All Time Economics Interview Questions

All Time Economics Interview Questions

1. How best to define economics?

Economics is usually defined as the problem of how best to distribute limited resources, limited because wants are characterized as unlimited, but common sense tells us that rather than limited resources, there is an abundance of resources. The difference is one of perspective and this is core to any alternative understanding of economics.

If wants are the focus, then of course resources are limited by definition, but if minimum needs or essentials are used as the foundation, then resources are seen to be abundant. The difference is between a description and an explanation. A focus on wants or desires describes a market situation, while a focus on essentials or needs allows an explanation of choices to begin.

2. What is a retention bonus?

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.

3. What is explanatory research?

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

4. What is a retention bonus?

5. What are the advantages of leaving the allocation of a countrys resources to the price mechanism?

The main conditions required are:

1. Either a finite number of agents or goods.
2. No externalities – That is, the consumption of one person should not harm or benefit anyone else.
3. No matter how much a person is consuming, they must be able to be made slightly happier by consuming a bit more of something.

6. What kind of market structure is the automotive industry?

There are many ways to describe the market structure of the automotive industry.

Here are two:

One of heterogeneous buyers makes up the population and nearly homogeneous sellers. This means that everyone (the population) needs a car (because a car is not a luxury item), but everyone has different needs (i.e.: compare a mother of 4 to a construction worker). Thus, buyers are everyone in the population, and they are heterogeneous (different). However, sellers are practically the same. GM, Ford, Chrysler, Nissan, Honda, Toyota, etc all offer the same products.

Thus, they are homogeneous (similar). Buyers with high brand-preference and highly marketed sellers this means that many automobile buyers have a brand loyalty, and sellers market to cultivate that loyalty.

A great example of this is Jeep and Harley Davidson. Both companies have created a kind of community amongst their owners (I am sure we have all seen two Jeeps passing and the driver’s wave at each other).

7. What are the advantages of free market economy?

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.

8. What are the disadvantages of mixed economy system?

The disadvantages of a mixed economy really depend on how “mixed” it is. For instance, if it is mixed more towards a free-market, there is little regulation (some may see this as a good, though), but if it is mixed more towards a command economy, the control may stifle growth.

Mixed economies can also have different characteristics. Each of these will share a different set of disadvantages. A will stifle profits due to it’s high tax structure, but will encourage new ideas due to its low regulation (this could result in many weird effects such as an economy comprised almost solely of small, well-niche businesses). B will encourage profits, but due to its regulation, some new ideas (and some growth) will be stifled. For instance, if environmental regulations are strict, the building of new plants or refineries might be lowered. This could result in a small number of very large and profitable businesses.

9. What was the theory of mercantilism?

Mercantilism was the economic philosophy underlying English colonial policy. The object of mercantilism was to increase the wealth of the Mother County (Great Britain) in gold and silver. To accomplish that goal, a favorable balance of trade was desired. That means that a nation would sell more than it would purchase, thus creating a surplus in the treasury. The name of the philosophy points out the importance is of merchants in this policy. Merchants would sell products to foreign nations and purchased items to be sold within the nation. Colonies played a vital role in mercantilism.

A colony would supply the necessary raw materials to the industries of England and the colonists would be a source of income to the nation because they would buy the finished products and supplies they needed to grow, from the Mother Country. The ideal was to become self-sufficient. The nation would produce everything its people needed and buy nothing from foreign nations. Since the ideal could not be accomplished in the real world of economics, the object of mercantilism was to minimize imports that cost money and maximize exports and the trade that brought money in to the nation.

10. Why was Vietnam divided into two countries?

The north was communist, the south was capitalist, which was determined by their supporter states, the USSR and the US after independence in 1954, and however, this division was only meant to be temporary, with elections to re-unify the country.

11. What can you do about tourists use of natural resources?

Countries have to legislate so that new tourist developments satisfy environmental safeguards.

All development must be sustainable.

1) There must be no pollution into waterways and oceans.
2) Garbage and sewage must be collected and recycled as much as possible.
3) Tourist movements into natural areas must be limited so the numbers do not do any damage to the environment.
4) Building must blend into the natural environment.
5) There must be legal deforestation (e.g., cutting down rainforests to build a golf course).
6) New resorts and gardens must not put too great a demand on water and other natural resources.

12. What are the various uses for break-even analysis?

Such analysis allows the firm to determine at what level of operations it will break even (earn zero profit) and to explore the relationship between volume, costs, and profits. It helps the management that at current costs of products how many numbers of units must be sold to recover the cost of producing the product.

For Example: If you spend, $200 on producing a product and selling price is $20 then you must sale 10 units to recover the cost of product.

It also helps the management to determine how much of units to be sold to get desired profit on product. For example: if in the above example you want to earn $20 profit then add it to it’s cost of $200 and it will become $220 now you need to earn profit of this $20 you need to sale 11 items of product.

