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Questions and Answers
What is the definition of economics?
Science of making decisions on the allocation of limited resources in the presence of unlimited wants and needs.
What are the factors of production?
Land, labor, capital, entrepreneur.
What is the end goal of economics?
To satisfy the needs and wants of people.
Which of the following is a goal of profit-oriented firms?
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According to managerial economics, high demand and low supply indicate high economic profits.
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What does managerial economics involve?
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Who is known as the 'Father of Modern Economics'?
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Which of the following is NOT considered a constraint in achieving managerial goals?
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What is the formula for accounting profit?
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Name one importance of profits in a free market economy.
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Study Notes
Fundamentals of Economics
- Economics Definition: The science of decision-making concerning the allocation of limited resources to meet unlimited wants and needs.
- Scarcity and Trade-offs: Scarcity implies trade-offs; making decisions often involves giving up one option to pursue another.
- Factors of Production: Includes land, labor, capital, and entrepreneurship, which are essential for producing goods and services.
Goals and Constraints
- Identifying Goals: Goals vary based on departmental aims; for instance, marketing may focus on maximizing sales, while finance might prioritize risk reduction.
- Constraints Affecting Decisions: Constraints such as available technology, labor, and capital hinder goal achievement within organizations.
Importance of Profit
- Profit as an Indicator: Profits indicate consumer preferences and guide resource allocation according to what is highly valued in the market.
- Profit Generation: Organizations create profits while fulfilling societal needs, influencing pricing and product quality.
- Market Dynamics: High demand and low supply result in high economic profits; new entrants to the market typically cause price drops and profit declines.
Managerial Economics
- Application in Decision-Making: Managerial economics applies economic principles to guide decision-making in organizations.
- Role of Econometrics: Econometrics deals with empirical evidence to support economic models.
Characteristics of the Manager
- Resource Direction: A manager directs resources toward achieving specific goals and coordinates the efforts of team members.
- Influencing Outcomes: Managers make decisions regarding product pricing and quality based on market conditions.
Types of Businesses
- Labor-Intensive: Operations that require significant manual labor.
- Capital-Intensive: Operations that depend heavily on financial resources.
Economics of Effective Management
- Key Principles: Effective management involves identifying goals and constraints, understanding profits, market dynamics, and the time value of money, as well as applying marginal analysis.
- Cost-Benefit Analysis: Accounting profit is determined by subtracting explicit costs from total revenue, highlighting the importance of tracking financial performance.
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Description
Test your knowledge of managerial economics with this departmental examination focusing on the fundamentals of economics. The quiz covers the six basic principles of effective management and decision-making processes related to resource allocation. Prepare to identify goals and constraints within an economic framework.
