A crucial area of study called managerial economics combines economic theory with management techniques to aid businesses in making wise decisions. It offers a framework for comprehending how companies might maximize earnings and utilize resources in a dynamic and frequently unpredictable business environment. The next 10 questions and answers explore several facets of managerial economics and provide information on issues including demand and supply analysis, production and cost estimation, market structures, pricing tactics, and decision-making under risk and uncertainty. The purpose of these questions and answers is to clarify the main ideas and strategies that managers and corporate executives may use to improve their strategic decision-making procedures and accomplish their organizational goals.
Now, let’s move on to the top 10 Managerial Economics Questions and Answers
Q1. A risk-neutral individual
a. Tends to play a lot of lotteries
b. Values a lottery at its expected level
c. Values a lottery at more than its expected value
d. Values a lottery at less than its expected value
Q2. A buyer values a house at $525,000 and a seller values the same house at $485,000. If sales tax is 8% and is levied on the seller, then what would be the lowest price that the seller would be willing to sell at?
a. $523,800
b. $525,000
c. $500,000
d. $527,000
Q3. In the market for insurance, low-risk customers are not served because
a. They do not like buying insurance
b. They are more costly to serve
c. Products designed to be attractive to them are also attractive to high-risk types.
d. All of the above
Q4. is higher than the cost of underpricing, then the management of the cruise liner should
a. Price lower than what they expect would fill capacity
b. price higher than what they expect would fill capacity
c. Price such that they would expect to just fill capacity
d. None of the above
Q5. Indirect price discrimination differs from direct price discrimination because
a. In indirect price discrimination high value consumers can sometimes still get the low price
b. Direct price discrimination encourages rivals to enter but indirect discrimination does not
c. There is no difference between the two
d. In direct price discrimination firms do not have to worry about cannibalizing
Q6. An increase in demand could arise from which of the following factors
a. an increase in income
b. a decrease in the price of a complement
c. an increase in the price of a substitute
d. all of the above
Q7. For direct price discrimination to work effectively
a. The low-valued customers should not be able to engage in arbitrage
b. You need to charge the same price to the different groups
c. Both groups should have the same elasticity of demand
d. None of the above
Q8. The manager of the sales department (a profit center) at Harvey’s HVAC, decides to outsource any sales training that the division needs since in house training is expensive, even though the outsourced training does not cover the company’s repair and warranty information from the service department. Who is making a bad decision?
a. The Sales department
b. The Service department
c. The Training division
d. None of the above
Q9. The marginal cost curve:
a. Usually declines initially as output increases and then rises with further increases in output
b. Is always constant
c. Usually rises initially as output increases and declines with further increases in output
d. Is equal to the average variable cost curve
Q10. The manager of the sales department (a profit center) at Harvey’s HVAC, decides to outsource any sales training that the division needs since in house training is expensive, even though the outsourced training does not cover the company’s repair and warranty information from the service department. Does the Sales department have enough incentive to make a good decision?
a. No, because them making the right decision does not affect the division profit
b. No, because them making the right decision decreases the division profit
c. Yes, because them making the right decision increases the company’s total profits
d. Yes, because them making the right decision would increase the division profit
Answers
- b
- a
- b
- a
- a
- d
- a
- a
- a
- c