Managerial economics is best defined as the economic study of - ANSWERSHow businesses can decide on the best use of scarce resources
Managerial economics: - ANSWERSHelps managers make decisions in the face of scarcity
Microeconomics includes the study of the - ANSWERSChoices made by individua...
UL ECON528 - Exam 1 Questions &
Answers
Managerial economics is best defined as the economic study of - ANSWERSHow
businesses can decide on the best use of scarce resources
Managerial economics: - ANSWERSHelps managers make decisions in the face of
scarcity
Microeconomics includes the study of the - ANSWERSChoices made by individuals and
businesses
The form of economics most relevant to managerial decision-making within the firm is -
ANSWERSMicroeconomics
CEOs should focus on - ANSWERSMaximizing firm profits
Managerial economics generally refers to the integration of economic theory with
business - ANSWERSPractice
A managerial decision is not profitable if - ANSWERSIt increases costs more than
revenue
(T/F) 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 -
ANSWERSFalse
Unlike an accountant, an economist measures costs on a ______ basis -
ANSWERSReplacement
When an economist uses the term "cost" referring to a firm, the economist refers to the -
ANSWERSOpportunity cost of producing a good or service, which includes both implicit
and explicit cost
Accounting consts - ANSWERSAre historical costs
A firm earns a normal profit when its total revenues just offset both the ______ cost and
______ cost - ANSWERSAccounting; opportunity
If Melissa owns a software company that incurs no fixed costs, then - ANSWERSHer
total cost equals her total variable cost
, In the short run, a firm cannot change the amount of capital it uses. Therefore the cost
of capital is a - ANSWERSFixed cost
Because the amount of labor a firm emplys can be changed, the cost of labor is known
as a - ANSWERSVariable cost
Marginal cost equals - ANSWERSThe change in total cost that results from a one-unit
increase in output
Lauren runs a chili restaurant in San Francisco. Her total revenue last year was
$110,000. The rent on her restaurant was $48,000, her labor costs were $42,000, and
her materials, food and other variable costs were $20,000. Lauren could have worked
as a biologist and earned $50,000 per year. An economist calculates her implicit costs
as - ANSWERS$50,000; The amount she could have earned but is missing out on
A factor of production that can be easily changed in the relevant time period is called a -
ANSWERSVariable input
Golda Rush quit her job as a manager for Home Depot to start her own hair dressing
salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of
$30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close
friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000
to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on
equipment and hairdressing material. Based on this information, what is the amount of
her implicit costs? - ANSWERS$41,500; The salary she gave up plus the $1,500
interest she was earning annually from her savings
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio."
Membership at his fitness center is very low and at this rate, Adam needs an additional
$12,000 per year to keep his studio open. Which of the following is true? -
ANSWERSThe $10,000 Adam spent on equipment is a fixed cost of business and the
$12,000 he'll need to continue operations is a variable cost
Which of the following is the best example of a short run adjustment? - ANSWERSA
local Wal-Mart hiring two more associates
If the price of music downloads was to decrease, then - ANSWERSThe demand for
MP3 players would increase
A change in all of the following variables will change the market demand for a product
except - ANSWERSThe price of the product. Income, tastes, and population and
demographics will change demand
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