MBA 701 week 1 Exam Questions with Correct Answers Latest Update 2025-2026
Economics - Answers the study of how individuals, institutions, commercial enterprises,
countries, and governments allocate scarce resources amongst competing uses
scarcity - Answers the output of goods and services is limited bc of the supply of productive
inputs and other resources needed for their production is finite
opportunity cost - Answers highest-valued alternative foregone when a choice is made
managerial economics - Answers application of economic principles to topics of concern to
managers
managerial economics combines - Answers the various business disciplines (acct, fin, market,
manage) with quantitative methods ( optimization analysis, game theory, statistics, forecasting)
to find optimal solutions to business problems
strategic behavior - Answers decisions made by an individual or group affect and are affected
by the decisions of other individuals or groups
game theory - Answers the study of strategic behavior
quantitative methods - Answers include mathematical tools and techniques of analysis-
optimization analysis, statistical methods, forecasting and game theory
role of a manager - Answers responsible for making the day-to-day operational and long run
strategic decisions that determine a company's success or failure
production function - Answers is assumed to exhibit certain desirable mathematical properties
like the law of diminishing returns, returns to scale and substitutability between and among
productive inputs
law of diminishing returns - Answers principle stating that profits or benefits gained from
something will represent a proportionally smaller gain as more money or energy is invested
returns to scale - Answers refers to the proportionality of changes in output after amounts of all
inputs in production have been changed by the same factor
interest rate - Answers price paid for the use of borrowed funds
discount rate - Answers used to determine present value
is a dollar today worth more than a dollar tomorrow? - Answers yes, a dollar today can be
reinvested at some interest rate to yield an even greater amount tomorrow
net present value - Answers difference between the present value of cash inflows and cash
outflows
, total revenue - Answers equal to prices times the number of units sold
total profit - Answers can be defined as total revenue earned from the sale of a good or service
sold minus the total cost incurred from its production
explicit costs are also called - Answers accounting costs and out of pocket expenses
explicit costs include - Answers wages paid to workers and raw materials suppliers
total economic cost (TC) - Answers includes all relevant opportunity costs which is the market
value of all resources used in the production process- both implicit and explicit
implicit costs - Answers represent the value of resources used in the production process for
which no direct payment is made
accounting profit - Answers the difference between total revenue and total explicit(accounting)
cost
economic profit - Answers difference between total revenue and total economic cost- which is
the sum of total explicit costs and total implicit costs
normal profit - Answers the minimum rate of return necessary to keep shareholders from pulling
their investment in search of a higher rate of return elsewhere
normal rate of return - Answers next best alternative investment of equivalent risk
total operating cost - Answers includes expenditures relating to a firm's ongoing operations
total variable cost (total operating cost) - Answers represents that portion of the firm's total
cost that vary with the level of output
operating profit - Answers the difference between total revenue and total operating (variable)
cost, is the firm's net income from its ongoing operations
market power - Answers ability of a firm to raise and maintain price above the level that would
prevail under competition
rationing function of prices - Answers guarantees that the quantity purchased is equal to
quantity available, 2- it ensures that the buyers who consume the good are the ones who value it
the most
financial markets - Answers stocks, bond, foreign exchange markets
financial intermediaries - Answers commercial banks, savings banks, and insurance companies
financial instrument - Answers its a tradable claim on the issuers future income or assets such
as common stock and bonds
Economics - Answers the study of how individuals, institutions, commercial enterprises,
countries, and governments allocate scarce resources amongst competing uses
scarcity - Answers the output of goods and services is limited bc of the supply of productive
inputs and other resources needed for their production is finite
opportunity cost - Answers highest-valued alternative foregone when a choice is made
managerial economics - Answers application of economic principles to topics of concern to
managers
managerial economics combines - Answers the various business disciplines (acct, fin, market,
manage) with quantitative methods ( optimization analysis, game theory, statistics, forecasting)
to find optimal solutions to business problems
strategic behavior - Answers decisions made by an individual or group affect and are affected
by the decisions of other individuals or groups
game theory - Answers the study of strategic behavior
quantitative methods - Answers include mathematical tools and techniques of analysis-
optimization analysis, statistical methods, forecasting and game theory
role of a manager - Answers responsible for making the day-to-day operational and long run
strategic decisions that determine a company's success or failure
production function - Answers is assumed to exhibit certain desirable mathematical properties
like the law of diminishing returns, returns to scale and substitutability between and among
productive inputs
law of diminishing returns - Answers principle stating that profits or benefits gained from
something will represent a proportionally smaller gain as more money or energy is invested
returns to scale - Answers refers to the proportionality of changes in output after amounts of all
inputs in production have been changed by the same factor
interest rate - Answers price paid for the use of borrowed funds
discount rate - Answers used to determine present value
is a dollar today worth more than a dollar tomorrow? - Answers yes, a dollar today can be
reinvested at some interest rate to yield an even greater amount tomorrow
net present value - Answers difference between the present value of cash inflows and cash
outflows
, total revenue - Answers equal to prices times the number of units sold
total profit - Answers can be defined as total revenue earned from the sale of a good or service
sold minus the total cost incurred from its production
explicit costs are also called - Answers accounting costs and out of pocket expenses
explicit costs include - Answers wages paid to workers and raw materials suppliers
total economic cost (TC) - Answers includes all relevant opportunity costs which is the market
value of all resources used in the production process- both implicit and explicit
implicit costs - Answers represent the value of resources used in the production process for
which no direct payment is made
accounting profit - Answers the difference between total revenue and total explicit(accounting)
cost
economic profit - Answers difference between total revenue and total economic cost- which is
the sum of total explicit costs and total implicit costs
normal profit - Answers the minimum rate of return necessary to keep shareholders from pulling
their investment in search of a higher rate of return elsewhere
normal rate of return - Answers next best alternative investment of equivalent risk
total operating cost - Answers includes expenditures relating to a firm's ongoing operations
total variable cost (total operating cost) - Answers represents that portion of the firm's total
cost that vary with the level of output
operating profit - Answers the difference between total revenue and total operating (variable)
cost, is the firm's net income from its ongoing operations
market power - Answers ability of a firm to raise and maintain price above the level that would
prevail under competition
rationing function of prices - Answers guarantees that the quantity purchased is equal to
quantity available, 2- it ensures that the buyers who consume the good are the ones who value it
the most
financial markets - Answers stocks, bond, foreign exchange markets
financial intermediaries - Answers commercial banks, savings banks, and insurance companies
financial instrument - Answers its a tradable claim on the issuers future income or assets such
as common stock and bonds
