Managerial Economics Interview Questions & Answers

Managerial Economics Interview Questions

Have you studied Managerial Economics as your major subject? And now you are searching for a suitable job, where your specialized knowledge can be put to use? If yes, then don’t panic and visit the wisdomjobs page to get a list of job opportunities from which you can select the best Managerial Economics job. In a Managerial Economics job you will be able to apply the economic theories to the business enterprise in order to facilitate decision making. With a major in managerial economics, you can develop a career as a survey researcher, credit analyst, investment analyst or an investment banker. Browse through the wisdomjobs page to get all the details about the Managerial Economics job vacancies and also find the application process for the same. You can also prepare for the interview by reading the Managerial Economics job interview questions and answers given to here.

Managerial Economics Interview Questions And Answers

Managerial Economics Interview Questions
    1. Question 1. What Is Managerial Economics?

      Answer :

      Economics is a social science, which studies human behavior in relation to optimizing allocation of available resources to achieve the given ends.

      The application of economic science is all pervasive. More specifically economic laws and tools of economic analysis are applied a great deal in the progress of business decision making. This has led to the emergence of a separate branch of study called Managerial Economics.

      Managerial Economics is the study of economics theories, logic and tools of economic analysis that are used in the process of business decision making. Economic theory and technique of economic analysis are applied to analyse business problems, evaluate business options and opportunities with a view to arriving at appropriate business decision. Managerial economic is thus constituted as that part of economic knowledge, logic, theories and analytical tools that are used for rational business decision making .

    2. Question 2. What Is Managerial Economics? What Is Its Relevance To Engineers/managers?

      Answer :

      Study of economic theories, logic and methodology for solving the practical problems of business. It is used to analyze business problems for rational business decisions. It is also called as Business Economics or Economics for firms.
      Relevance to engineers/Managers:
      Engineering and Management involves a lot of strategic decision making situations. Managerial economics helps in rational decision making. The various economic concepts help a manger to take right decisions. The scope of managerial economics is:

      • The selection of the production or the service to be produced.
      • The choice of production methods and resource combinations.
      • The choice of best price and quantity combinations.
      • Promotional strategy and activities.
      • The selection of location from which to produce.

    3. Question 3. What Are The Basic Economical Concepts?

      Answer :

      The basic/fundamental economic concepts are:

      • Incremental concept
      • Discounting concept
      • Time perspective
      • Opportunity cost
      • Equimarginal concept.

    4. Question 4. What Is Micro And Macro Economics?

      Answer :

      The study of economics is divided into two parts.

      • Micro Economics
      • Macro Economics

      Micro economics:

      • The word micro means a millionth part. Microeconomics is the study of the small part or component of the whole economy that we are analyzing. For example we may be studying an individual firm or in any particular industry. In Microeconomics we study of the price of the particular product or particular factor of the production.
      •  theory studies the behavior of individual decision-making units such as consumers, recourse owners and business firms.

      Macro Economics

      • Macro economics is the study of behavior of the economy as a whole. It examines the overall level of nations out put, employment, price and foreign trade.
      • Macroeconomics is concerned with aggregate and average of entire economy.

    5. Question 5. What Are The Differences Between Micro Economics And Macro Economics?

      Answer :


      • Micro economics is the study of small part of component of the whole economy.
      • Micro economics is called the price theory. It’s explained its composition, or allocation of total production why more of something is produced than of others.
      • In Micro study about individual consumer behavior or individuals firm or what happens in any particular industry.
      • If it be an analysis of price, we study about the price of a particular producer or of a particular factor of production.
      • If it is demand we analysis demand of an individual or that of an industry.
      • Here we study the income of an individual.


      • Macro economics is the study and analysis of economic system as a whole.
      • Macro economics is called income theory. It explains the level of total production and why the level rises and fall.
      • In Macro we study how the aggregates and the averages of the economy as whole is determined and what causes fluctuation in them.
      • In macro we study the general price level in country.
      • In macro we study the aggregate demand of the entire country.
      • Here we study the national income of the country.

    6. Question 6. State Law Of Demand ?

      Answer :

      law of demand basically says when the price of a certain product goes up,quantity demanded of that product goes down. when price goes down, quantity demanded goes up.

    7. Question 7. What Does Perfect Competition Mean?

      Answer :

      Perfect competition is basically an economic model that helps to describe a hypothetical market form. In this form the producer or the consumer does have any kind of market authority in order to make changes in prices.

    8. Question 8. What Is A Demand Forecast?

      Answer :

      A demand forecast is the prediction of what will happen to your company's existing product sales. It would be best to determine the demand forecast using a multi-functional approach. The inputs from sales and marketing, finance, and production should be considered. The final demand forecast is the consensus of all participating managers. You may also want to put up a Sales and Operations Planning group composed of representatives from the different departments that will be tasked to prepare the demand forecast.

