Answer Sheet Managerial Economics
Managerial Economics
Section A
1) a. Macroeconomics
2) c. Demand function
3) b. Arc elasticity
4) b. Consumer goods
5) c. The Indifference Curve
6) a. Future costs
7) c. Equilibrium
8) b. Gross national product
9) b. Product approach
10) c. GDP
PART TWO:
1) The elasticity of one variable with respect to another between two given points. It is used when there is no general function to define the relationship of the two variables. Arc elasticity is also defined as the elasticity between two points on a curve.
The P arc elasticity of Q is calculated as
The percentage is calculated differently from the normal manner of percent change. This percent change uses the average (or midpoint) of the points, in lieu of the original point as the base.
2) Definition of 'Law of Diminishing Marginal Returns'
A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee.
The law of diminishing marginal returns means that the productivity of a variable input declines as more is used in short-run production, holding one or more inputs fixed. This law has a direct bearing on market supply, the supply price, and the law of supply. If the productivity of a variable input declines, then more is needed to produce a given quantity of output, which means the cost of production increases, and a higher supply price is needed. The direct relation between price and quantity produced is the essence of the law of supply.
An economic theory that states as additional inputs are put into production, the additional return will be in successively smaller increments. This can be due to crowding, adding less appropriate resources or increasing inputs of lower quality.
In More Laymen Terms
As the saying goes, "Too Many Cooks Spoil the Broth," in any production there is a point of diminishing returns where just adding more inputs will not give the same
Section A
1) a. Macroeconomics
2) c. Demand function
3) b. Arc elasticity
4) b. Consumer goods
5) c. The Indifference Curve
6) a. Future costs
7) c. Equilibrium
8) b. Gross national product
9) b. Product approach
10) c. GDP
PART TWO:
1) The elasticity of one variable with respect to another between two given points. It is used when there is no general function to define the relationship of the two variables. Arc elasticity is also defined as the elasticity between two points on a curve.
The P arc elasticity of Q is calculated as
The percentage is calculated differently from the normal manner of percent change. This percent change uses the average (or midpoint) of the points, in lieu of the original point as the base.
2) Definition of 'Law of Diminishing Marginal Returns'
A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee.
The law of diminishing marginal returns means that the productivity of a variable input declines as more is used in short-run production, holding one or more inputs fixed. This law has a direct bearing on market supply, the supply price, and the law of supply. If the productivity of a variable input declines, then more is needed to produce a given quantity of output, which means the cost of production increases, and a higher supply price is needed. The direct relation between price and quantity produced is the essence of the law of supply.
An economic theory that states as additional inputs are put into production, the additional return will be in successively smaller increments. This can be due to crowding, adding less appropriate resources or increasing inputs of lower quality.
In More Laymen Terms
As the saying goes, "Too Many Cooks Spoil the Broth," in any production there is a point of diminishing returns where just adding more inputs will not give the same