1 Managerial economics is the 2 Economic models are 3 According to the theory of

Question

1 Managerial economics is the

2 Economic models are

3 According to the theory of the firm, management's ultimate objective is to maximize revenue.

4 According to the law of demand, if a firm increases the price of a good,

5 Marginal cost is the

6 If marginal revenue is positive, then a decrease in quantity results in

The next three questions refer to this demand and cost function.

Inverse demand: P = 40 - Q

Total cost: TC = 16 + 10Q

7 What condition will maximize profit?

8 What is marginal revenue for this product?

9 What is the profit-maximizing price for this product?

10 Demand for a good is price inelastic at the current price. The firm can increase profit by

Explanation / Answer

1) use of economic tools in the analysis of major decisions faced by firms.

Managerial economics is the study of tools and theory that links theory to practice which makes it easier for managers to make decisions.

2) generalised representation of a process of relationships.

Economic models give a generalised representation of a relationship between two or more variables.

3)false

Firm's ultimate goal is to maximise profit. Revenue does not tell us anything about the cost of production.

4) consumers in the market will demand fewer units of the good.

There is an inverse relationship between Price and quantity demanded of the good other things being constant. So if price rises quantity demanded falls.

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