Chapter 1

Question 1

Economics

Answer 1

is the science of making decisions in the presence of scarce resources

Question 2

Managerial Economics

Answer 2

is the study of how to direct scarce resources in the way that most efficiently achieves a managerial goal

Question 3

Accounting Profits

Answer 3

total revenue-dollar cost of producing the firm’s goods or services

Question 4

Economic Profits

Answer 4

total revenue- total opportunity cost of producing the firm’s goods or services

Question 5

Explicit cost

Answer 5

cost of the resource

Question 6

Implicit Cost

Answer 6

giving up the best alternative use of the resource

Question 7

Net Benefits Equation

Answer 7

NB(Q)= B(Q)-C(Q)

Question 8

Marginal Benefit

Answer 8

the change in total benefits

refers to the additional benefit that arise by using an additional unit of the managerial control variable.

Question 9

Marginal Cost

Answer 9

the change in total cost

is the additional cost incurred by using an additional unit of the managerial cost variable

Question 10

Marginal Net Benefit Equation

Answer 10

MNB(Q)= MB(Q)-MC(Q)

Question 11

marginal net benefits

Answer 11

change in net benefits that arises from a one unit change in Q

Question 12

What do profits signal?

Answer 12

profits signal to resource holders where resources are most highly valued by society

Question 13

What does maximizing net benefits take into account that total benefits does not?

Answer 13

cost

Question 14

Opportunity cost is what in relation to accounting costs?

Answer 14

usually higher because of explicit and implicit

Question 15

Draw benefits and cost curve

Answer 15

…..

Question 16

As long as marginal benefits exceed marginal cost

Answer 16

an increase in Q adds more to total benefits

Question 17

Marginal Principle

Answer 17

to maximize benefits, the manager should increase the managerial control variable up to the point where marginal benefits equal marginal costs. This level of the managerial control variable corresponds to the level at which marginal net benefits are zero; nothing more can be gained

Question 18

So long as marginal benefits exceeds marginals costs

Answer 18

an increase in Q adds more to total benefits than it does to total cost

Question 19

Maximizing benefits and not taking into account cost

Answer 19

it is equivalent to maximizing total revenues without regard to costs