13. What still matters in strategic management lies in the value of planning?

There is an old saying that if you fail to plan, you are planning to fail. By acting on this, strategic management actually gives the organization direction, a sense of identity and unity towards what the business goal. Therein lays the continued importance of strategic management towards business success.

Every business has a vision and a mission. Strategic management takes into consideration both of these. Strategic management helps in achieving the organizational goals in an effective and efficient manner. For more details on importance of management, you can see the “Importance of Management” section on

14. What is the importance of strategic management towards the success of a business?

Strategic management used to play a different after the Second Word 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..

15. How tourism is an upcoming industry?

Tourism is an upcoming industry because it is generating high level of income, nowadays it is third number of high income generating industry…

16. What caused the Great Depression?

e business boom of the 1920s made people overly confident therefore, they invested their money in risky stocks and deals. In addition, banks made careless loans and soon failed when people could not pay them back. Third, businesses produced more goods than were wanted and they could not sell or make a profit. Lastly, human workers / jobs were becoming replaced by machines and people could not find work.

17. Is there a difference between corporate profit maximization and maximization of shareholder wealth?

Sure, profit maximization relates to profits *only* while shareholder wealth also involves total company equity, debt ratios and any of 15 other financial performance measure ratios. Management could focus on profit maximization over a longer period of time, say, 40 years (Toyota), while the shareholder would rather see stock values and corporate total value increase immediately (get in and get out) (90% of American manufacturers).

If management focused on short-term profit maximization, say at the expense of long-term sales revenues, then shareholder wealth (stock price) could actually decrease because of the loss of market share.

18. Is there a rule of thumb for office rent or lease per gross income?

There is a GRM (Gross Rent Multiplier) that compares the total rental/lease income to the value or price of the property.
The price can run 8 to 10 times the gross income, but that can vary based on market conditions, interest rates, management, building type, quality.

Capitalization Rate (cap rate) is a more comprehensive way of evaluation, but if the GRM is known for a building type and location, you can quickly determine a ballpark value.

19. How does one arrive at a competitive pricing strategy for a multi-service practice where there are no specific products in question?

If your question is competitive pricing of services then utilize ABC (Activity Based Costing) to determine the Cost per activity related to the service.

Accumulate all such activities into a package and arrive at Cost per Package. Analyze the overall revenues that packages may stream in discounted over the next three years. You now have two points of Play

a) Cost per package
b) Overall discounted cost per enhanced package

20. How do the average household income of the different countries compare?

In order to answer this question it is best to look at median household income. Median household income represents the statistical mid-point, with half of all households making more and half making less.

For the developed nations, median household income figures range from $30,000 to $55,000. For US states median household income figures range from $32,000 to $57,000. Overall, median household income levels among developed nations are similar to those found among US states.

21. What is the marginal cost of capital?

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

22. What will be the long-term effects of the Baby Boom?

There are millions of Baby Boomers coming up hot and heavy. There are pros and cons…

PROS:

Baby Boomers want things right and aren’t too old to fight for it which could be excellent in the areas of health care, politics, and taking a good solid stand on important issues of the country they are in.

Baby Boomers are either going to retire and travel, stay around home, have ill health perhaps, or many well go back to work part-time or full-time. Although I am not classed as a Baby Boomer I found that I would rather work part-time than stay home constantly and it helps financially.

Baby Boomers may even have more free time to volunteer in places that need help, or, they may even go back to College or night school. Some may even go into their own businesses. They have much to offer.

23. Who are Canadas top three trading partners?

1 U.S
2 Japan
3 United Kingdom

24. What is the Gross Domestic Product of Norway?

Norway is one of the world’s most developed nations and is home to one of the most advanced economies in the world. The country’s overall GDP is quite large considering the nation’s small population. Its GDP per capita is higher than that of the United States, ranked second in both nominal and PPP figures.

Its GDP figures in 2005 were as follows:

1) Nominal GDP: $296 billion (25th rank)
2) GDP PPP was $195 billion (42nd rank)
3) Nominal GDP per capita: $64,000 (2nd rank)
4) GDP PPP per capita: $42,000 (2nd rank)

25. What is the economy in Bulgaria like?

Bulgaria was somewhat hesitant in terms of embracing market reforms. The economy suffered greatly after the fall of communism with standard of living dropping drastically. In the mid 1990s, the economy improved and reforms were implemented. Economic growth has been steady and stable, ranging from 5% to 7% since the late 1990s.

Currently its GDP per capita is considerably above that of most developing nations but still considerably lower than that of Eastern Europe’s more developed economies, not to mention the post-industrial economies of Western Europe. 15% of its GDP is still derived from agriculture, compared to less than 3% in most developed nations. Unemployment remains relatively high at almost 10% and the country receives roughly $475 billion in financial aid annually.

