Managerial Economics Exam 1 - Assignment Essays

question

Manager

answer

person who directs resources to achieve a stated goal

question

Economics

answer

the science of making decisions in the presence of scarce resources

question

Resources

answer

anything used to produce a good or service

question

Managerial Economics

answer

study of how direct scarce resources in the way that most efficiently achieves a managerial goal

question

Effective Management

answer

identify goals and constraints, understand incentives

question

Nature and Importance of Profits

answer

typical firms objectives is to maximize profits

question

Accounting Profit

answer

TR - explicit costs

question

Economic Profit

answer

TR - (explicit plus implicit costs)

question

Opportunity Cost

answer

explicit cost of a resource plus that implicit cost of giving up the best alternative

question

Profit Principle

answer

profits are a signal to resource holders where resource are most highly value by society

question

Five Forces to Sustainable Industry

answer

Entry, Power of Buyers, Substitutes and Complements, Rivals, Power of input Suppliers

question

Consumer-Producer Rivalry

answer

competing interest of consumer and producer

question

Consumer-Consumer Rivalry

answer

reduces the negotiating power of consumer

question

Producer-Producer Rivalry

answer

multiple sellers in the Market

question

Time Value of Money

answer

gap exists between the time when costs are borne and when benefits are received

question

Present Value Analysis

answer

Future Value/(1 + interest)^year

question

Present Value Stream

answer

Sum of Future Value/(1+interest)^year

question

Net Present Value

answer

Sum of Future Value/(1+interest)^year - Current Cost

question

Profit Maximization

answer

maximizing the value of the firm which is the present value of current and future profit

question

Marginal Analysis

answer

N(Q) = B(Q) - C(Q)

question

Marginal Benefit

answer

MB(Q) = Change in TB/ Change in Q

question

Marginal Cost

answer

MC(Q) = Change in TC/ Change in Q

question

Marginal Net Benefit

answer

MNB(Q) = MB(Q) - MC(Q)

question

Market Demand Curve

answer

total quantity and price per unit of goods all consumers are willing and able to purchase

question

Law of Demand

answer

quantity of goods consumers are willing and able to purchase increase as the price falls

question

Change in Quantity Demanded

answer

Price, Movement along Curve

question

Demand Shifters

answer

Income, Related Good, Population, Advertisement

question

Linear Demand Function

answer

Qxd = Ao + AxPx + AyPy + AmM + AhH

question

Qxd

answer

# of units of good X demanded

question

answer

Price of good X

question

answer

Price of related good Y

question

answer

Income

question

answer

Any other factors affecting X

question

Ax < O

answer

Law of Demand

question

Ay > O, in linear demand

answer

Substitute

question

Ay < O, in linear demand

answer

Complement

question

Am > O, in linear demand

answer

Normal Good

question

Am < O, in linear demand

answer

Inferior Good

question

Total Consumer Value

answer

sum of the maximum amount a consumer is willing to pay at different quantities

question

Total Expenditure

answer

is the per - unit market price times the number of units consumed

question

Consumer Surplus

answer

extra value that consumer derives from a good but do not pay for

question

Law of Supply

answer

As the price of a good rises, the quantity supplied of the good rises, Conversely, as the price of a good falls, the quantity of a good falls

question

Change in Quantity Supplied

answer

Price, movement along curve **

question

Supply Shifters

answer

Input prices, Technology, Number of firms, taxes

question

Linear Supply Function

answer

Qxs = B0 + BxPx + ByPy + BwW + BrPr + BhH

question

Bx > O

answer

Law of Supply

question

Br < O

answer

good rises, less of good X

question

Price Ceiling

answer

Shortages, Demand - Supply

question

Price Floor

answer

Surpluses, Supply - Demand

question

Elasticity

answer

Measures the responsiveness of a percentage change in one variable resulting from a percent change in another

question

Elasticity Formula

answer

% Change in G / % Change in S

question

Own Price Elasticity

answer

Elastic > 1 , 1 = unit elastic, Inelastic < 1

question

TR Test Elastic

answer

Price Increases, TR decreases

question

TR Test Inelastic

answer

Price Increases, TR increases

question

TR Test Unit Elastic

answer

TR is maximized

question

Marginal Revenue

answer

MR = Change in TR/ Change in Q

question

Eqxd, Py > O

answer

X and Y are Substitutes

question

Eqxd, Py < O

answer

X and Y are Complements

question

Cross Price Elasticity

answer

Shows responsiveness of the demand for a good due to changes in the price of a related good

question

Change in Revenue Function

answer

[ Rx ( 1 + Eqx ) + Ry (Eqy) ] x % Px

question

Eqxd, M > O

answer

Elastic Normal Good

question

Eqxd, M < O

answer

Elastic Interior Good

question

Linear function in Action, Own Price

answer

AxPx / units demanded

question

Linear function in Action, Cross Price

answer

AyPy / units demanded

question

Linear function in Action, Income

answer

AxM / units demanded

question

Econometrics

answer

statistical analysis of economic phenomena

question

T - Statistic

answer

used to determine the statistical significance of a regression coefficient, greater than 2

