Managerial Economics > QUESTIONS & ANSWERS > Managerial Economics Exam #1 Questions with Solutions (All)

Managerial Economics Exam #1 Questions with Solutions

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Managerial economics Correct Answer study of how to direct scare resources in the way that most efficiently achieves a managerial goal MICROECONOMICS tends to be more _______, while MANAGERIAL ECON... OMICS is largely ________. Correct Answer descriptive, prescriptive ("should") How has managerial economics been able to apply theory to the real world? (3 ways) Correct Answer 1. creating measurable objectives for the firm 2. minimizing unnecessary assumptions 3. enabling measurement with analysis What is the basic theory of the firm? Correct Answer all firms exist to maximize economic profit What is included in calculating economic profit? Correct Answer explicit and implicit costs of production what are some problems associated with such a basic theory of the firm (profit maximization)? Correct Answer -it ignores what firms DO to maximize profits (bad decisions) -decisions regarding timing of profits + presence of risk are not taken into account What is the shareholder wealth maximization theory? Correct Answer it suggests that the objective of the firm is to maximize shareholder wealth it is measured as the present value of all expected future profits, discounted by the shareholder's req. rate of return it is thought to be more comprehensive because it accounts for amount, timing, and levels of risk associated with the firm's profit What are some problems with quantifiable objectives like profit and shareholder wealth maximization? Correct Answer -only useful when costs and revenues can be easily identified and estimated -when opportunity and production costs are more difficult to identify, goals of managers and owners are seldom aligned [Show More]

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