ECON 528 MIDTERM 187 QUESTIONS AND ANSWERS
WITH ACCURATE SOLUTION!!
Managerial economics is best defined as the economic study of: Answer - how
businesses can decide on the best use of scarce resources.
Managerial economics helps managers Answer - make decisions in the face of
scarcity.
Microeconomics includes the study of the Answer - choices made by
individuals and businesses
The form of economics most relevant to managerial decision-making within the
firm Answer - microeconomics
CEOs should focus on Answer - maximizing firm profits.
Managerial economics generally refers to the integration of economic theory
with business Answer - Practice
A managerial decision is not profitable if 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. Answer - . False
Why is it useful to study Managerial Economics? 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? 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 Answer - scarce resources
, Microeconomic models are used to Answer - make predictions.
explain real-life phenomena.
evaluate production alternatives.
Managerial Economics as a specialized branch of Economics Answer - Provide
logic and methodology to find solutions to business problems
Unlike an accountant, an economist measures costs on a(n) ________ basis
Answer - replacement
When an economist uses the term "cost" referring to a firm, the economist
refers to the Answer - opportunity cost of producing a good or service, which
includes both implicit and explicit cost
Accounting costs Answer - are historical costs
A firm earns a normal profit when its total revenues just offset both the
________ cost and ________ cost. Answer - accounting; opportunity
If Melissa owns a software company that incurs no fixed costs, then 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 Answer - fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor
is known as Answer - variable cost.
WITH ACCURATE SOLUTION!!
Managerial economics is best defined as the economic study of: Answer - how
businesses can decide on the best use of scarce resources.
Managerial economics helps managers Answer - make decisions in the face of
scarcity.
Microeconomics includes the study of the Answer - choices made by
individuals and businesses
The form of economics most relevant to managerial decision-making within the
firm Answer - microeconomics
CEOs should focus on Answer - maximizing firm profits.
Managerial economics generally refers to the integration of economic theory
with business Answer - Practice
A managerial decision is not profitable if 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. Answer - . False
Why is it useful to study Managerial Economics? 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? 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 Answer - scarce resources
, Microeconomic models are used to Answer - make predictions.
explain real-life phenomena.
evaluate production alternatives.
Managerial Economics as a specialized branch of Economics Answer - Provide
logic and methodology to find solutions to business problems
Unlike an accountant, an economist measures costs on a(n) ________ basis
Answer - replacement
When an economist uses the term "cost" referring to a firm, the economist
refers to the Answer - opportunity cost of producing a good or service, which
includes both implicit and explicit cost
Accounting costs Answer - are historical costs
A firm earns a normal profit when its total revenues just offset both the
________ cost and ________ cost. Answer - accounting; opportunity
If Melissa owns a software company that incurs no fixed costs, then 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 Answer - fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor
is known as Answer - variable cost.
