Question 1

When the choice variable is a continuous variable,the decision rule for an unconstrained maximization problem is:

Accepted Answer

A) If MB > MC,increase the activity. B) If MB < MC,decrease the activity. C) Choose the activity so that MB = MC. D) all of the above E) none of the above A) If MB > MC,increase the activity. B) If MB < MC,decrease the activity. C) Choose the activity so that MB = MC. D) all of the above E) none of the above

Question 2

A manager in charge of new product development can hire engineers and market researchers.The annual salary of an engineer is $30,000 and that of a market researcher is $20,000.The marginal contribution of engineers and market researchers are   Given the above information,if the manager has an annual budget of $120,000,how should this budget be allocated in order to maximize the number of new products developed?

Accepted Answer

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

Question 3

A package delivery service uses vans and employees to deliver the maximum number of packages given a fixed budget.The last van added 600 packages to total output,while the last employee added 500 packages.If vans cost $400 per week and employees earn $300 per week,the firm

Accepted Answer

A) could deliver more packages with the same budget by using more employees and fewer vans. 
B) could deliver more packages with the same budget by using more vans and fewer employees. 
C) should use more vans and fewer employees because the last dollar spent on vans added more to total output than the last dollar spent on employees. 
D) is delivering the maximum number of packages given the fixed budget. 
E) both b and c 
A) could deliver more packages with the same budget by using more employees and fewer vans. 
B) could deliver more packages with the same budget by using more vans and fewer employees. 
C) should use more vans and fewer employees because the last dollar spent on vans added more to total output than the last dollar spent on employees. 
D) is delivering the maximum number of packages given the fixed budget. 
E) both b and c

Question 4

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 contributions of engineers and market researchers are:   Based on the above information,how should the manager with an annual budget of $160,000,allocate this budget in order to maximize the number of new products developed?

Accepted Answer

A) Hire 2 engineers and 1 market researcher. 
B) Hire 3 engineers and 2 market researchers. 
C) Hire 4 engineers and 3 market researchers. 
D) Hire 4 engineers and 1 market researcher. 
A) Hire 2 engineers and 1 market researcher. 
B) Hire 3 engineers and 2 market researchers. 
C) Hire 4 engineers and 3 market researchers. 
D) Hire 4 engineers and 1 market researcher.

Question 5

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A:   If the decision maker is choosing 300 units of activity A,

Accepted Answer

A) this level maximizes net benefits. 
B) if the activity is increased by one unit,net benefits will increase by $20. 
C) if the activity is decreased by one unit,net benefits will decrease by $20. 
D) both b and c 
E) all of the above 
A) this level maximizes net benefits. 
B) if the activity is increased by one unit,net benefits will increase by $20. 
C) if the activity is decreased by one unit,net benefits will decrease by $20. 
D) both b and c 
E) all of the above

Question 6

A restaurant hires cooks and waiters.Cooks earn $10 an hour; waiters earn $5 an hour.The manager,who wants to maximize the number of meals served given a fixed payroll of $45 per hour,expects the following from cooks and waiters:  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Total wumber of meals seived }$
$\begin{array}{c}
\begin{array}{c}
\text {Number of employees}\
\hline 1\
2\
3\
4\
5
\end{array}
\begin{array}{c}
\text {Cook}\
\hline200\
380\
540\
660\
740
\end{array}
\begin{array}{c}
\text {Waiter's}\
\hline 120\
230\
310\
360\
390
\end{array}
\end{array}$
 Given the above information,and given the fixed payroll,the maximum number of meals that can be served is

Accepted Answer

A) 240. 
B) 670. 
C) 850. 
D) 1,130. 
E) none of the above 
A) 240. 
B) 670. 
C) 850. 
D) 1,130. 
E) none of the above

Question 7

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 each security guard is paid $200 a week and the cost of a stolen radio is $25,how many security guards should the firm hire?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 8

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 has a payroll of $80,000,how should the budget be allocated in order to maximize the number of customers served?

Accepted Answer

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

Question 9

function a decision maker seeks to maximize or minimize is the ________ function.

Accepted Answer

A) optimal 
B) decision-making 
C) objective 
D) marginal 
E) none of the above 
A) optimal 
B) decision-making 
C) objective 
D) marginal 
E) none of the above

Question 10

A metal refining plant emits sulfur dioxide into the air and has decided to install air scrubbers to reduce the amount of pollution.Each scrubber costs $180,000 and the Environmental Protection Agency (EPA)fines the plant $5,000 for every part of pollution emitted per million. $\begin{array}{cccc}
  \text { Number of air  } & \text { Amount of pollution  }  \
 \text { scrubbers } & \text { (parts per milion) } \
0 &150\
1&100\
2&60\
3&30\
4&10\
5&0
\end{array}$
 Based on the information above,the first air scrubber __________ (increases/decreases)the total cost of pollution by $______.

Accepted Answer

A) increases,$180,000 
B) increases,$530,000 
C) decreases,$ 70,000 
D) decreases,$250,000 
E) none of the above 
A) increases,$180,000 
B) increases,$530,000 
C) decreases,$ 70,000 
D) decreases,$250,000 
E) none of the above

Question 11

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll.The last doctor hired treated 1,600 extra patients in a year,while the last nurse hired treated 1,000 extra patients in a year.If doctors make $40,000 a year,what do nurses make?

