Managerial economics is concerned with which combination of the following ? (a) Investment Analysis and Decisions (b) Production Behaviour and Cost Analysis (c) Input Reward Analysis and Decisions (d) Economic Environment Analysis Code :
(a), (b) and (d)
(a), (b) and (d) — option 3. The exception is (c) input reward analysis.
What managerial economics is. The application of economic theory and the tools of decision science to the problems a firm actually faces. It is normative and firm-level: it asks what the manager should do, not how the economy behaves in aggregate.
| Area | What the manager decides | In the question |
|---|---|---|
| Investment analysis and decisions | Capital budgeting — which projects to fund, using NPV, IRR and payback; the cost of capital | (a) |
| Production behaviour and cost analysis | The production function, returns to scale, the cost curves, the least-cost combination of inputs, break-even analysis | (b) |
| Economic environment analysis | Business cycles, inflation, monetary and fiscal policy, industry structure —> the external setting in which the firm decides | (d) |
| Input reward analysis | Factor pricing — how rent, wages, interest and profit are determined as rewards to land, labour, capital and enterprise | (c) — excluded |
Why (c) is the odd one out. Input reward analysis is the theory of distribution, a branch of general economic theory concerned with how national income is shared among the factors of production. That is a question about the economy, not a decision the firm takes. The firm treats input prices as data and asks how much of each input to buy — which belongs under production and cost analysis, already covered by (b).
The usual scope of the subject : demand analysis and forecasting, production and cost analysis, pricing decisions and practices, profit management, capital budgeting, and analysis of the macro-economic environment. Its tool-kit draws on microeconomics for the theory, and on statistics, operations research and accounting for the technique.
The distinction worth carrying is that managerial economics is microeconomic and normative: it bridges abstract economic theory and actual business practice, using the theory only so far as it helps a manager choose.
Hence, the answer is (a), (b) and (d).
Similar Questions
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A. Specifying objectives
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E. Collection of data and data adjustment
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Which one of the following statements is not correct ?
When P0 and P1 and Q0 and Q1 denote before and after change in the price and quantity respectively and in both the situations, total outlay remains the same, which of the following formulae give the similar value of the arc price - elasticity of demand ?
(a) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}+P_{1}}{Q_{0}+Q_{1}}\)
(b) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{1}}\)
(c) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{0}}{Q_{0}}\)
(d) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{1}}\)
(e) \(\dfrac{Q_{0}-Q_{1}}{P_{0}-P_{1}}\times\dfrac{P_{1}}{Q_{0}}\)
Code :
For the following two statements of Assertion (A) and Reasoning (R), indicate the correct code :
Assertion (A) : Ridge Lines in isoquant map set the limits for the positive productivities of the respective inputs used in the production process.
Reasoning (R) : Isoquants will slope positively if the use of an input is increased beyond the limit set by the ridge lines.
Code :
If a 100% scale-efficient plant has 92% technical efficiency and 88.5% allocative-efficiency, then its overall efficiency will be :
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The Law of Diminishing Returns applies when the gaps among the successive 'multiple-level of output' isoquants:
Important Questions from Production Function
Match List I with List II
LIST I
(Production Cost)
LIST II
(Underlying Meaning)
A.
Implicit Costs
I.
Change in the total cost per unit change in output.
B.
Marginal cost
II
Total increase in costs resulting from the implementation of a particular managerial decision.
C.
Incremental Cost
III.
Inputed value of inputs owned and used by the firm.
D.
Sunk Cost
IV.
The costs that are not affected by managerial decision.
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For the following two statements of Assertion (A) and Reasoning (R) suggest the correct code:
Assertion (A): Low initial price regarded as the principal means for entering into mass market for some new products.
Reasoning (R): Firms generally enter into production of new products with excess capacity of the plant initially.
Code:
Indicate the correct code from the following types of the long run average cost curves on which the minimum average cost of production in long run can be determined:
(i) Long run average cost curve under normal production function
(ii) Long run average cost curve under linearly homogeneous production function
(iii) Planning curve
(iv) Envelope curve
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In which one of the following concepts, a buyer is passively involved in an exchange transaction, and he accepts whatever is offered to him by a marketer?
Lowering of costs that a firm often experiences when it produces two or more products together than each alone is known as ________.
