1_Introduction to Managerial Economics

Question 1

LO: ___ is the study of the production, distribution and consumption of goods and services and the choice related to the allocation of scarce resources.

Answer 1

Economics

Question 2

LO: ___ is a field of economics that places emphasis on the choice aspect of the allocation of scarce resources; it provides terminology and reasoning for it’s own improvement of decision making.

Answer 2

Managerial economics

Question 3

LO: ___ is the study of individual decision making entity such as a household (crucial for understanding behavior in an economy) or business while ___ is the study of decision-making on an economy scale (crucial for making managerial decisions).

Answer 3

Microeconomics**
Macroeconomics

**focus in managerial accounting

Question 4

LO: Describe managerial situations in which economic principles are especially helpful, and situations that do not yield themselves to economic analysis

Answer 4

How people decide what to buy (and from whom)
How much people decide to buy
How much firms decide to produce
How prices are determined (by firms and consumers)

Question 5

Managerial economics generally refers to the integration of economic theory with business

a. All of the above
b. Management
c. Practice
d. Ethics

Answer 5

c. Practice

Question 6

A managerial decision is not profitable if

a. it increases costs more than revenue
b. it increases revenue more than costs.
c. it increases some revenues more than it decreases others.
d. it decreases some cost more than it increases others.

Answer 6

a. it increases costs more than revenue

Question 7

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.

a. False
b. True

Answer 7

a. False

Profit maximization rule states that if a firm chooses to maximize its profits, it must choose that level of output where MC = MR

Question 8

Managerial economics is best defined as the economic study of:

a. how businesses can operate at the lowest costs.
b. how businesses can make the most profits.
c. how businesses can decide on the best use of scarce resources.
d. how businesses can sell the most products.

Answer 8

c. how businesses can decide on the best use of scarce resources

Question 9

Managerial economics:

a. ensures managers always make good decisions.
b. helps managers make decisions in the face of scarcity.
c. describes how pay for managers is set.
d. explains which products consumers will buy.

Answer 9

b. helps managers make decisions in the face of scarcity

Question 10

Microeconomics includes the study of the

a. recessions and inflation in the global economy.
b. nationwide unemployment rate.
c. choices made by individuals and businesses.
d. reasons why the government changes interest rates.
e. aggregate effects on the national economy.

Answer 10

c. choices made by individuals and businesses

Question 11

The form of economics most relevant to managerial decision-making within the firm is:

a. free-enterprise economics
b. macroeconomics
c. microeconomics
d. welfare economics

Answer 11

c. microeconomics

Question 12

CEOs should focus on

a. beating their competitors.
b. maximizing firm profits.
c. minimizing costs.
d. getting the best pay package for the senior management team.

Answer 12

b. maximizing firm profits