ECON 528 Midterm Exam QUESTIONS
AND CORRECT ANSWERS
Managerial economics is best defined as the economic study of:
a. how businesses can sell the most products.
b. how businesses can operate at the lowest costs.
c. how businesses can decide on the best use of scarce resources.
d. how businesses can make the most profits. - CORRECT ANSWER c. how businesses can
decide on the best use of scarce resources.
Managerial economics:
a. describes how pay for managers is set.
b. helps managers make decisions in the face of scarcity.
c. explains which products consumers will buy.
d. ensures managers always make good decisions. - CORRECT ANSWER b. helps managers
make decisions in the face of scarcity.
Microeconomics includes the study of the:
a. aggregate effects on the national economy.
b. choices made by individuals and businesses.
c. reasons why the government changes interest rates.
d. nationwide unemployment rate.
e. recessions and inflation in the global economy. - CORRECT ANSWER b. choices made by
individuals and businesses
The form of economics most relevant to managerial decision-making within the firm is:
a. welfare economics
b. macroeconomics
c. free-enterprise economics
d. microeconomics - CORRECT ANSWER d. microeconomics
,CEOs should focus on:
a. beating their competitors.
b. getting the best pay package for the senior management team.
c. maximizing firm profits.
d. minimizing costs. - CORRECT ANSWER c. maximizing firm profits.
Managerial economics generally refers to the integration of economic theory with business
_________
A. Ethics
B. Practice
C. Management
D. All of the above - CORRECT ANSWER B. Practice
A managerial decision is not profitable if:
A. if increases revenue more than costs.
B. it increases some revenues more than it decreases others.
C. it increases costs more than revenue.
D. it decreases some costs more than it increases others. - CORRECT ANSWER C. it increases
costs more than revenue
(True or False) 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 - help with making
crucial business decisions
- maximize profits
- create value for the product or service provided
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:
A) decision makers.
B) scarce resources.
C) models.
D) unlimited resources. - CORRECT ANSWER scarce resources
Microeconomic models are used to:
A) make predictions.
B) explain real-life phenomena.
C) evaluate production alternatives.
D) All of the above. - CORRECT ANSWER All:
make predictions.
explain real-life phenomena.
evaluate production alternatives.
Managerial Economics as a specialized branch of Economics that:
Provide ready-made solutions to business problems
b. Provide logic and methodology to find solutions to business problems
c. provide alternative answers to specific business problems.
d. Provide theoretical background to analyze business problem - CORRECT ANSWER b.
Provide logic and methodology to find solutions to business problems
Unlike an accountant, an economist measures costs on a(n) ________ basis:
a. conservative
b. historical
, c. replacement
d. explicit - CORRECT ANSWER c. replacement
When an economist uses the term "cost" referring to a firm, the economist refers to the:
a. explicit cost of producing a good or service but not the implicit cost of producing a good or service.
b. price of the good to the consumer.
c. opportunity cost of producing a good or service, which includes both implicit and explicit cost.
d. cost that can be actually verified and measured.
e. implicit cost of producing a good or service but not the explicit cost of producing a good or service.
- CORRECT ANSWER c. opportunity cost of producing a good or service, which includes
both implicit and explicit cost
Accounting costs are based on:
a. usually include normal profits.
b. historical costs.
c. usually include implicit costs.
d. are replacements costs. - CORRECT ANSWER b. historical costs
A firm earns a normal profit when its total revenues just offset both the ________ cost and ________
cost.
a. historical; replacement
b. explicit; accounting
c. accounting; replacement
d. accounting; opportunity - CORRECT ANSWER d. accounting; opportunity
If Melissa owns a software company that incurs no fixed costs, then:
a. her marginal cost must equal zero.
b. her total variable cost is less than her total cost.
c. her total cost equals zero.
d. her total cost equals her total variable cost.
e. she will earn an economic profit. - CORRECT ANSWER d. her total cost equals her total
variable cost.
