Question 1

When making the output decision to maximize profit and when output is a discrete choice variable,a manager should choose

Accepted Answer

A) the level of output where marginal revenue exactly equals marginal cost. 
B) the last level of output for which marginal revenue exceeds marginal cost. 
C) the output level where marginal revenue is as close to marginal cost as possible. 
D) the output level where sunk costs are minimized and total revenue is maximized. 
A) the level of output where marginal revenue exactly equals marginal cost. 
B) the last level of output for which marginal revenue exceeds marginal cost. 
C) the output level where marginal revenue is as close to marginal cost as possible. 
D) the output level where sunk costs are minimized and total revenue is maximized.

Question 2

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A:   If the decision maker is choosing 400 units of activity A,

Accepted Answer

A) this level maximizes net benefits. 
B) the activity could be reduced by one unit and net benefits will increase by $10. 
C) the activity could be reduced by one unit and net benefits will rise by $25. 
D) the activity could be increased by one unit and net benefits will increase by $15. 
E) the activity could be reduced by one unit and net benefits would decrease by $10. 
A) this level maximizes net benefits. 
B) the activity could be reduced by one unit and net benefits will increase by $10. 
C) the activity could be reduced by one unit and net benefits will rise by $25. 
D) the activity could be increased by one unit and net benefits will increase by $15. 
E) the activity could be reduced by one unit and net benefits would decrease by $10.

Question 3

Refer to the following table:   The optimal level of activity is:

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any of the activity levels. 
A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any of the activity levels.

Question 4

Use the following marginal benefit and marginal cost functions for activity A: MB = 100 - 5A
MC = 20 + 3A
The optimal level of A is

Accepted Answer

A) 40 
B) 30 
C) 20 
D) 10 
E) 0 
A) 40 
B) 30 
C) 20 
D) 10 
E) 0

Question 5

The manager of the customer service department at a bank can hire employees with a high school degree (HS)who earn $10,000 annually or employees with a bachelor's degree (B)who earn $20,000.The manager wants to maximize the number of customers served given a fixed payroll.   Given the above info,if the manager currently has three HS and three B,what must be true?

Accepted Answer

A) More customers could be served if the manager hires fewer HS and more B. 
B) More customers could be served if the manager hires more HS and fewer B. 
C) The manager is making the correct decision because the marginal contributions are proportionate. 
D) The manager is not making the correct decision because bachelor's degree holders are more productive at all levels of customer served.   . 
A) More customers could be served if the manager hires fewer HS and more B. 
B) More customers could be served if the manager hires more HS and fewer B. 
C) The manager is making the correct decision because the marginal contributions are proportionate. 
D) The manager is not making the correct decision because bachelor's degree holders are more productive at all levels of customer served.   .

Question 6

A restaurant currently has two cooks and ten waiters.Cooks earn $10 an hour and waiters earn $5 an hour.The last cook added 40 meals served to total output,while the last waiter added 25 meals served to total output.In order to maximize the number of meals served with a fixed budget,the manager should

Accepted Answer

A) continue to use two cooks and ten waiters because output is being maximized. 
B) should use more cooks and fewer waiters because cooks are more productive than waiters. 
C) should use more cooks and fewer waiters because productivity per dollar is higher for cooks than for waiters. 
D) should use more waiters and fewer cooks because waiters are paid less than cooks. 
E) should use more waiters and fewer cooks because productivity per dollar is higher for waiters than for cooks. 
A) continue to use two cooks and ten waiters because output is being maximized. 
B) should use more cooks and fewer waiters because cooks are more productive than waiters. 
C) should use more cooks and fewer waiters because productivity per dollar is higher for cooks than for waiters. 
D) should use more waiters and fewer cooks because waiters are paid less than cooks. 
E) should use more waiters and fewer cooks because productivity per dollar is higher for waiters than for cooks.

Question 7

In order to minimize the net cost of pollution reduction,the level of pollution reduction (the amount of a pollutant not released into the environment)should be the level at which

Accepted Answer

A) the marginal benefit of reducing pollution exceeds the marginal cost of reducing pollution by the greatest possible amount. 
B) the total benefit of reducing pollution equals the total cost of reducing pollution. 
C) the marginal benefit of reducing pollution equals the marginal cost of reducing pollution. 
D) the total cost of reducing pollution is minimized and the total benefits of reducing pollution are maximized. 
A) the marginal benefit of reducing pollution exceeds the marginal cost of reducing pollution by the greatest possible amount. 
B) the total benefit of reducing pollution equals the total cost of reducing pollution. 
C) the marginal benefit of reducing pollution equals the marginal cost of reducing pollution. 
D) the total cost of reducing pollution is minimized and the total benefits of reducing pollution are maximized.