    9. Question 9. What Is Equilibrium Of The Firm And Industry ?

      Answer :

      According to Miller, “Firm is an organisation that buys and hires resources and sells goods and services”. Lipsey has defined as “firm is the unit that employs factors of production to produce commodities that it sells to other firms, to households, or to the government.”

    10. Question 10. Explain Factors Influencing Managerial Decision ?

      Answer :

      Critical managerial decision making is the key to superior performance at work. One has to refer to critical Data, past records and performance metrics and analysis before making decisions. 

    11. Question 11. How Will You Arrive At A Business Decision? What Is A Business Environment?

      Answer :

      Managerial Decisions/ Decision Analysis is the Process of selecting the best out of alternative opportunities, open to the firm.
      To arrive at a business decision, the four main phases are:

      1. Determine and define the objective.
      2. Collection of information regarding economic, social, political and technological environment and foreseeing the necessity and occasion for decision.
      3. Inventing, developing and analyzing possible courses of action.
      4. Selecting a particular course of action from the available alternatives.

      Business environment comprises of the economic, social, political and technological environment.

    12. Question 12. What Are Firms?

      Answer :

      Firm is an organization owned by one or jointly by a few or many people, engaged in a productive activity, with a definite aim.

    13. Question 13. What Are The Factors Of Production?

      Answer :

      There are three types of factor of production.

      1. Land.
      2. Labor
      3. Capital.

    14. Question 14. What Are The Main Techniques Of Demand Estimation?

      Answer :

      Demand estimation is predicting future demand form a product. The information regarding future demand is essential for planning and scheduling production, purchase of raw materials, acquision of finance and advertising.
      The various techniques of demand estimation: 

      1. Survey Method
      2. Statistical Method.

    15. Question 15. What Is The Significance Of Foreign Exchange Rate Risk And How Can This Risk Be Mitigated?

      Answer :

      Foreign exchange risk is also known as hedging. Those people who are risk averse follow this kind of transaction to save firm from unexpected loses. Since exchange rate can change in either way i.e. it can depreciate or appreciate, company can gain at the same time but to mitigate loses they engage into forward contracts.

    16. Question 16. What Is Pricing Of Factors Of Production?

      Answer :

      Whenever we have touched on the pricing of productive factors, we have signified the prices of their unit services, i.e., their rents. In order to set aside consideration of the pricing of the factors as "wholes," as embodiments of a series of future unit services, we have been assuming that no businessmen purchase factors (whether land, labor, or capital goods) outright, but only unit services of these factors. This assumption will be continued for the time being. Later on, we shall drop this restrictive assumption and consider the pricing of "whole factors."

    17. Question 17. What Are The Types Of Market Economies?

      Answer :

      There are 4 main types of market economies. They are also known as Economic Systems. They are

      • Free Market,
      • Mixed Market,
      • Command and
      • Traditional Economy.

    18. Question 18. What Is The Importance Of Microeconomics In Study Of Managerial Economics?

      Answer :

      It’s a economics for decision making where we have to be very optimize and implement those situation which will be helpful in profit maximization in our business effectively and efficiently.

      Since the microeconomics explains the concepts like demand, production, supply analysis, so that it maximizes the profit.

    19. Question 19. What Is The Difference Between Project Proposal And Project Feasibility Study?

      Answer :

      Project feasibility study is required to make a decision whether the project proposal is technically and economically feasible. After finalization of the project feasibility report by the experts (technical & economical), the decision for going ahead for preparation of Detailed Project Report (DPR) for the project proposal.

    20. Question 20. Why Does An Indifference Curve Never Meet?

      Answer :

      No indifference curve can intersect because all points on indifference curve are ranked equally preferred and ranked either or less more preferred than every other point on the curve.

    21. Question 21. What Is Full Employment Gdp?

      Answer :

      The market value of all final goods and services produced at full employment. There is no more resources to be deployed. At this stage if there is further expansion of output, then it will lead to inflation.

    22. Question 22. What Is The Importance Of Strategic Management Towards The Success Of A Business?

      Answer :

      Strategic management used to play a different after the Second World War. Strategic plans of the past usually range 3 to 5 years. Some companies could even have plans for 10 good years. That is not possible today given rapid evolution of our society.

    23. Question 23. What Are The Functions Of Price Mechanism In A Free Market Economy?

      Answer :

      Price Mechanism

      • Price mechanism is the point, which equilibrates supply and demand within a market. It is a mechanism of pricing. The price mechanism is one, which allows the prices of goods and services to be decided by the interplay between supply and demand. There is no centralized price fixing.
      • The price mechanism is the concept that the free market, when left to its own devices, will formulate fair prices of the goods or services on its own by the natural laws of supply and demand.