AND CORRECT ANSWERS
Managerial economics is best defined as the economic study of:
a. how businesses can sell the most products.
b. how businesses can operate at the lowest costs.
c. how businesses can decide on the best use of scarce resources.
d. how businesses can make the most profits. - CORRECT ANSWER c. how businesses can
decide on the best use of scarce resources.
Managerial economics:
a. describes how pay for managers is set.
b. helps managers make decisions in the face of scarcity.
c. explains which products consumers will buy.
d. ensures managers always make good decisions. - CORRECT ANSWER b. helps managers
make decisions in the face of scarcity.
Microeconomics includes the study of the:
a. aggregate effects on the national economy.
b. choices made by individuals and businesses.
c. reasons why the government changes interest rates.
d. nationwide unemployment rate.
e. recessions and inflation in the global economy. - CORRECT ANSWER b. choices made by
individuals and businesses
The form of economics most relevant to managerial decision-making within the firm is:
a. welfare economics
b. macroeconomics
c. free-enterprise economics
d. microeconomics - CORRECT ANSWER d. microeconomics
,CEOs should focus on:
a. beating their competitors.
b. getting the best pay package for the senior management team.
c. maximizing firm profits.
d. minimizing costs. - CORRECT ANSWER c. maximizing firm profits.
Managerial economics generally refers to the integration of economic theory with business
_________
A. Ethics
B. Practice
C. Management
D. All of the above - CORRECT ANSWER B. Practice
A managerial decision is not profitable if:
A. if increases revenue more than costs.
B. it increases some revenues more than it decreases others.
C. it increases costs more than revenue.
D. it decreases some costs more than it increases others. - CORRECT ANSWER C. it increases
costs more than revenue
(True or False) 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 - help with making
crucial business decisions
- maximize profits
- create value for the product or service provided
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:
A) decision makers.
B) scarce resources.
C) models.
D) unlimited resources. - CORRECT ANSWER scarce resources
Microeconomic models are used to:
A) make predictions.
B) explain real-life phenomena.
C) evaluate production alternatives.
D) All of the above. - CORRECT ANSWER All:
make predictions.
explain real-life phenomena.
evaluate production alternatives.
Managerial Economics as a specialized branch of Economics that:
Provide ready-made solutions to business problems
b. Provide logic and methodology to find solutions to business problems
c. provide alternative answers to specific business problems.
d. Provide theoretical background to analyze business problem - CORRECT ANSWER b.
Provide logic and methodology to find solutions to business problems
Unlike an accountant, an economist measures costs on a(n) ________ basis:
a. conservative
b. historical
, c. replacement
d. explicit - CORRECT ANSWER c. replacement
When an economist uses the term "cost" referring to a firm, the economist refers to the:
a. explicit cost of producing a good or service but not the implicit cost of producing a good or service.
b. price of the good to the consumer.
c. opportunity cost of producing a good or service, which includes both implicit and explicit cost.
d. cost that can be actually verified and measured.
e. implicit cost of producing a good or service but not the explicit cost of producing a good or service.
- CORRECT ANSWER c. opportunity cost of producing a good or service, which includes
both implicit and explicit cost
Accounting costs are based on:
a. usually include normal profits.
b. historical costs.
c. usually include implicit costs.
d. are replacements costs. - CORRECT ANSWER b. historical costs
A firm earns a normal profit when its total revenues just offset both the ________ cost and ________
cost.
a. historical; replacement
b. explicit; accounting
c. accounting; replacement
d. accounting; opportunity - CORRECT ANSWER d. accounting; opportunity
If Melissa owns a software company that incurs no fixed costs, then:
a. her marginal cost must equal zero.
b. her total variable cost is less than her total cost.
c. her total cost equals zero.
d. her total cost equals her total variable cost.
e. she will earn an economic profit. - CORRECT ANSWER d. her total cost equals her total
variable cost.