Question 8

Refer to the following table:   What is the marginal cost of the 1st unit of the activity?

Accepted Answer

A) 0 
B) 5 
C) 10 
D) 15 
E) none of the above 
A) 0 
B) 5 
C) 10 
D) 15 
E) none of the above

Question 9

The optimal level of any activity is that level for which

Accepted Answer

A) total benefit exceeds total cost by the greatest amount. 
B) marginal benefit exceeds marginal cost by the greatest possible amount. 
C) both a and b 
D) none of the above 
A) total benefit exceeds total cost by the greatest amount. 
B) marginal benefit exceeds marginal cost by the greatest possible amount. 
C) both a and b 
D) none of the above

Question 10

a constrained minimization problem,the decision maker

Accepted Answer

A) is constrained by the specific amount of total benefits. 
B) is constrained by the choice set of values for the activities. 
C) seeks to minimize the cost of achieving a specific goal. 
D) all of the above 
E) none of the above 
A) is constrained by the specific amount of total benefits. 
B) is constrained by the choice set of values for the activities. 
C) seeks to minimize the cost of achieving a specific goal. 
D) all of the above 
E) none of the above

Question 11

The optimization rule for unconstrained optimization is to select that level of activity at which

Accepted Answer

A) marginal benefit equals marginal cost. 
B) total benefit is less than total cost. 
C) total benefit is equal to total cost. 
D) marginal benefit exceeds marginal cost. 
A) marginal benefit equals marginal cost. 
B) total benefit is less than total cost. 
C) total benefit is equal to total cost. 
D) marginal benefit exceeds marginal cost.

Question 12

A manager in charge of new product development can hire engineers and market researchers.The annual salary of an engineer is $40,000 while a market researcher receives $20,000.The marginal contribution of engineers and market researchers are:   Based on the above information,how should a manager with an annual budget of $240,000,allocate this budget in order to maximize the number of new products developed?

Accepted Answer

A) Hire three engineers and four market researchers. 
B) Hire three engineers and five market researchers. 
C) Hire five engineers and two market researchers. 
D) Hire four engineers and four market researchers. 
A) Hire three engineers and four market researchers. 
B) Hire three engineers and five market researchers. 
C) Hire five engineers and two market researchers. 
D) Hire four engineers and four market researchers.

Question 13

A government agency is having problems with personal telephone calls made during working hours.Because each minute of a personal call costs the agency $0.50 in wasted wages,it has decided to hire operators to monitor calls.The agency wants to hire the number of operators that will minimize the total cost of personal calls. $\begin{array}{c}
\begin{array}{c}
\text {Number of}\
\text {  operators}\
0\
1\
2\
3\
4\
5\
\end{array}
\begin{array}{c}
\text {Minutes of personal}\
\text {  calls(per week) }\
3900\
2300\
1300\
600\
100\
0\
\end{array}
\end{array}$
 Based on the above information,what is the most the agency would be willing to pay the fifth operator?

Accepted Answer

A) $100 
B) $200 
C) $400 
D) $500 
E) none of the above 
A) $100 
B) $200 
C) $400 
D) $500 
E) none of the above

Question 14

Refer to the following table:   The optimal level of activity is:

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any activity level. 
A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any activity level.

Question 15

A radio manufacturer is experiencing theft problems at its warehouse and has decided to hire security guards to reduce the thefts.The firm wants to minimize the net cost of warehouse thefts. $\begin{array}{c}
\begin{array}{c}
\text {Number of}\
\text {  Security Guards}\
0\
1\
2\
3\
4\
5\
\end{array}
\begin{array}{c}
\text {Number of Radios}\
\text { Stolen Per Week }\
50\
30\
20\
14\
8\
6\
\end{array}
\end{array}$
  Given the above info,if the cost of a stolen radio is $25,what is the MOST the firm would be willing to pay to hire the first security guard?

Accepted Answer

A) $200 
B) $250 
C) $500 
D) $750 
A) $200 
B) $250 
C) $500 
D) $750

Question 16

The manager of the customer service department at a bank can hire employees with a high school degree (HS)who earn $10,000 annually or employees with a bachelor's degree (B)who earn $20,000.The manager wants to maximize the number of customers served given a fixed payroll.   Given the above info,if the manager's payroll is $120,000,what should be done to maximize the number of customers served?

Accepted Answer

A) Hire six HS and three B. 
B) Hire five HS and five B. 
C) Hire four HS and four B. 
D) Hire two HS and five B. 
A) Hire six HS and three B. 
B) Hire five HS and five B. 
C) Hire four HS and four B. 
D) Hire two HS and five B.

