LSUS MBA 701: Economic Analysis for
Management
Exam 1 Comprehensive Question Bank & Study Guide
100% CORRECT VERIFIED ANSWERS — 2025/2026 EDITION
Section 1: Foundational Concepts & Managerial Economics
Q1: What is a manager?
Someone who directs resources to achieve a goal. A manager directs the efforts of others, purchases
inputs used in the production of the firm's output, directs choices regarding product pricing and quality,
and constructs incentives to induce maximal effort from employees.
Q2: What is the formal definition of economics?
The science of making decisions in the presence of scarce resources.
Q3: What is the relationship between scarcity and decision-making?
Scarcity implies trade-offs. Decisions are crucial because resources are limited, and choosing one
option requires giving up another.
Q4: What is managerial economics?
The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
Examples include determining how many employees to hire, how to structure compensation, what price
to sell a product at, and whether to "make or buy" product components.
Q5: What are the 7 principles of effective managerial decision-making?
1. Identify goals and constraints
2. Recognize the nature and importance of profits
3. Understand incentives
4. Understand markets
5. Recognize the time value of money
6. Use marginal analysis
7. Make data-driven decisions
LSUS MBA 701 Exam 1 Study Guide Page 1 of 6
, Q6: What should a firm's primary, overarching goal be?
To maximize profits (specifically, the value of the firm).
Q7: What are common examples of structural constraints a firm faces?
Available technology, legal limitations, and the prices of inputs used in production.
Q8: Differentiate between Accounting Profit and Economic Profit.
Accounting Profit: The total amount of money earned from sales (revenue) minus the explicit dollar
cost of producing the goods or services.
Economic Profit: The difference between total revenue and total opportunity cost (explicit plus implicit
costs).
Q9: What is opportunity cost?
The explicit cost of a resource plus the implicit cost of giving up its best alternative use.
Q10: What is the macroeconomic role of profits in society?
Profits serve as a market signal. They signal to resource holders where resources are most highly
valued by society.
Q11: What do internal incentives impact within an organization?
Incentives dictate how resources are used and how hard employees work.
Section 2: Time Value of Money & Present Value Analysis
Q12: Why do managers utilize present value (PV) analysis?
To properly account for the timing of receipts and expenditures, given that a gap often exists between
when costs are incurred and when benefits/revenues are realized.
LSUS MBA 701 Exam 1 Study Guide Page 2 of 6
Management
Exam 1 Comprehensive Question Bank & Study Guide
100% CORRECT VERIFIED ANSWERS — 2025/2026 EDITION
Section 1: Foundational Concepts & Managerial Economics
Q1: What is a manager?
Someone who directs resources to achieve a goal. A manager directs the efforts of others, purchases
inputs used in the production of the firm's output, directs choices regarding product pricing and quality,
and constructs incentives to induce maximal effort from employees.
Q2: What is the formal definition of economics?
The science of making decisions in the presence of scarce resources.
Q3: What is the relationship between scarcity and decision-making?
Scarcity implies trade-offs. Decisions are crucial because resources are limited, and choosing one
option requires giving up another.
Q4: What is managerial economics?
The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
Examples include determining how many employees to hire, how to structure compensation, what price
to sell a product at, and whether to "make or buy" product components.
Q5: What are the 7 principles of effective managerial decision-making?
1. Identify goals and constraints
2. Recognize the nature and importance of profits
3. Understand incentives
4. Understand markets
5. Recognize the time value of money
6. Use marginal analysis
7. Make data-driven decisions
LSUS MBA 701 Exam 1 Study Guide Page 1 of 6
, Q6: What should a firm's primary, overarching goal be?
To maximize profits (specifically, the value of the firm).
Q7: What are common examples of structural constraints a firm faces?
Available technology, legal limitations, and the prices of inputs used in production.
Q8: Differentiate between Accounting Profit and Economic Profit.
Accounting Profit: The total amount of money earned from sales (revenue) minus the explicit dollar
cost of producing the goods or services.
Economic Profit: The difference between total revenue and total opportunity cost (explicit plus implicit
costs).
Q9: What is opportunity cost?
The explicit cost of a resource plus the implicit cost of giving up its best alternative use.
Q10: What is the macroeconomic role of profits in society?
Profits serve as a market signal. They signal to resource holders where resources are most highly
valued by society.
Q11: What do internal incentives impact within an organization?
Incentives dictate how resources are used and how hard employees work.
Section 2: Time Value of Money & Present Value Analysis
Q12: Why do managers utilize present value (PV) analysis?
To properly account for the timing of receipts and expenditures, given that a gap often exists between
when costs are incurred and when benefits/revenues are realized.
LSUS MBA 701 Exam 1 Study Guide Page 2 of 6
