Questions and Answers of Fundamentals of Managerial Economics

Why is a formally documented partnership deed in the interest of all the partners? Explain with suitable example.
“A cooperative is the most ideal form of business still it is not very popular”. What are the reasons for this in your opinion?
“It is more advisable to form a company than a partnership”. Do you agree with this statement?Give justification for your answer.
“Segregation of ownership from management works against the objective of profit maximisation”.Do you agree with this statement? Why? Or why not?
Identify an industry of your choice and select a company within that industry; compare the performance of that company with that of the industry over past five years. Then explain the relationship
Describe some of the opportunity costs when you decide to do the following:i. Go for higher studies after graduation instead of taking a job ii. Watch a movie tonight instead of studying for an
“All choices made by individuals have a cost associated with them known as opportunity cost”.Explain.
Which economic principles are related to managerial decisions?
Distinguish between microeconomics, macroeconomics and managerial economics.
Managerial economics helps in decision-making in the framework of uncertainty and scarcity of resources. Discuss the statement and elaborate with an example.
Discuss the principles of economics which help in effective managerial decision-making.
We often use managerial and business economics synonymously. Is it correct? Argue with logic.
“Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management.” Explain.
What is ‘managerial economics’? How does it differ from economics? Also discuss the nature and scope of managerial economics.
x. Disinvestment is less than increment in investment at ________ turning point.
ix. The buying and selling of government securities by the central bank is known as ________.
viii. During recession, the government generally uses ________ as a tool to recover from recession.
vi. The investment multiplier is the ________ of marginal propensity to save.
v. The combined multiplier and accelerator ______is known as ‘super multiplier’.
iv. Gap between two cycles can not be ________with certainty.
iii. Keynes had assumed that supply price of capital goods is a _______factor.
ii. Increase in investment brings ______times increase in income.
i. Recession phase is marked by large scale ________of workers.
x. The phase of contraction is also known as ‘slump’. True or False
ix. Investment starts falling beyond the upper turning point if a business cycle. True or False
vii. If MPC is equal to 1, the investment multiplier is also equal to one. True or False
vi. Trough announces the momentum for a new growth process. True or False
iv. There is a consensus that fall in aggregate demand causes recession. True or False
iii. When rate of technology slows down, marginal productivity of workers rises. True or False
ii. Accelerator does not have a reverse action. True or False
i. Peak marks the onset of recession. True or False
x. There is no possibility of a tie- up among the players in:a. Extensive form gamesb. Normal form gamesc. Cooperative gamesd. Non-Cooperative games
ix. Backward induction is the method by which equilibrium is determined in:a. Cournot modelb. Bertrand modelc. Stackelberg modeld. None of the above
viii. The set of outcomes for a game is determined by:a. Equilibriumb. Payoffc. Payoff matrixd. Strategy profile
vii. Which of the following distinguishes Stackelberg game from Cournot and Bertrand models:a. Firm chooses opponents in this gameb. It is a sequential move gamec. It is a simultaneous move gamed.
vi. None of the following is valid for asymmetric games EXCEPT:a. All outcomes involve a sum of payoffs equal to zero.b. Both players act at the same time.c. There is no possibility of tie-up among
v. Find out which one among the following statements is always correct about Nash equilibrium:a. Any player has the incentive to change its action unilaterally.b. It is a suboptimal collective
iv. Which of the following statements is NOT correct about zero sum games:a. Total benefit of the players is equal to zerob. Both players losec. One player’s loss is the other’s gaind. Sum of
iii. If players make their moves in a particular order over time, then the game is:a. Normal formb. Strategic formc. Extensive formd. Constant sum
ii. A player who takes the maxmin strategy is:a. A conservative pessimistb. One who believes that other players would inflict maximum harm to him/herc. One who tries to impose the maximum damage on
i. Cournot game is an example of a:a. Simultaneous move gameb. Sequential move gamec. One shot gamed. Zero sum game
x. If an entrant decides to stay out in a market entry game, its profit earned is equal to ________.
ix. Game theory assumes all decision makers to be ________.
viii. A player’s behaviour is determined by a ________.
vii. The dominant strategy of the opponent in Prisoner’s Dilemma is to ________ .
vi. Behaviour of firms in an oligopoly can be explained with ________ games.
v. In ______ strategy the player is pessimistic by nature.
iv. Both players are in a “win-win situation” in _________ games.
iii. Gain to a player for any given counter strategy is measured by the __________of the player.
ii. ________games need decision-making at regular intervals.
i. In _______ games the payoffs depend on the strategies of the game.