Accepted Answer

A) $25,000 a year 
B) $20,000 a year 
C) $15,000 a year 
D) $10,000 a year 
A) $25,000 a year 
B) $20,000 a year 
C) $15,000 a year 
D) $10,000 a year

Question 12

A firm will maximize profit by producing that level of output at which

Accepted Answer

A) the additional revenue from the last unit sold is equal to the additional cost of the last unit by the largest amount. 
B) the average or unit cost of production is minimized. 
C) the fixed costs of production are minimized. 
D) total revenue equals total cost. 
E) all of the above 
A) the additional revenue from the last unit sold is equal to the additional cost of the last unit by the largest amount. 
B) the average or unit cost of production is minimized. 
C) the fixed costs of production are minimized. 
D) total revenue equals total cost. 
E) all of the above

Question 13

Refer to the following table:   What is marginal benefit for the 4th unit of the activity?

Accepted Answer

A) 65 
B) 60 
C) 55 
D) 50 
E) none of the above 
A) 65 
B) 60 
C) 55 
D) 50 
E) none of the above

Question 14

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll.The last doctor hired treated 1,600 extra patients in a year,while the last nurse hired treated 1,000 extra patients in a year.If doctors make $64,000 a year and nurses make $40,000 a year,then

Accepted Answer

A) the clinic could serve more patients by hiring more doctors and fewer nurses. 
B) the clinic could serve more patients by hiring fewer doctors and more nurses. 
C) the clinic is making the correct decision. 
D) the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses. 
E) a and d 
A) the clinic could serve more patients by hiring more doctors and fewer nurses. 
B) the clinic could serve more patients by hiring fewer doctors and more nurses. 
C) the clinic is making the correct decision. 
D) the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses. 
E) a and d

Question 15

Dr.X,an assistant professor at a large state university,is trying to decide how to allocate the 50 hours a week she spends working among the various activities expected of an assistant professor.The professor wants to maximize her raise next year and the table shows estimates of how time spent in each activity will contribute to her raise:   Given the above information,what is Dr.X's maximum possible raise if she works 50 hours?

Accepted Answer

A) $1495 
B) $1600 
C) $1845 
D) $1860 
A) $1495 
B) $1600 
C) $1845 
D) $1860

Question 16

firm will maximize profit by producing that level of output at which

Accepted Answer

A) the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount. 
B) the additional revenue from the last unit sold equals the additional cost of the last unit. 
C) total revenue exceeds total cost by the largest amount. 
D) total revenue equals total cost. 
E) both b and c 
A) the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount. 
B) the additional revenue from the last unit sold equals the additional cost of the last unit. 
C) total revenue exceeds total cost by the largest amount. 
D) total revenue equals total cost. 
E) both b and c

Question 17

A grocery store hires cashiers and baggers.Cashiers earn $8 an hour; baggers earn $4 an hour.The manager,who wants to maximize the number of customers served given a fixed payroll,expects the following productivity from cashiers and baggers: $$\begin{array} { c c c } 
& { \text { Tgtal number of customars served } } \
\text { Number af employees } & \text { Cashiers } & \text { Baggers } \
\hline 1 & 240 & 136 \
2 & 440 & 264 \
3 & 600 & 384 \
4 & 712 & 496 \
5 & 776 & 560 \
\hline
\end{array}$$  Given the above information,what is the maximum possible number of customers that can be served with a payroll of $32?

Accepted Answer

A) 1208 
B) 936 
C) 864 
D) 312 
E) none of the above 
A) 1208 
B) 936 
C) 864 
D) 312 
E) none of the above

Question 18

In making a decision about whether to increase its advertising budget the firm management should not consider

Accepted Answer

A) the added revenue from increased sales. 
B) the added cost of producing more goods for sale. 
C) interest payments on the firm's loan. 
D) the cost of the increased advertising. 
A) the added revenue from increased sales. 
B) the added cost of producing more goods for sale. 
C) interest payments on the firm's loan. 
D) the cost of the increased advertising.

When the choice variable is a continuous variable,the decision rule for an unconstrained maximization problem is:

A package delivery service uses vans and employees to deliver the maximum number of packages given a fixed budget.The last van added 600 packages to total output,while the last employee added 500 packages.If vans cost $400 per week and employees earn $300 per week,the firm

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A: If the decision maker is choosing 300 units of activity A,

function a decision maker seeks to maximize or minimize is the ________ function.

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll.The last doctor hired treated 1,600 extra patients in a year,while the last nurse hired treated 1,000 extra patients in a year.If doctors make $40,000 a year,what do nurses make?

A firm will maximize profit by producing that level of output at which

Refer to the following table: What is marginal benefit for the 4^th unit of the activity?

firm will maximize profit by producing that level of output at which

In making a decision about whether to increase its advertising budget the firm management should not consider

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 the choice variable is a continuous variable,the decision rule for an unconstrained maximization problem is:

A package delivery service uses vans and employees to deliver the maximum number of packages given a fixed budget.The last van added 600 packages to total output,while the last employee added 500 packages.If vans cost $400 per week and employees earn $300 per week,the firm

Refer to the figure below,which shows marginal benefits (MB)and marginal cost (MC)of activity A: If the decision maker is choosing 300 units of activity A,

function a decision maker seeks to maximize or minimize is the ________ function.

A firm will maximize profit by producing that level of output at which

Refer to the following table: What is marginal benefit for the 4th unit of the activity?

firm will maximize profit by producing that level of output at which

In making a decision about whether to increase its advertising budget the firm management should not consider

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 marginal benefit for the 4^th unit of the activity?