    24. Question 24. What Is Social Cost Benefit Analysis?

      Answer :

      • It refers to the study of feasibility of a project in terms of its total economic cost and total economic benefits.
      • it means to compare total cost will total benefit if we add external cost with private cost, it’s called total social cost if we add external benefit with private benefit, called total social benefit.

    25. Question 25. What Is Collateral Management?

      Answer :

      Collateral Management is a function to manage collateral effectively. It provides interface to enter collateral data, and it has a master data of collateral descriptions and types. It maintains customer, collateral, and credit account relationships so the amount of idle collateral can be determined. It is usually packaged in an application or part of the core-banking application.

    26. Question 26. How Do Tax Cuts Affect The Economy?

      Answer :

      Tax cuts improve the economy by giving the people more spending power and higher consumer confidence, which leads to them spending more of all of their income which leads to more jobs, more business investment in more efficient technologies, and ultimately higher GDP growth.

    27. Question 27. What Is Meant By The Term National Debt?

      Answer :

      When a government spends more than it receives in taxes, it runs a budget deficit, which is usually covered by issuing debt obligations to domestic and/or international investors. In the US, these obligations are Treasury bills, Treasury notes, and Treasury bonds. The total outstanding amount of such obligations constitutes a National Debt.

    28. Question 28. What Is Pps?

      Answer :

      Packets per second (pps) are a measure of throughput for network devices such as bridges, routers, and switches. It is a reliable measurement only if all packet sizes are the same. Vendors will often rate their equipment based on pps, but make sure comparisons are made using the same packet sizes.

    29. Question 29. What Is Universal Banking?

      Answer :

      It generally refers to the combination of commercial banking and investment banking. It is a supermarket for both wholesaler and retailer financial services as it offers a wide range of financial services.

    30. Question 30. What Are The Advantage Of Capitalism?

      Answer :

      The advantage of capitalism is that the governments have limited control over other business.

    31. Question 31. What Does Macroeconomics Mean?

      Answer :

      The study of the overall aspects and workings of a national economy is such as income, output, and the interrelationship among diverse economic sectors. It is the study of all aspects of the economy. It is different from microeconomics, which studies how individual entities (such as people, families, or even corporations) fit in the economy.

    32. Question 32. How Does Outsourcing Affect The Economy?

      Answer :

      In principle, outsourcing makes things a little cheaper and increase profitability. However, some things need to be done 'in house'. For example, some employers (largely) outsource recruitment to key posts. The people making the decisions may be good at picking bright people, but they often do not really know what is needed by the employer. In Britain, it often said that corporations 'hire people who are good at getting jobs but bad at doing them'. To the extent that this is true, it is damaging for all concerned.

    33. Question 33. How Do You Explain Gni Per Capita?

      Answer :

      A measure of the wealth is earned by nations through economic activates all around the world.
      Gross National Income comprises the total value of goods and services produced within a country (i.e. its Gross Domestic Product), together with its income received from other countries (notably interest and dividends), and less similar payments made to other countries. It is also known as GNP.
      It can be calculated as follows:
      GNI = Gross Domestic Product + Net property income from abroad.

    34. Question 34. What Is The Difference Between Service Industry And Industry In Economy?

      Answer :

      Industry is a generic term, but is most commonly used as a substitute term for a manufacturer of goods such as Pepsi or Ford. The term industry can also be used to refer to a very specific group of companies.

      The service industry is essentially non-good producing industries such as retail trade, wholesale trade, and the service industries. According to the U.S. Census Bureau, these companies make up 70% of the total economic activity in the United States. Good examples of the service industry include health care, hospitality & accommodations, and real estate. The financial and insurance sectors would also be included within the service industry.

    35. Question 35. What Is Profitability Analysis?

      Answer :

      This is an analysis of costs and revenue to determine whether a venture will make a profit. This is important information in deciding on whether to make an investment. The length of time required to repay the initial investment can be a critical factor.

    36. Question 36. What Is A Tariff?

      Answer :

      A tariff is nothing but the tax on goods leaving or entering some place.

    37. Question 37. What Is Bop?

      Answer :

      It is called as Balance of payments - an economic term. (BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits).

    38. Question 38. What Is The Incidence Of Tax?

      Answer :

      tax incidence refers to who actually pays the tax.

      Tax incidence can be divided into:

      1. Formal incidence: the party liable to the tax.
      2. Informal incidence: party, who actually pays the tax.

      The tax incidence is decided by the elasticity of demand and supply for a good or service.