x. In zero sum games, whatever is gained by one player is lost by the other player. True or False
ix. The Nash equilibrium in Stackelberg game is similar to equilibrium in perfect competition. True or False
viii. Constant sum games are games of pure competition. True or False
vii. In dominant strategy equilibrium, one player has a dominant strategy and the other has a dominated strategy. True or False
vi. Uncertainty is a problem of existence of relevant probabilities. True or False
v. Asymmetric games have identical strategies for both set of players. True or False
iv. A game tree gives the complete plan of action of the players over a period of time. True or False
iii. A strategy is dominant for a player if the player has another strategy at least as good as or better than this strategy. True or False
ii. Players of a game cannot make binding agreements on each other. True or False
i. The leader follower model is an example of a sequential move game. True or False
x. ep at the midpoint of a linear demand curve is equal to one. True or False
ix. If shoes of Reebok are available, then the price elasticity of demand of Woodland shoes would be low. True or False
viii. AR is the revenue earned per unit of output sold. True or False
vii. Price discrimination is the practice of charging different prices for different products from the same consumer. True or False
vi. If more inputs are available, then elasticity of supply is lower. True or False
v. A higher positive ec implies greater substitutability between two items. True or False
iv. Demand for salt is inelastic. True or False
iii. Demand for electricity is relatively inelastic. True or False
ii. Arc elasticity measures elasticity at a point on the demand curve. True or False
i. Two linear demand curves parallel to each other will have equal elasticities at a given price. True or False
x. Which of the following can be derived from law of equimarginal utilities?a. Marginal utility of the cheapest commodity should be equal to marginal utility of income.b. Marginal utility of the most
ix. All of the following are valid for ordinal school of consumer preferences EXCEPT:a. Consumer preferences can be plotted on an indifference curve.b. Ranking of utility is important.c. Magnitude of
viii. Gain in utility due to increased consumption of a good is equal to which of the following?a. Marginal utility/Increase in consumptionb. Marginal utility ¥ Increase in consumptionc. Marginal
vii. A consumer had to pay off his debt from his income. Assuming no change in price of goods he consumes, which of the following would happen?a. A shift in the budget line towards the right.b. A
vi. Which of the following is valid for linear indifference curves?a. The goods are perfect complements.b. The goods are perfect substitutes.c. MRS for such curves is an decreasing ratio.d. MRS for
v. In order to stay on the same convex indifference curve, the consumer must:a. Reveal preference for any one of the commodities.b. Have equal units of both commodities.c. Have more units of one
iv. All the following facts hold good for consumer’s equilibrium EXCEPT:a. Utility is maximised at the tangency of budget line to an indifference curveb. The indifference curve is the highest
iii. The difference between the price consumers are willing to pay and they actually pay is called:a. Cost plus pricingb. Consumer surplusc. Feasible setd. Marginal utility
ii. Continuity of consumption is a prerequisite for:a. Law of diminishing marginal utilityb. Revealed preferencec. Indifference curve analysisd. Marginal rate of substitution
i. Indifference curves do not intersect because of:a. Transitivityb. Higher utility on a higher indifference curvec. Both a and bd. None of the above
x. The point at which marginal utility is zero is the point of _______.
ix. Slope of the indifference curve is equal to the slope of the budget line at the _______ bundle.
viii. Cardinalists propose that utility is _______.
vii. Ordinal school proposes that utility cannot be measured in _______ units.
vi. Given the equation of the budget line, if the quantity consumed of one good is nil, then quantity consumed of the other good would be the ratio of _______ and price of the other good.
v. At the optimum bundle, slope of the indifference curve should be equal to the slope of _______.
iv. _______ goods have L-shaped indifference curves.
iii. The law of diminishing marginal utility mandates that demand for the commodity should be _______.
ii. The theory of revealed preference proposes that _______ reveals preference.
i. The assumption of _______ implies that an individual consumer’s preferences are always consistent.
x. A higher indifference curve implies more quantities of both the goods. True or False
ix. Convexity implies that a curve is bowed away from the origin. True or False
viii. If the utility from a commodity A is more than that from another commodity B, the consumer would increase consumption of B and reduce consumption of A. True or False
vii. The law of diminishing marginal utility holds good for items of addiction. True or False
vi. If a consumer prefers butter to cheese and is indifferent between cheese and margarine, then he would be indifferent between butter and margarine. True or False
v. A feasible purchase of commodity bundle can never lie under the budget line. True or False
iv. Any consumption bundle would be preferred or indifferent to its ownself. True or False
iii. For concave indifference curves, marginal rate of substitution decreases along the curve. True or False
ii. Slope of indifference curve bears relation with diminishing marginal utility. True or False

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