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Social Science
Economics
Managerial Economics
Economics Midterm
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Terms in this set (19)
What is Economics?
Economics is the science which studies human behavior as a relationship between given ends and scarce means (or Resources) which have alternative uses. It is about making choices.
What is the difference between simple regression and multiple regression?
• Simple regression is one dependent variable it is considered just one.
• Multiple Regression is several dependent variables it is considered multiple.
State the function of F-test
Is the useful as it measures the statistical significance of the entire regression equation rather than just for an individual.
State all the steps required to build up regression analysis.
a. Specify the regression model
b. Obtain data on variables
c. Estimate the quantitative relationships
d. Test the statistical significance of the results
e. Usage of results in decision-making
State two types or forms of optimization techniques of economic analysis used by managers in making rational decisions:
Total Revenue and Total Cost approach
Marginal Revenue and Marginal Cost approach
According to the Manager's claim or hypothesis below "If a manager wants to determine the relationship between the firm's advertisement expenditures and it sales revenue, he will undergo the test of hypothesis" what problem do you think organization or the business is facing?
Assuming that higher advertising expenditures lead to higher sale for a firm. The manager collects data on advertising expenditure and on sales revenue in a specific period of time. This hypothesis can be translated into the mathematical function, where it leads to −
Y = A + Bx
Where Y is sales, x is the advertisement expenditure, A and B are constant.
Managerial Economics is a discipline that combines economic theory with managerial practice.
TRUE
A close interrelationship between management and economics has led to the development of managerial economics.
TRUE
According to Mansfield, "Managerial economics is defined as "the integration of economic theory with business practice for the purpose of facilitating decision making and moving forward planning by management."
FALSE
CORRECT ANSWER IS: According to Spencer and Siegelman "Managerial economics is defined as "the integration of economic theory with business practice for the purpose of facilitating decision making and moving forward planning by management."
Managerial Economics is more limited in scope as compared to microeconomics.
TRUE
It is believed that the success of a firm depends on its primary measure and that is profit.
TRUE
Based on economics models, and theories societies at the global level can be classified into three main categories - distribution, production and consumption.
FALSE
CORRECT ANSWER IS: Societies can be classified into two main categories - production and consumption.
The performances of firms get analyzed in the framework of an economic model called the theory of the firm.
TRUE
In a given an existing environment, practically, business economics can be used by the goal-oriented manager in two ways......................
(a) helping the managers to increased profit and also reallocating labor from a market activity to the production line.
(b) provide a framework for evaluating whether resources are being allocated efficiently within a firm and also help managers respond to various economic signals.
(c) helping the managers to increased profit and also reallocating labor for efficiency in cost.
(d) helping firms to minimize cost and maximize output.
In the scope of business studies, managerial skills can be obtained through the study of some interested and importance topics such as production, cost, demand, pricing, market structures and government regulations by studying..................................
(a) managerial economics.
(b) strategic management.
(c) management for decision.
(d) economics for decision making.
In the field of distribution of goods and services in the market, commercial entities present the output to the consumers through..........................
(a) bargaining.
(b) pricing.
(c) regulation.
(d) cost estimation.
The rational application of business economics should result in ...........
(a) better managerial decisions, higher profitability and cost maximization.
(b) better managerial decisions and efficient production.
(c) better managerial decisions, higher profits and an increase in the value of the firm in terms of efficiency.
(d) higher profits and value addition to firms in terms of efficiency.
The Real Estate appraisal wants to determine if the selling price of a houses can be accounted for by the total square footage of living area (i.e. Square Feet in 1000s), the size of the garage (as measured by the number of cars that can fit in the garage, and the number of bedrooms in each house. In this example: The dependent variable---Y= selling price of a house, Independent Variables (X's)= X1, X2, and X3. Where X1= Total square footage of living area, X2= The size of the garage, X3= The number of bedrooms in each house.
18. Interpret the R-square value of 0.95 associated with the estimation of the selling price.
About 95% variation in the selling price (Y) is explained by the independent variables(changes) in the square footage, size of the garage and bedrooms.
Given the information about the regression estimation of the selling price below:
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
...
P-values
B Std. Error Beta
1 (Constant) 126.440 11.528 10.968 0.000
Square Footage 30.803 14.659 .509 2.101 0.074
Size of Garage 12.567 4.459 .386 2.818 0.026
Bedrooms 4.576 7.143 .148 0.641 0.542
a. Dependent Variable: Selling Price
Extra Note for self: use Formula for Multiple Regression: Y=a+bX1+cX2+dX3+u
The dependent variable =Y
Independent Variables (X's)= X1, X2, and X3
a= intercept
b, c, d= coefficients
u= error term or disturbance term
19. What is the interpretation of the coefficient value of Size of Garage?
Analysis of the size of the garage (X2) and the selling price (Y). Based on the information given in estimation if the size of the garage (X2) increases by 1 car then the selling price will increase by 12.567.
20. What is the interpretation of the coefficient value of Size of Garage?
Analysis of the size of the bedroom (X3) and the selling price (Y). Based on the information given in estimation if the size of the bedroom (X3) increases by 4 then the selling price will increase by 4.576.
...
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