Final Exam for Managerial Economics

Name: J Yr. & Sec.: Date: Score:

ESSAY:

1. Intelligent use of economic forecasts requires a great deal of judgement on the part of the
executive. How does a manager’s “gut feel” HELP HIS BUSINESS DECISIONS? How does statistics
aid him in arriving a better decisions?
2. Can there be a riskless business? Explain. Distinguish between risk and uncertainties, What is the
role of “feel or intuition” In business decision making?
3. Differentiate capital budgeting from capital expenditure. One of the crudest methods of capital
budgeting use in the Philippines that exclusively based on the urgent need for capital outlay.
When will such a criterion optimize corporate welfare? When will it work against objective?
Why?
4. Most firms are forced to reduce their price if they want to sell beyond a certain volume.. Can
firms sell any quantity they want at a given price ? Of what use are the total cost (TC) and total
revenue (TR) curves in this example.
5. Differentiate Average variable cost (AVC) from Average fixed cost (AFC) . Explain the graphical
movement of the two. While AVC tends to go down, it has also to rise at some point why?
6. What is profit? How does an accountant formulate the means to arrive at maximum profit?
Compare and contrast the accounting profit from economic profit point of view, What is the
concept of marginalism? How does it work in the profit planning activity of the firm?

Suppose the Duerme Enterprises has the following cost schedule. Its TFC is P1,000 per month and its
variable costs are in column 3. Complete the table below and graph TFC, TVC and TC and the AFC, AVC,
ATC and MC curves in another graph.

Ouput TFC TVC TC AFC AVC ATC MC

0 1000 0
1 1000 500
2 1000 1000
3 1000 2000
4 1000 3500
5 1000 5500
 Q

Identification

1. The additional cost from an additional unit of output produced.

2. It shows the relationship between the level of inputs and output.
3. The difference between ATC and AVC in the short-run period.
4. Cost that exists only in the very short run or immediate period.
5. Cost that decreases with the increases in the output produced.
6. A monetary expenditure made to outsiders who supply the inputs.
7. Inputs that do not vary with the level of output.
8. Variable cost per unit of output.
9. It states that as you combine the fixed inputs to the variable inputs, total products
increase at an increasing rate continuously increase at a decreasing rate and at a
certain point it declines.
10. Cost of self-owned or self-employed resources.
11. The total output produced per unit of a resource employed.
12. Production period where all factors of production used are variable inputs.
13. The rational stage of production.
14. A production stage where the firm is over utilizing its fixed inputs.
15. It is a J shaped curve.

True of False
1. Land and managerial talent are fixed inputs in the short run.
2. Rent, depreciation and salary of the managers are variable costs in the short run.
3. Implicit costs of a resource is counted as economic cost due to the opportunity costs
of the said resource.
4. When TP is maximum, MP is negative.
5. In the short-run period, TC = TFC at zero output.
6. In the long-run, ATC = AVC.
. From the economist’s point of view, the real importance of cost lies in the fact they
represent constraints to production.
8. For the firm to reduce its fixed cost, it has to produce more output.
9. Normal profit is part of the firm’s implicit cost.
10. In the short run, the firm’s plant capacity or size of the plant is fixed.
11. Advertisement is important in monopolistic competition.
12. Pure competition is characterized by product differentiation.
 13. In order to sell more, firms under pure competition have to lower their price.
14. Under monopoly, economic profit is still present in the long-run period.
15. If the price is equal to it’s the average total cost, the firm is operating with positive
profit.
16. Pure competition is prevalent in the agriculture sector.
17. Loss is minimized or profit maximized at quantity produced where MR = MC.
18. Monopoly is a market structure characterized by product differentiation.
19. Collusion is prevalent under monopolistic competition.
20. Under monopolistic competition, product differentiation allows some firms to
charge higher prices than others.
21. Consumers prefer a market characterized by oligopoly rather than monopolistic
competition.
22. In order to sell more a monopolist has to lower his price.

Matching Type. Copy the letter of the correct answer on the blank before each number.

1. Demand for the industry.

2. Demand for the firm in pure competition.
3. Demand for pure monopoly.
4. Demand for oligopoly.
5. Demand for monopolistic competition.
6. Kinked demand curve.
7. Relatively inelastic demand.
8. Perfectly elastic demand.
9. Demand where buyer nor seller cannot control price in the market.
10. Demand curve where price is rigid, to increase or to decrease the price will always mean a
decrease in revenue.

Goodluck and God bless!