opportunity |cost |of |producing |a |good |or |service, |which |includes |both |
implicit |and |explicit |cost
Accounting |costs |- |CORRECT |ANSWER✔✔-are |historical |costs
A |firm |earns |a |normal |profit |when |its |total |revenues |just |offset |both |the |________ |cost |and |
________ |cost. |- |CORRECT |ANSWER✔✔-accounting; |opportunity
If |Melissa |owns |a |software |company |that |incurs |no |fixed |costs, |then |- |CORRECT |ANSWER✔✔-
her |total |cost |equals |her |total |variable |cost
In |the |short |run, |a |firm |cannot |change |the |amount |of |capital |it |uses. |Therefore |the |cost |of |
capital |is |a |- |CORRECT |ANSWER✔✔-fixed |cost.
Because |the |amount |of |labor |a |firm |employs |can |be |changed, |the |cost |of |labor |is |known |as |- |
CORRECT |ANSWER✔✔-variable |cost.
Marginal |cost |equals |- |CORRECT |ANSWER✔✔-the |change |in |total |cost |that |results |from |a |one-
unit |increase |in |output
Lauren |runs |a |chili |restaurant |in |San |Francisco. |Her |total |revenue |last |year |was |$110,000. |The |
rent |on |her |restaurant |was |$48,000, |her |labor |costs |were |$42,000, |and |her |materials, |food |
and |other |variable |costs |were |$20,000. |Lauren |could |have |worked |as |a |biologist |and |earned |
$50,000 |per |year. |An |economist |calculates |her |implicit |costs |as |- |CORRECT |ANSWER✔✔-
$50,000
Correct Answers
Managerial |economics |is |best |defined |as |the |economic |study |of: |- |CORRECT |ANSWER✔✔-how
|businesses |can |decide |on |the |best |use |of |scarce |resources.
Managerial |economics |helps |managers |- |CORRECT |ANSWER✔✔-make |decisions |in |the |face |of |
scarcity.
Microeconomics |includes |the |study |of |the |- |CORRECT |ANSWER✔✔-choices |made |by |
individuals |and |businesses
The |form |of |economics |most |relevant |to |managerial |decision-making |within |the |firm |- |
CORRECT |ANSWER✔✔-microeconomics
CEOs |should |focus |on |- |CORRECT |ANSWER✔✔-maximizing |firm |profits.
Managerial |economics |generally |refers |to |the |integration |of |economic |theory |with |business |- |
CORRECT |ANSWER✔✔-Practice
A |managerial |decision |is |not |profitable |if |- |CORRECT |ANSWER✔✔-it |increases |costs |more |than
|revenue
According |to |the |profit-maximization |goal, |the |firm |should |attempt |to |maximize |short-run |
profits |since |there |is |too |much |uncertainty |associated |with |long-run |profits. |- |CORRECT |
ANSWER✔✔-. |False
,Why |is |it |useful |to |study |Managerial |Economics? |- |CORRECT |ANSWER✔✔-Studying |and |
understanding |Managerial |Economics |is |important |to |make |crucial |business |decisions |to |
maximize |profit |and |create |value |for |the |product |or |service |one |is |providing. |By |blending |
economic |theory |and |empirical |data, |managers |can |understand |the |"how" |and |"why" |a |certain
|business |decision |will |maximize |wealth. |Once |managers |understand |this |reasoning |behind |
economic |theories, |they |can |use |data |to |refine |the |theory |aspect |of |managerial |economics |to |
better |fit |their |business, |yielding |continuous |improved |decisions |and |ultimately |the |most |
desirable |results. |This |helps |managers |to |create |value. |Consumers, |just |like |firms, |have |scare |
resources. |Consumers |will |invest |their |resources |in |the |product |or |service |that |meets |their |
needs |with |the |greatest |value. |Understanding |managerial |economics |gives |managers |an |edge |
in |creating |value |for |their |products.
Why |can |Managerial |Economics |be |applied |to |any |business |decision |making |process, |
regardless |of |the |industry? |- |CORRECT |ANSWER✔✔-Managerial |Economics |is |applicable |to |
different |types |of |organizations |like |for-profit |firms, |not-for |profit-firms, |and |government |
agencies. |All |of |these |types |of |organizations |provide |goods |and |services, |even |though |they |do |
not |all |have |the |same |objectives |when |it |comes |to |maximizing |wealth. |According |to |the |text,
|"[economic] |models |are |simplified |representations |of |a |real-world |organization |and |its |
environment" |and |managers |can |use |these |models |to |make |decisions |in |a |timely |and |cost |
effective |manner. |The |models |to |do |match |every |detail |of |an |organization |so, |although |the |
over |arching |objectives |may |be |different |from |firm |to |firm, |business |transactions |generally |
conform |to |similar |standards |and |processes. |A |model |can |be |used |to |redirect |the |outcome |of |
a |decision |and |it |does |not |judge |wether |the |outcome |does/does |not |support |the |organizations
|objectives.
Microeconomics |studies |the |allocation |of |- |CORRECT |ANSWER✔✔-scarce |resources
Microeconomic |models |are |used |to |- |CORRECT |ANSWER✔✔-make |predictions.
explain |real-life |phenomena.
evaluate |production |alternatives.
Managerial |Economics |as |a |specialized |branch |of |Economics |- |CORRECT |ANSWER✔✔-Provide |
logic |and |methodology |to |find |solutions |to |business |problems
, Unlike |an |accountant, |an |economist |measures |costs |on |a(n) |________ |basis |- |CORRECT |
ANSWER✔✔-replacement
When |an |economist |uses |the |term |"cost" |referring |to |a |firm, |the |economist |refers |to |the |- |
CORRECT |ANSWER✔✔-opportunity |cost |of |producing |a |good |or |service, |which |includes |both |
implicit |and |explicit |cost
Accounting |costs |- |CORRECT |ANSWER✔✔-are |historical |costs
A |firm |earns |a |normal |profit |when |its |total |revenues |just |offset |both |the |________ |cost |and |
________ |cost. |- |CORRECT |ANSWER✔✔-accounting; |opportunity
If |Melissa |owns |a |software |company |that |incurs |no |fixed |costs, |then |- |CORRECT |ANSWER✔✔-
her |total |cost |equals |her |total |variable |cost
In |the |short |run, |a |firm |cannot |change |the |amount |of |capital |it |uses. |Therefore |the |cost |of |
capital |is |a |- |CORRECT |ANSWER✔✔-fixed |cost.
Because |the |amount |of |labor |a |firm |employs |can |be |changed, |the |cost |of |labor |is |known |as |- |
CORRECT |ANSWER✔✔-variable |cost.
Marginal |cost |equals |- |CORRECT |ANSWER✔✔-the |change |in |total |cost |that |results |from |a |one-
unit |increase |in |output
Lauren |runs |a |chili |restaurant |in |San |Francisco. |Her |total |revenue |last |year |was |$110,000. |The |
rent |on |her |restaurant |was |$48,000, |her |labor |costs |were |$42,000, |and |her |materials, |food |
and |other |variable |costs |were |$20,000. |Lauren |could |have |worked |as |a |biologist |and |earned |
$50,000 |per |year. |An |economist |calculates |her |implicit |costs |as |- |CORRECT |ANSWER✔✔-
$50,000
