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Managerial Economics Exam Review Questions

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1. If you raise the price of your good but sell more units is this a violation of the law of demand?
2. How could input suppliers ever lower your profits?
3. An investment has a useful life of 10 years. It costs $150,000. If the interest rate is 4% what stream of annual payments makes it worthwhile. (Each year has equal payment amounts.)
4. Why might third world workers making 50 cents per hour not necessarily be cost effective in comparison to US workers making $10 per hour?
Total Product Total Cost
0 100
1 150
2 184
3 208
4 227
5 250
6 280
7 318
8 366
9 425
10 500
11 595
12 712
What is ATC, AVC, AFC, MC?

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Solution Preview

1. Not necessarily. Another factor, such as the amount of competition in the industry, could have changed. Also, some luxury goods become more attractive to consumers as their price increases, because of the status they confer ...

Solution Summary

This solution gives answers and explanations for 5 common managerial economics exam questions. The topics covered are:
1. Law of demand
2. Inputs
3. Present value
4. Worker productivity
5. Cost calculations

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Managerial Economics Discussion Questions

1. Do you mow your own lawn or do your own cleaning (if you do not have a lawn)? Use the concept of trade-offs to explain why you make the choice you made. Why might your choice be different than someone like Bill Gates or Oprah Winfrey? Are their trades-offs different from yours? Explain.

2. Briefly describe an example of a financial decision from your business, volunteer work you do, or your own household. List some of the opportunity costs incurred. Identify whether these costs were monetary or non-monetary.

3. Discuss the following statement from the standpoints of both efficiency and equity: "Everyone in society should be guaranteed the best healthcare possible."

4. Classify the following statements as positive or normative. Explain.

a. When a worker is laid-off, they ought to receive unemployment benefits until they find a job.

b. Markets are usually a good way to organize economic activity.

c. India has a comparative advantage over the U. S. in producing textiles.

d. The U.S. should import all of its textiles from India.

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