Bedri Managerial Economics Exam

RIFT VALLEY UNIVERSITY-HARAR CAMPUS
FINAL EXAM OF MANAGERIAL ECONOMICS

FOR MBA PROGRAM STUDENTS
NAME BEDRI MUKTAR AHMED

ID.# 146/12 PROGRAM WEAKEND
PART I: MULTIPLE CHOICE QUESTIONS (GIVE EXPLANATION TO YOUR

ANSWERS)
1. B - Managerial economics to establish appropriate decision making not rolling

2. C - because of rules of demand of supply product of market
3. A – is not characterized of competitive market product defertaition but identical
4. D - the repeated dilemma have determined that confusing always answer for
both the reason
5. A - in equal product or production in different iso product curve
6. B - variable cost , fixed cost and sunk cost irrelevant cost
7. B -
8. B
9. C
10. B
11. D – b/couse all activities are the existence of under employees
12. D – all the reducing the prise of firm that product
13. C – increasing its nominal demands
14. A
15. C
PART II: DESCRIBE EACH OF THE FOLLOWING EFFECTS SUBSEQUENT TO

MANAGERIAL DECISIONS
1. Recruitment of ineffective employees

Businesses rely on their employees to be successful. Hiring the right people is imperative,
and there are many repercussions when recruiting and selection systems fail. More than just
losing money from lack of productivity, hiring the wrong people negatively affects many
aspects of daily business and productivity. There are many ways that bad hiring decisions can
hurt your company.
Turnover
When the wrong person for the position is hired, it typically results in having to refill the
position again. Time, money and energy are lost during this downtime, as well as additional
recruiting and training costs. It hurts a company to have an open position in several ways,
including loss of productivity, frustration of continuous retraining and inability to progress
with company initiatives. Bad hires may also result in good employees leaving the company,
creating an even greater turnover problem.
Money
It costs between 50 and 175 percent of the position’s annual salary for staff replacements,
according to the Corporate Advisory Board of Washington, D.C. These costs may include job
posting fees, training fees (especially if training is conducted off-site) and paying the
“wrong” employee’s salary before employment officially ends. If that person was a
salesperson or account manager, the company may lose revenue for sales not made or clients
lost. If the business is small or a start-up, hiring the wrong person may bring down the entire
company.
Morale
A wrong hire due to an ineffective recruitment and selection process can hurt the morale and
productivity of good employees. If the employee was in upper management, good employees
may reconsider their tenure. If it was a lower-level employee, then fellow workers having to
take up that person's slack may feel overworked and underappreciated. Also, bad hires often
engender negative attitudes in the workplace.
Confidence
Good employees may lose confidence in their management team in the face of consistently
poor hiring decisions. Managers may lose confidence in their own abilities if they cannot
train or motivate the bad hire, or if they were involved in hiring. Managers and small business
owners must also wrestle with terminating the employee and dealing with feelings of guilt
and stress.
2. Change of exchange rate

Effects of exchange rate changes
The government may influence the exchange rate in order to influence the economy
(Monetary Policy). The government may influence the exchange rate directly by buying or
selling the domestic currency from the currency reserves in the foreign exchange market.
Alternatively the government can affect the exchange rate indirectly, by affecting the level of
aggregate demand, employment, inflation and the balance of payments.
The government can, for example, increase the value of the exchange rate (by raising short-
term interest rates) in order to decrease the prices of imports and reduce the import price-led
inflation within the economy. However, this may cause export volumes to fall, especially if
they are price sensitive (elastic) as well as leading to a fall in employment.
The government may also decrease the exchange rate to achieve some of its macroeconomic
goals, such as improving the balance of payments (imports less competitive and exports more
competitive) or increasing employment. However, higher import prices could cause import
price led inflation.
a. Changes in exports
As we have seen, a depreciation of a currency will reduce the overseas price of exports,
which should lead to an increase in demand for exports. The higher the price elasticity of
demand for exports, the bigger the increase in demand for exports will be.
b. Changes in imports
A depreciation of a currency will increase the price of imports. This will lead to a
decrease in the demand for imports, with the scale of the decrease depending on the price
elasticity of demand for imports. If demand is very inelastic, then imports will change
very little. If, on the other hand, demand is very elastic, then imports will change
considerably.
Thus government policy may be to manipulate the Exchange Rate to achieve certain
objectives (managed exchange rate - also known as `dirty floating´
3. Rising of general price level
Inflation risk is the danger that a general increase in the price level will undermine the
real economic value of corporate agreements that involve a fixed promise to pay over an
extended period. Leases, rental agreements, and corporate bonds are all examples of
business contracts that can be susceptible to inflation risk.
4. High cost of input
Input marginal cost of inputs and economic rent in cases where input are high supply
at the current market prise , if the price of input goes up the cost of producing the
good increase
5. Ways insure safety in business must be insure their equipment is used and maintained
correctly to reduce the risk of accidents or damage to health and safety requirements
6. An optimal decision is a decision that leads to at least as good a known or expected

outcome as all other available decision options. It is an important concept in decision
theory. In order to compare the different decision outcomes

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RIFT VALLEY UNIVERSITY-HARAR CAMPUS

FINAL EXAM OF MANAGERIAL ECONOMICS

NAME BEDRI MUKTAR AHMED

PART I: MULTIPLE CHOICE QUESTIONS (GIVE EXPLANATION TO YOUR

1. B - Managerial economics to establish appropriate decision making not rolling

PART II: DESCRIBE EACH OF THE FOLLOWING EFFECTS SUBSEQUENT TO

1. Recruitment of ineffective employees

2. Change of exchange rate

6. An optimal decision is a decision that leads to at least as good a known or expected

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