question
Managerial Economics
answer
refers to the application of economic theory and the tools
of decision, science to examine how an organization can achieve its aims or objectives most efficiently.
of decision, science to examine how an organization can achieve its aims or objectives most efficiently.
question
Economics
answer
The study of choice facing scarcity and its unintended consequences.
question
Microeconomics
answer
Study of the economic behavior of individual decision-making units.
question
Mathematical Economics
answer
Expresses and analyzes economic models using the tools of mathematics. Ex.: the demand function.
question
Econometrics
answer
Applies statistical tools to real-world data to estimate the models postulated by economic theory and for forecasting.
question
The Decision Making Process
answer
Define the problem
Determine objectives
Identify problem solution
select best possible solution
implement decision
Determine objectives
Identify problem solution
select best possible solution
implement decision
question
According to economic theory
answer
:the primary goal of managers is to maximize the value of the firm (this is given by the present value of all expected future profits of the firm).
question
Value
answer
CF/(1+i)^n
question
Constraints that firms face:
answer
-Resource constraints
-Legal constraints (regulation)
-Managerial constraints
-Legal constraints (regulation)
-Managerial constraints
question
Prinicipal-agent Problem
answer
The moral hazard problem of managers (the agents) pursuing their own interests rather than those of share holders (the principals).
question
Accounting vs. Economic Profit
answer
* Accounting profit only looks at money so only takes into account explicit costs
* Economic profit looks at both types of costs
* Thus, accounting profit (TR-EC) always > economic profit (TR-(EC+IC)
* Economic profit looks at both types of costs
* Thus, accounting profit (TR-EC) always > economic profit (TR-(EC+IC)
question
Theories of Profit
answer
Risk-bearing theories of profit:Above-normal returns are required in fields that are above-average risk.
Frictional theory of profit: Profits arise from friction or disturbances from long-run equilibrium.
Monopoly theory of profit: Firms with monopoly power can restrict output and charge higher prices and earn profits even in the long-run.
Innovation theory of profit:Profit is the reward for the introduction of a successful innovation.
Managerial efficiency theory of profit: More efficient firms may earn above-normal returns and economic profits in the short-run.
Frictional theory of profit: Profits arise from friction or disturbances from long-run equilibrium.
Monopoly theory of profit: Firms with monopoly power can restrict output and charge higher prices and earn profits even in the long-run.
Innovation theory of profit:Profit is the reward for the introduction of a successful innovation.
Managerial efficiency theory of profit: More efficient firms may earn above-normal returns and economic profits in the short-run.
question
Market
answer
An institutional arrangement under which buyers and sellers
can exchange some quantity of a good or service at a
mutually agreeable price.
can exchange some quantity of a good or service at a
mutually agreeable price.
question
Perfectly Competitive Market
answer
A market that meets the conditions of
(1) many buyers and sellers,
(2) all firms selling identical products,
(3) no barriers to new firms entering the market.
(1) many buyers and sellers,
(2) all firms selling identical products,
(3) no barriers to new firms entering the market.
question
Demand vs. Quantity Demanded
answer
A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve.
question
Determinates in Demand (changes the position of the curve)
answer
1. Consumers' incomes
2. Consumers' tastes
3. The price of related commodities
5. The number of consumers in the market
2. Consumers' tastes
3. The price of related commodities
5. The number of consumers in the market
question
Normal vs. Inferior Goods
answer
Normal goods are goods that the individual wants; e.g. steak, nice car, computer, etc.
Inferior goods are goods that the individual uses because they have to, e.g. public transit. As individual's income rises, the individual uses fewer inferior goods - not gonna use public transit if you can afford a car.
Inferior goods are goods that the individual uses because they have to, e.g. public transit. As individual's income rises, the individual uses fewer inferior goods - not gonna use public transit if you can afford a car.
question
Changes in Supply
answer
1.An improvement in technology
2.A reduction in the price of resources used in the production of the commodity
3. For agricultural commodities, more favorable weather condition
2.A reduction in the price of resources used in the production of the commodity
3. For agricultural commodities, more favorable weather condition
question
Market Equilibrium
answer
The price at which the quantity demanded of the commodity equals the quantity supplied and the market clears.
Surplus vs Shortage
Surplus vs Shortage
question
Interfering with Market
answer
Price Ceiling: A maximum price set below the equilibrium price
Price Floor: A minimum price set above the equilibrium price
Excise Taxes: a tax on each unit of commodity
Price Floor: A minimum price set above the equilibrium price
Excise Taxes: a tax on each unit of commodity
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
