ECON 528 Midterm | Questions with 100% Verified Answers |
Latest Update 2026/2027
Question: Managerial economics is best defined as the economic study
of:
Answer:
how businesses can decide on the best use of scarce resources.
Question: Managerial economics helps managers
Answer:
make decisions in the face of scarcity.
Question: Microeconomics includes the study of the
Answer:
choices made by individuals and businesses
Question: The form of economics most relevant to managerial decision-
making within the firm
Answer:
microeconomics
Question: CEOs should focus on
Answer:
maximizing firm profits.
Question: Managerial economics generally refers to the integration of
economic theory with business
Answer:
Practice
Question: A managerial decision is not profitable if
Answer:
it increases costs more than revenue
,Question: 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
Question: 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.
Question: 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.
Question: Microeconomics studies the allocation of
Answer:
scarce resources
Question: Microeconomic models are used to
Answer:
make predictions.
explain real-life phenomena.
evaluate production alternatives.
, Question: Managerial Economics as a specialized branch of Economics
Answer:
Provide logic and methodology to find solutions to business problems
Question: Unlike an accountant, an economist measures costs on a(n)
________ basis
Answer:
replacement
Question: 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
Question: Accounting costs
Answer:
are historical costs
Question: A firm earns a normal profit when its total revenues just offset
both the ________ cost and ________ cost.
Answer:
accounting; opportunity
Question: If Melissa owns a software company that incurs no fixed costs,
then
Answer:
her total cost equals her total variable cost
Question: In the short run, a firm cannot change the amount of capital it
uses. Therefore the cost of capital is a
Answer:
fixed cost.
Question: Because the amount of labor a firm employs can be changed,
the cost of labor is known as
Answer:
variable cost.
Latest Update 2026/2027
Question: Managerial economics is best defined as the economic study
of:
Answer:
how businesses can decide on the best use of scarce resources.
Question: Managerial economics helps managers
Answer:
make decisions in the face of scarcity.
Question: Microeconomics includes the study of the
Answer:
choices made by individuals and businesses
Question: The form of economics most relevant to managerial decision-
making within the firm
Answer:
microeconomics
Question: CEOs should focus on
Answer:
maximizing firm profits.
Question: Managerial economics generally refers to the integration of
economic theory with business
Answer:
Practice
Question: A managerial decision is not profitable if
Answer:
it increases costs more than revenue
,Question: 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
Question: 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.
Question: 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.
Question: Microeconomics studies the allocation of
Answer:
scarce resources
Question: Microeconomic models are used to
Answer:
make predictions.
explain real-life phenomena.
evaluate production alternatives.
, Question: Managerial Economics as a specialized branch of Economics
Answer:
Provide logic and methodology to find solutions to business problems
Question: Unlike an accountant, an economist measures costs on a(n)
________ basis
Answer:
replacement
Question: 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
Question: Accounting costs
Answer:
are historical costs
Question: A firm earns a normal profit when its total revenues just offset
both the ________ cost and ________ cost.
Answer:
accounting; opportunity
Question: If Melissa owns a software company that incurs no fixed costs,
then
Answer:
her total cost equals her total variable cost
Question: In the short run, a firm cannot change the amount of capital it
uses. Therefore the cost of capital is a
Answer:
fixed cost.
Question: Because the amount of labor a firm employs can be changed,
the cost of labor is known as
Answer:
variable cost.
