1. What conditions must be met in order for a firm to make normal profits? Sometimes firms do make above normal profits. Explain the factors that allow firms to make above normal profits.
2. When does a firm has normal economic profits? What does imply?
3. Explain how incremental analysis and marginal analysis are related to one another.
4. Macroeconomics does not play an important role in managerial decision making because it is not directed specifically to the theory of the firm. Explain whether this statement is true or false.
5. Explain why the knowledge of managerial economics is important to managers of a firm.
6. What is the difference between accounting profits and economic profits.
7. What difference exists between microeconomics and managerial economics?
8. Managers in the sedition making process face various constraints. Some of them are contractual requirements and legal restrictions. Explain how these constraints affect the decision of managers.
9. Profit Maximization and value maximization are two approaches to optimization in economics. Which approach is more comprehensive? Explain why?
10. Suppose that the manager of a firm, that uses coal energy, decides to install new equipment that will reduce air pollution like acid rain. Explain how this decision will affect the value of the firm.