Managerial Economics and Business Strategy Midterm Questions And Answers
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Course
Managerial Economics and Business Strategy
Institution
Managerial Economics And Business Strategy
he production function Q = L^.5K^.5 is called
Cobb Douglas.
Leontief.
Linear.
none of the above.
~ Cobb Douglas.
The production function for a competitive firm is Q = K.5L.5. The firm sells its
output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at
25 units. T...
Managerial Economics and
Business Strategy Midterm
Questions And Answers
manager
✓~ A person who directs resources to achieve a stated goal.
Economics
✓~ The science of making decisions in the presence of scarce resources.
managerial economics
✓~ The study of how to direct scarce resources in the way that most efficiently
achieves a managerial goal.
economic profits
✓~ The difference between total revenue and total opportunity cost.
opportunity cost
, ✓~ The cost of the explicit and implicit resources that are forgone when a
decision is made.
incentives
✓~ Affect how resources are used and how hard workers work.
consumer-producer rivalry
✓~ Occurs because of the competing interests of consumers and producers.
consumer-consumer rivalry
✓~ Reduces the negotiating power of consumers in the marketplace.
producer-producer rivalry
✓~ Functions only when multiple sellers of a product compete in the
marketplace.
present value
✓~ The amount that would have to be invested today at the prevailing interest
rate to generate the given future value.
,net present value
✓~ The present value of the income stream generated by a product minus the
current cost of the project.
value of a firm
✓~ Takes into account the long-term impact of managerial decisions on profits.
managerial analysis
✓~ States that optimal managerial decisions involve comparing the marginal (or
incremental) benefits of a decision with the marginal (or incremental) costs.
marginal benefit
✓~ The change in total benefits arising form a change in the managerial control
variable, Q.
marginal cost
✓~ The change in total costs arising from a change in the managerial control
variable, Q.
incremental revenues
, ✓~ The additional revenues that stem from a yes-or-no decision.
incremental costs
✓~ The additional costs that stem from a yes-or-no decision.
variable costs
✓~ Costs that change with changes in output; include the costs of inputs that
vary with output.
short-run cost function
✓~ A function that defines the minimum possible cost of producing each output
level when variable factors are employed in the cost-minimizing fashion.
average fixed cost
✓~ Fixed costs divided by the number of units of output.
average variable cost
✓~ Variable costs divided by the number of units of output.
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