question

F- Statistic and R- square

answer

provides measure of overall fit of a regression

question

Least Square Regression

answer

line that minimizes the sum of squared deviations

question

P - Value

answer

less than .05

question

Consumer Opportunities

answer

set of all possible goods and services customers can consume

question

Customer Preferences

answer

Determine which set of goods and services will be consumed

question

Completeness

answer

For any two bundles, A>B, B>A, A~B

question

More is Better

answer

If A has more than B, go with A

question

Transitivity

answer

A > B, B > C, then A > C, A ~ B, B ~ C, A ~ C

question

Diminishing Marginal Rate of Substitution

answer

Will give up less of Y as you move down the indifference curve

question

Budget Constraint

answer

Restriction set by income

question

Price increase of X

answer

Increase of Consumption of Y, Substitute

question

Price decrease of X

answer

Decrease of Consumption of Y, Substitute

question

Price increase of X

answer

Decrease of Consumption of Y, Complement

question

Price Decrease of X

answer

Increase of Consumption of Y, Complement

question

Normal Good Consumer Equilibrium

answer

Increase of income and Consumption, Decrease of income and consumption

question

Inferior Good Consumer Equilibrium

answer

Increase in Income and decrease of consumption, decrease in income and increase in consumption

question

Substitution Effect

answer

holds real income constant and moves along indifference curve

question

Income Effect

answer

Shifts the indifference curve depending on income

question

Labor Leisure Function

answer

E = 70 + 7(24 - L)

question

Economic Theory for Decision Making

answer

Identifies managers the essential for making decisions

question

Economic Profit 2

answer

is negative when costs exceeds revenues

question

Example of Implicit Costs

answer

Foregone Wages

question

Opportunity Costs Today

answer

the foregone interest that could be earned if you had the money today

question

Present Value with Higher Interest

answer

decreases the present value of the future amount

question

Present Value with Lower Interest

answer

increases the present value of the future amount

question

Benefits that arise by having an Addition unit

answer

marginal benefit

question

What would not shift demand for good A

answer

drop in price of good A

question

If A is an inferior good, increase in Income

answer

decrease demand for good A

question

If A is a normal good, increase in Income

answer

increase demand for good A

question

Income Elasticity

answer

responsiveness of consumer demand to changes in income

question

Greater the standard error of an estimated coefficient

answer

lower the t-value

question

marginal revenue is O

answer

unitary elastic

question

Consumer is limited to selecting a bundle of goods that is affordable is what ?

answer

Budget Constraint

question

Rate which Consumer is willing to substitute one good for another, while still maintaining satisfaction

answer

Marginal Rate of Substitution

1 of 101

question

Manager

answer

person who directs resources to achieve a stated goal

question

Economics

answer

the science of making decisions in the presence of scarce resources

question

Resources

answer

anything used to produce a good or service

question

Managerial Economics

answer

study of how direct scarce resources in the way that most efficiently achieves a managerial goal

question

Effective Management

answer

identify goals and constraints, understand incentives

question

Nature and Importance of Profits

answer

typical firms objectives is to maximize profits

question

Accounting Profit

answer

TR - explicit costs

question

Economic Profit

answer

TR - (explicit plus implicit costs)

question

Opportunity Cost

answer

explicit cost of a resource plus that implicit cost of giving up the best alternative

question

Profit Principle

answer

profits are a signal to resource holders where resource are most highly value by society

question

Five Forces to Sustainable Industry

answer

Entry, Power of Buyers, Substitutes and Complements, Rivals, Power of input Suppliers

question

Consumer-Producer Rivalry

answer

competing interest of consumer and producer

question

Consumer-Consumer Rivalry

answer

reduces the negotiating power of consumer

question

Producer-Producer Rivalry

answer

multiple sellers in the Market

question

Time Value of Money

answer

gap exists between the time when costs are borne and when benefits are received

question

Present Value Analysis

answer

Future Value/(1 + interest)^year

question

Present Value Stream

answer

Sum of Future Value/(1+interest)^year

question

Net Present Value

answer

Sum of Future Value/(1+interest)^year - Current Cost

question

Profit Maximization

answer

maximizing the value of the firm which is the present value of current and future profit

question

Marginal Analysis

answer

N(Q) = B(Q) - C(Q)

question

Marginal Benefit

answer

MB(Q) = Change in TB/ Change in Q

question

Marginal Cost

answer

MC(Q) = Change in TC/ Change in Q

question

Marginal Net Benefit

answer

MNB(Q) = MB(Q) - MC(Q)

question

Market Demand Curve

answer

total quantity and price per unit of goods all consumers are willing and able to purchase

question

Law of Demand

answer

quantity of goods consumers are willing and able to purchase increase as the price falls