Question 17

The optimal level of any activity is that level for which

Accepted Answer

A) total benefit is maximized. 
B) marginal benefit exceeds marginal cost by the greatest possible amount. 
C) total cost is minimized. 
D) both a and c 
E) none of the above 
A) total benefit is maximized. 
B) marginal benefit exceeds marginal cost by the greatest possible amount. 
C) total cost is minimized. 
D) both a and c 
E) none of the above

Question 18

The decision rule for constrained optimization is to select the level for each activity at which

Accepted Answer

A) marginal benefit equals marginal cost for each activity. 
B) total benefit equals total cost for each activity. 
C) marginal benefit per dollar of marginal cost is equal across all activities. 
D) total benefit per dollar of total cost is equal across all activities. 
A) marginal benefit equals marginal cost for each activity. 
B) total benefit equals total cost for each activity. 
C) marginal benefit per dollar of marginal cost is equal across all activities. 
D) total benefit per dollar of total cost is equal across all activities.

Question 19

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

Accepted Answer

A) is making the correct decision because the dollar expenditure ($4800)is equal for vans and employees. 
B) should use more vans and fewer employees because the last van added 480 packages while the last employee only added 450 packages. 
C) should use fewer vans and more employees because the last dollar spent on vans yielded 1.2 additional packages delivered,while the last dollar spent on employees yielded 1.5 packages delivered. 
D) could deliver more packages for the same budget by using fewer vans and more employees. 
E) both c and d 
A) is making the correct decision because the dollar expenditure ($4800)is equal for vans and employees. 
B) should use more vans and fewer employees because the last van added 480 packages while the last employee only added 450 packages. 
C) should use fewer vans and more employees because the last dollar spent on vans yielded 1.2 additional packages delivered,while the last dollar spent on employees yielded 1.5 packages delivered. 
D) could deliver more packages for the same budget by using fewer vans and more employees. 
E) both c and d

Question 20

A manager in charge of new product development can hire engineers and market researchers.The annual salary of an engineer is $40,000 while a market researcher receives $20,000.The marginal contribution of engineers and market researchers are:   Based on the above information,if the manager has an annual budget of $140,000 and currently is hiring two engineers and three market researchers,then

Accepted Answer

A) the last dollar spent on an engineer yielded more new products than the last dollar spent on a market researcher. 
B) the last dollar spent on a market researcher yielded more new products than the last dollar spent on an engineer. 
C) he is making the correct decision because engineers make more than market researchers. 
D) he is making the correct decision because the last market researcher hired was more productive than the last engineer hired. 
A) the last dollar spent on an engineer yielded more new products than the last dollar spent on a market researcher. 
B) the last dollar spent on a market researcher yielded more new products than the last dollar spent on an engineer. 
C) he is making the correct decision because engineers make more than market researchers. 
D) he is making the correct decision because the last market researcher hired was more productive than the last engineer hired.

When making the output decision to maximize profit and when output is a discrete choice variable,a manager should choose

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A: If the decision maker is choosing 400 units of activity A,

Refer to the following table: The optimal level of activity is:

Use the following marginal benefit and marginal cost functions for activity A: MB = 100 - 5A MC = 20 + 3A The optimal level of A is

In order to minimize the net cost of pollution reduction,the level of pollution reduction (the amount of a pollutant not released into the environment)should be the level at which

Refer to the following table: What is the marginal cost of the 1^st unit of the activity?

The optimal level of any activity is that level for which

a constrained minimization problem,the decision maker

The optimization rule for unconstrained optimization is to select that level of activity at which

Refer to the following table: The optimal level of activity is:

The optimal level of any activity is that level for which

The decision rule for constrained optimization is to select the level for each activity at which

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

Managers,profits,and Markets

Demand,supply,and Market Equilibrium

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 3: Marginal Analysis for Optimal Decisions

When making the output decision to maximize profit and when output is a discrete choice variable,a manager should choose

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A: If the decision maker is choosing 400 units of activity A,

Refer to the following table: The optimal level of activity is:

Use the following marginal benefit and marginal cost functions for activity A: MB = 100 - 5A MC = 20 + 3A The optimal level of A is

In order to minimize the net cost of pollution reduction,the level of pollution reduction (the amount of a pollutant not released into the environment)should be the level at which

Refer to the following table: What is the marginal cost of the 1st unit of the activity?

The optimal level of any activity is that level for which

a constrained minimization problem,the decision maker

The optimization rule for unconstrained optimization is to select that level of activity at which

Refer to the following table: The optimal level of activity is:

The optimal level of any activity is that level for which

The decision rule for constrained optimization is to select the level for each activity at which

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

Managers,profits,and Markets

Demand,supply,and Market Equilibrium

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Refer to the following table: What is the marginal cost of the 1^st unit of the activity?