MBA5004
Managerial Economics
Midterms (Qns & Ans)
2025
1. Which of the following best describes the concept of
"opportunity cost"?
- A) The cost of producing one more unit of a good
- B) The value of the next best alternative foregone
- C) The total cost of all resources used in production
- D) The cost of acquiring new customers
- ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the value of the next
best alternative that is given up when a decision is made.
©2024/2025
,2. What is the primary purpose of marginal analysis in
managerial economics?
- A) To determine the total cost of production
- B) To analyze the additional benefits and costs of a decision
- C) To calculate the average cost of production
- D) To forecast future market trends
- ANS: B) To analyze the additional benefits and costs of a
decision
- Rationale: Marginal analysis helps in evaluating the
additional benefits and costs associated with a decision to
optimize resource allocation.
3. Which of the following is a key characteristic of a perfectly
competitive market?
- A) Few sellers
- B) Differentiated products
- C) No barriers to entry
- D) Price-setting firms
- ANS: C) No barriers to entry
- Rationale: In a perfectly competitive market, there are no
barriers to entry, allowing firms to freely enter and exit the
market.
©2024/2025
, 4. What is the primary difference between fixed costs and
variable costs?
- A) Fixed costs change with the level of output, while variable
costs remain constant
- B) Fixed costs remain constant regardless of output, while
variable costs change with the level of output
- C) Fixed costs are incurred only in the short run, while
variable costs are incurred only in the long run
- D) Fixed costs are associated with labor, while variable costs
are associated with materials
- ANS: B) Fixed costs remain constant regardless of output,
while variable costs change with the level of output
- Rationale: Fixed costs do not vary with the level of output,
while variable costs fluctuate based on production levels.
5. Which of the following best describes the concept of "price
elasticity of demand"?
- A) The responsiveness of quantity demanded to changes in
price
- B) The total revenue generated from sales
- C) The relationship between price and supply
- D) The cost of producing one more unit of a good
©2024/2025
Managerial Economics
Midterms (Qns & Ans)
2025
1. Which of the following best describes the concept of
"opportunity cost"?
- A) The cost of producing one more unit of a good
- B) The value of the next best alternative foregone
- C) The total cost of all resources used in production
- D) The cost of acquiring new customers
- ANS: B) The value of the next best alternative foregone
- Rationale: Opportunity cost represents the value of the next
best alternative that is given up when a decision is made.
©2024/2025
,2. What is the primary purpose of marginal analysis in
managerial economics?
- A) To determine the total cost of production
- B) To analyze the additional benefits and costs of a decision
- C) To calculate the average cost of production
- D) To forecast future market trends
- ANS: B) To analyze the additional benefits and costs of a
decision
- Rationale: Marginal analysis helps in evaluating the
additional benefits and costs associated with a decision to
optimize resource allocation.
3. Which of the following is a key characteristic of a perfectly
competitive market?
- A) Few sellers
- B) Differentiated products
- C) No barriers to entry
- D) Price-setting firms
- ANS: C) No barriers to entry
- Rationale: In a perfectly competitive market, there are no
barriers to entry, allowing firms to freely enter and exit the
market.
©2024/2025
, 4. What is the primary difference between fixed costs and
variable costs?
- A) Fixed costs change with the level of output, while variable
costs remain constant
- B) Fixed costs remain constant regardless of output, while
variable costs change with the level of output
- C) Fixed costs are incurred only in the short run, while
variable costs are incurred only in the long run
- D) Fixed costs are associated with labor, while variable costs
are associated with materials
- ANS: B) Fixed costs remain constant regardless of output,
while variable costs change with the level of output
- Rationale: Fixed costs do not vary with the level of output,
while variable costs fluctuate based on production levels.
5. Which of the following best describes the concept of "price
elasticity of demand"?
- A) The responsiveness of quantity demanded to changes in
price
- B) The total revenue generated from sales
- C) The relationship between price and supply
- D) The cost of producing one more unit of a good
©2024/2025