question

Change in Quantity Demanded

answer

Price, Movement along Curve

question

Demand Shifters

answer

Income, Related Good, Population, Advertisement

question

Linear Demand Function

answer

Qxd = Ao + AxPx + AyPy + AmM + AhH

question

Qxd

answer

# of units of good X demanded

question

answer

Price of good X

question

answer

Price of related good Y

question

answer

Income

question

answer

Any other factors affecting X

question

Ax < O

answer

Law of Demand

question

Ay > O, in linear demand

answer

Substitute

question

Ay < O, in linear demand

answer

Complement

question

Am > O, in linear demand

answer

Normal Good

question

Am < O, in linear demand

answer

Inferior Good

question

Total Consumer Value

answer

sum of the maximum amount a consumer is willing to pay at different quantities

question

Total Expenditure

answer

is the per - unit market price times the number of units consumed

question

Consumer Surplus

answer

extra value that consumer derives from a good but do not pay for

question

Law of Supply

answer

As the price of a good rises, the quantity supplied of the good rises, Conversely, as the price of a good falls, the quantity of a good falls

question

Change in Quantity Supplied

answer

Price, movement along curve **

question

Supply Shifters

answer

Input prices, Technology, Number of firms, taxes

question

Linear Supply Function

answer

Qxs = B0 + BxPx + ByPy + BwW + BrPr + BhH

question

Bx > O

answer

Law of Supply

question

Br < O

answer

good rises, less of good X

question

Price Ceiling

answer

Shortages, Demand - Supply

question

Price Floor

answer

Surpluses, Supply - Demand

question

Elasticity

answer

Measures the responsiveness of a percentage change in one variable resulting from a percent change in another

question

Elasticity Formula

answer

% Change in G / % Change in S

question

Own Price Elasticity

answer

Elastic > 1 , 1 = unit elastic, Inelastic < 1

question

TR Test Elastic

answer

Price Increases, TR decreases

question

TR Test Inelastic

answer

Price Increases, TR increases

question

TR Test Unit Elastic

answer

TR is maximized

question

Marginal Revenue

answer

MR = Change in TR/ Change in Q

question

Eqxd, Py > O

answer

X and Y are Substitutes

question

Eqxd, Py < O

answer

X and Y are Complements

question

Cross Price Elasticity

answer

Shows responsiveness of the demand for a good due to changes in the price of a related good

question

Change in Revenue Function

answer

[ Rx ( 1 + Eqx ) + Ry (Eqy) ] x % Px

question

Eqxd, M > O

answer

Elastic Normal Good

question

Eqxd, M < O

answer

Elastic Interior Good

question

Linear function in Action, Own Price

answer

AxPx / units demanded

question

Linear function in Action, Cross Price

answer

AyPy / units demanded

question

Linear function in Action, Income

answer

AxM / units demanded

question

Econometrics

answer

statistical analysis of economic phenomena

question

T - Statistic

answer

used to determine the statistical significance of a regression coefficient, greater than 2

question

F- Statistic and R- square

answer

provides measure of overall fit of a regression

question

Least Square Regression

answer

line that minimizes the sum of squared deviations

question

P - Value

answer

less than .05

question

Consumer Opportunities

answer

set of all possible goods and services customers can consume

question

Customer Preferences

answer

Determine which set of goods and services will be consumed

question

Completeness

answer

For any two bundles, A>B, B>A, A~B

question

More is Better

answer

If A has more than B, go with A

question

Transitivity

answer

A > B, B > C, then A > C, A ~ B, B ~ C, A ~ C

question

Diminishing Marginal Rate of Substitution

answer

Will give up less of Y as you move down the indifference curve

question

Budget Constraint

answer

Restriction set by income

question

Price increase of X

answer

Increase of Consumption of Y, Substitute

question

Price decrease of X

answer

Decrease of Consumption of Y, Substitute

question

Price increase of X

answer

Decrease of Consumption of Y, Complement

question

Price Decrease of X

answer

Increase of Consumption of Y, Complement

question

Normal Good Consumer Equilibrium

answer

Increase of income and Consumption, Decrease of income and consumption

question

Inferior Good Consumer Equilibrium

answer

Increase in Income and decrease of consumption, decrease in income and increase in consumption

question

Substitution Effect

answer

holds real income constant and moves along indifference curve

question

Income Effect

answer

Shifts the indifference curve depending on income

question

Labor Leisure Function

answer

E = 70 + 7(24 - L)

question

Economic Theory for Decision Making

answer

Identifies managers the essential for making decisions

question

Economic Profit 2

answer

is negative when costs exceeds revenues

question

Example of Implicit Costs

answer

Foregone Wages

question

Opportunity Costs Today

answer

the foregone interest that could be earned if you had the money today

question

Present Value with Higher Interest

answer

decreases the present value of the future amount

question

Present Value with Lower Interest

answer

increases the present value of the future amount

question

Benefits that arise by having an Addition unit

answer

marginal benefit

question

What would not shift demand for good A

answer

drop in price of good A

question

If A is an inferior good, increase in Income

answer

decrease demand for good A

question

If A is a normal good, increase in Income

answer

increase demand for good A

question

Income Elasticity

answer

responsiveness of consumer demand to changes in income

question

Greater the standard error of an estimated coefficient

answer

lower the t-value

question

marginal revenue is O

answer

unitary elastic

question

Consumer is limited to selecting a bundle of goods that is affordable is what ?

answer

Budget Constraint

question

Rate which Consumer is willing to substitute one good for another, while still maintaining satisfaction

answer

Marginal Rate of Substitution

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