    39. Question 39. Which Is A Better Measure Of Economic Well-being Real Gdp Or Nominal Gdp?

      Answer :

      Well real GDP takes into account the inflation rate and thus is more accurate at recording the actual increase in production activities. Therefore, Real GDP is better.

    40. Question 40. What Is The Difference Between An Economic Luxury And An Economic Necessity?

      Answer :

      An economic luxury is wasting land on pools huge garden, etc. An economic necessity is what you need a certain amount of space (houses) to make something very necessary (to live in).

    41. Question 41. How To Find The Marginal Cost Of A Product?

      Answer :

      In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. Mathematically, the marginal cost (MC) function is expressed as the first (order) derivative of the total cost (TC) function with respect to quantity (Q).

    42. Question 42. What Is The Marginal Cost Of Capital?

      Answer :

      Marginal or incremental cost of capital is cost of the additional capital raised in a given period.

    43. Question 43. What Is Consumer Demand?

      Answer :

      Consumer Demand is how much of something that consumers are wanting. A company needs to know the consumer demand so they know how much of a product to make.

    44. Question 44. What Are The Advantages Of Free Market Economy?

      Answer :

      There are many advantages to a free market economy. They range from the moral issues to the practical issues. We will deal mainly with the practical ones.

      Unprecedented innovation - Free markets are wrought with inventions and the capital to research them. Countries classified as having a free market have been responsible for the vast majority of inventions since the 19th century.
      Very high-income mobility - This means that under a free market system it is easier to move around income brackets. It is just easier to become rich or poor when you are left to your own devices as opposed to a controlled economy where resources are allocated by the government.

    45. Question 45. What Is A Retention Bonus?

      Answer :

      A Retention bonus is an incentive paid to a key employee to retain them through a critical business cycle. This could be a transitional period (such as mergers and acquisitions) to ensure productivity or to meet a critical milestone. It has proven to be a very good tool in persuading employees to stay.

    46. Question 46. What Is Ramsay Pricing?

      Answer :

      It assigns costs based on the price elasticity of demand. At higher the elasticity (elastic), the lower the charge of fixed costs when allocated amongst products.

    47. Question 47. How Do Reductions In Government Spending Affect The Economy?

      Answer :

      Generally the government is very good at wasting money and resources so less spending, by the government helps the economy as those resources are allocated in areas that are more efficient.

    48. Question 48. What Perfect Competitive Market And Pure Monopoly Market Have In Common?

      Answer :

      A perfect competitive market and pure monopoly market both have to follow the "law of demand".

    49. Question 49. How Do You Define A Control In Economics?

      Answer :

      A control in economics means a steady profit rate that is increasing.

    50. Question 50. What Is Price Level?

      Answer :

      The price level refers to the monetary value of a good or service.

    51. Question 51. What Are Financial Centers?

      Answer :

      Banks and brokerage firms are considered financial centers.

    52. Question 52. What Is Explanatory Research?

      Answer :

      Explanatory research is research conducted in order to explain any behavior in the market. It could be done through using questionnaires, group discussions, interviews, random sampling, etc.

    53. Question 53. What Is The Advantage Of Mixed Economy System?

      Answer :

      Advantages are:

      1. People can make their own decisions.
      2. The government has limited control, which is good for structure.
      3. Provides freedoms such as Enterprise, ownership, Social Welfare, Profit Earnings, Political Freedom.
      4. All national resources are utilized under mixed economy.
      5. It will activate the government support and direction.

    54. Question 54. What Is An Opportunity Cost?

      Answer :

      Opportunity cost is cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. Concept of opportunity cost is central to economics because it reminds us that every day we each have choices to make and for each choice, that we make there is a second best option that we forego {that we pass up}.

    55. Question 55. What Is An Oligopoly?

      Answer :

      Oligopoly is a market where the supply is controlled by a small group of companies. In this condition, the actions of one company will have a material effect on the entire market for a product.

      Several characteristics of an Oligopoly:

      1. Substantial barriers to entry.
      2. Market dominated by a few large firms.
      3. Differentiated products.
      4. Price rigidity.

    56. Question 56. What Is Privatization?

      Answer :

      Privatization is the transfer of ownership from the public sector (government) to the private sector (business).

    57. Question 57. Why Do Prices Tend To Up?

      Answer :

      Prices tend to move up mainly due to increase in the supply of money, demand and cost of production.

    58. Question 58. What Is Meaning Of Market Economy?

      Answer :

      The meaning of a market economy is in which the decision and production are made. The consumption of goods services are based on voluntary exchange in markets.

Popular Interview Questions

All Interview Questions

Managerial Economics Practice Test

All rights reserved © 2020 Wisdom IT Services India Pvt. Ltd Protection Status

Managerial Economics Tutorial