Overall, the nation has overcome many of the problems that have plagued the economy during the early 1990s. Bulgaria remains ahead of most other developing or quasi-developed nations, yet lags behind other former communist nations such as the Czech Republic, Slovenia or Hungary.

26. Who decides what goods services will be produced and sold in the US?

It is mostly the American consumer. The US government also plays a large role in the nation’s economy, constituting roughly 36% of GDP – making it the largest and thus most influential economic institution and consumer. Manufacturers or those controlling supply may also manipulate demand through advertising and popular media.

27. What is the Malthusian theory on population?

If population growth continues then there will not be enough resources around for everyone this will lead to an event such as famine or war, which will reduce the population.

28. What does macroeconomics mean?

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.

29. Is there competition between the producers in Canada?

Yes, Canada is a mixed economy. Thus, there is going to be some degree of competition among “producers.”

30. How do tax cuts affect the economy?

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.

31. What is the difference in changing the scope between a spiral approach and a waterfall approach?

The scope of requirements changes in Waterfall model is less than that in Spiral Model. In Waterfall model, you progress to the next stage only when the requirements of the stage above it are finalized and signed off. So literally, we do not have any scope of changing the requirements once we move down the phases in this model.

However, Spiral model gives us flexibility to change the requirements and scope anytime during the life cycle.
In this model, we implement the individual requirements following all the standard phases of Software Life Cycle. Therefore, if any new change is there, we can implement it in next version of the software.

32. What is globalization and what are its effects on the Indian economy?

It is largely positive. Globalization has brought many jobs and large sums of investment to India. India’s economy has been growing at exceptional rates for the past several years and many new opportunities have opened up for India. Yet, India does remain quite poor.

Its GDP per capita is less than $2,000, a fraction of the GDP per capita found in some Latin American and Eastern European nations. Most of those who profit from globalization in India are the upper classes, with many in the lower classes being displaced and suffering from miserable labor conditions.

Nonetheless, globalization has created a large economic boom for India with largely positive effects Define economics on the welfare and scaruty of resources. Economics need to be studied to see where the economy is going, what can be removed from the economy and what can be added in order to improve it.

Economics is one of the fundamentals of business and if studied carefully, one can do very well business if all the right moves are made.

33. What are the types of market economies?

From my understanding, there are 4 main types of market economies. They are also known as Economic Systems. The 4 are Free Market, Mixed Market, Command and Traditional Economy. Please try to understand that there are various terms for them, and it can be different from one book to another.

What is important is to understand its characteristics. The Free Market, just simply means let the invisible hand in the Economy work, while in the Command Economy, the invisible hand is the government. The mixed Economy has a mixture of both. Traditional economy is a bit different though, the economy only moves when an elder tells them to.

34. What is the opportunity cost of devoting scarce university land to car parking?

Since opportunity cost is defined as the cost of any activity measured in terms of the best alternative activity, which is forgone, in this case, the opportunity cost can be a field for students to play around or a land where a library can be built. Another example would be the opportunity cost of coming to school.

This answer will be the time enjoyed going to the cinema or time spent with your partner. Hence, the opportunity cost of coming to school will be the cost of not going to cinema and spending time with your partner.

35. How do reductions in government spending affect the economy?

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.

36. What is the significance of foreign exchange rate risk and how can this risk be mitigated?

Foreign exchange risk is the level of uncertainty that a company must manage for changes in foreign exchange rates that will adversely affect the money the company receives for goods and services over a period.

For example, a company sells goods to a foreign company. They ship the goods today, but will not receive payment for several days, weeks or months. During this grace period, the exchange rates fluctuate. At the time of settlement, when the foreign company pays the domestic company for the goods, the rates may have traveled to a level that is less than what the company contemplated. As a result, the company may suffer a loss or the profits may erode.

To minimize or manage the risk, companies enter into contracts to buy foreign currency at a specified rate. This allows the companies to minimize the uncertainty of the risk, so that they can price their products accordingly.

37. How do the determinants of demand affect the price of a particular product?

As demand for a good goes up, the price goes up. So any determinant of demand that has positive or negative effect on demand will have the same affect on the price.

38. What is a monopoly?

one business or company dominates its area and squeezes out all its competition, the result is the consumer does not have a free choice, and inevitably, the price of its products or services will increase, and the ‘Monopoly’ increases its profit. Although, sometimes prices stay low to discourage anyone from entering the market, profit still does occur.

Not to be confused with a pure monopoly, where a company has control over the entire market for a product because of barriers.

However, a monopoly is a philosophical process of direct competition leading to a pure monopoly it is not in itself a purely dominating force. It is rather, the process of obtaining competitive grounds for strive toward total control.