Top 10 Managerial Economics Questions and Answers

Managerial Economics is a critical field of study that blends economic principles with management practices to help organizations make informed decisions. It provides a framework for understanding how businesses can optimize resources and maximize profits in a dynamic and often uncertain business environment. Below are 10 questions and answers that delve into various aspects of Managerial Economics, offering insights into topics such as demand and supply analysis, production and cost estimation, market structures, pricing strategies, and decision-making under risk and uncertainty. These questions and answers aim to shed light on the key concepts and tools that managers and business leaders can employ to enhance their strategic decision-making processes and achieve their organizational objectives.

Now, let’s move on to the top 10 Managerial Economics Questions and Answers

Q1. An example of moral hazard is

a. an hourly salesman working harder than a commission salesman
b. a piece-rate garment worker shirking more than a per-hour worker
c. A taxi driver paid per mile taking a longer route than necessary
d. an author on contract going to as many book signings as one with a percentage royalty rate

Q2. With which choice are you more likely to avoid Bid-rigging cartels?

a. The winning bids are announced
b. The winning bids are not announced
c. Winning bids are announced right after the auction
d. Both A&C

Q3. As price increases, demand typically

a. does not change
b. becomes more elastic
c. becomes less elastic
d. elasticity does not change

Q4. If the price of a Canadian dollar went from 0.95 US dollars to 0.98 US dollars, we would say that the US dollar has

a. Appreciated
b. Depreciated
c. Not changed in value
d. None of the above

Q5. The biggest advantage of capitalism is that

a. It creates wealth by letting a person follow his or her own self-interest
b. It generates wealth with the help of government intervention
c. It forces involuntary exchanges
d. Prices hinder in moving assets from high-value to low-value uses

Q6. A sudden decrease in the market demand in a competitive industry leads to

a. Demand creating supply
b. Losses in the short-run and average profits in the long-run
c. New firms being attracted to the industry
d. Above average profits in the short-run and average profits in the long-run

Q7. The manager of Fatty Foods is thinking about retiring. He has two options: to leave his stores as a company stores, to be managed by a salaried manager, or to sell some of them as franchises. The franchisor however is offering a really low franchisor fee for the store. What would be his best bet?

a. Sell them off as franchises
b. Let the stores stay company stores
c. Shut down the business completely
d. Never retire

Q8. An indication that Insurance companies anticipate adverse selection is

a. they do not require a deductible
b. they do not require a co-payment
c. they classify clients into different risk types according to their claim history
d.they do not classify clients into different risk types according to pre-existing conditions

Q9. Advance-purchase discounts offered by airlines are an example of

a. Direct price discrimination
b. Indirect price discrimination
c. All of the above
d. None of the above

Q10. What is an aggregate demand curve

a. The demand of an individual with respect to price
b. The total demand of the market with respect to price of a good
c. The preference of an individual in the market
d. None of the above