Question 1

Which of the following values cannot be calculated at the firm's breakeven level of output?

Accepted Answer

A)  Operating leverage 
B)  Contribution margin per unit 
C)  Degree of operating leverage 
D)  Profit 
A)  Operating leverage 
B)  Contribution margin per unit 
C)  Degree of operating leverage 
D)  Profit C

Question 2

A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average variable cost of $150. If the firm's cost and revenue curves are linear and output is equal to 500 units, what is the firm's degree of operating leverage?

Accepted Answer

A)  5 
B)  4 
C)  3 
D)  None of the above is correct. 
A)  5 
B)  4 
C)  3 
D)  None of the above is correct. A

Question 3

The minimum short-run average total cost occurs at a level of output that is greater than that at which average variable cost is at a minimum.

Accepted Answer

A) True 
 B)False  True

Question 4

Learning curves represent the relationship between

Accepted Answer

A)  average variable cost and the number of units produced per time period. 
B)  average variable cost and the cumulative number of units produced. 
C)  total cost and technology. 
D)  average variable cost and the rate of increase in technology. 
A)  average variable cost and the number of units produced per time period. 
B)  average variable cost and the cumulative number of units produced. 
C)  total cost and technology. 
D)  average variable cost and the rate of increase in technology.

Question 5

If an input is owned and used by a firm, then its

Accepted Answer

A)  explicit cost is zero. 
B)  implicit cost is zero. 
C)  opportunity cost is zero. 
D)  economic cost is zero. 
A)  explicit cost is zero. 
B)  implicit cost is zero. 
C)  opportunity cost is zero. 
D)  economic cost is zero.

Question 6

Tetrangle Manufacturing has fixed costs of $2,160 per day. The firm manufactures bicycle component upgrade kits. The kits have a short-run average variable cost of $48 and are sold for $66 each.
(i)What is the breakeven level of daily output for the firm?
(ii)What is the degree of operating leverage when daily output is Q = 170?

Accepted Answer

The answer of Tetrangle Manufacturing has fixed costs of $2,160...

Question 7

Use the following to answer questions below:
  
-Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing decreasing returns to scale?

Accepted Answer

A)  Output level A 
B)  Output level B 
C)  Output level C 
D)  None of the above is correct. 
A)  Output level A 
B)  Output level B 
C)  Output level C 
D)  None of the above is correct.

Question 8

The law of diminishing returns is reflected in the downward-sloping portion of the short-run marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions below:
  
-Refer to the graph of the short-run total cost and total variable cost curves. At what level of output is marginal cost decreasing?

Accepted Answer

A)  1 
B)  4 
C)  8 
D)  None of the above is correct. 
A)  1 
B)  4 
C)  8 
D)  None of the above is correct.

Question 10

Use the following to answer questions below:
  
-Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing constant returns to scale?

Accepted Answer

A)  Output level A 
B)  Output level B 
C)  Output level C 
D)  None of the above is correct. 
A)  Output level A 
B)  Output level B 
C)  Output level C 
D)  None of the above is correct.

Question 11

Total variable cost is equal to short-run total cost minus total fixed cost.

Accepted Answer

A) True 
 B)False

Question 12

Economic cost is generally lower than accounting cost.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would be referred to as "outsourcing"?

Accepted Answer

A)  Marketing products outside of a firm's home country 
B)  Hiring temporary workers on a contract basis 
C)  Subcontracting production to firms in other countries 
D)  Identifying and implementing production innovations 
A)  Marketing products outside of a firm's home country 
B)  Hiring temporary workers on a contract basis 
C)  Subcontracting production to firms in other countries 
D)  Identifying and implementing production innovations

Question 14

Use the following to answer questions below:
  
-Refer to the short-run per-unit cost curves graph. Which of the four curves represents marginal cost?

Accepted Answer

A)  Curve A 
B)  Curve B 
C)  Curve C 
D)  Curve D 
A)  Curve A 
B)  Curve B 
C)  Curve C 
D)  Curve D

Question 15

While it may contribute to cost savings, logistics is not a source of competitive advantage.

Accepted Answer

A) True 
 B)False

Question 16

A firm currently produces 2,500 units of output per week. After an additional worker is hired, output rises to 2,620 units per week. If the weekly wage paid to a worker is $480, what is the firm's short-run marginal cost?

Accepted Answer

A)  $4 
B)  $120 
C)  $480 
D)  None of the above is correct. 
A)  $4 
B)  $120 
C)  $480 
D)  None of the above is correct.

Question 17

Long-run average cost slopes downward over a range of output where a firm experiences decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 18

Farview Construction, Inc., has the following short-run total cost schedule:
 $$\begin{array} { l r r r r r r r r r r r } 
Q & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \
T C & 30 & 38 & 43 & 46 & 48 & 52 & 59 & 70 & 87 & 112 & 147
\end{array}$$ (i)What is the firm's average fixed cost when Q = 10?
(ii)What is the firm's average variable cost when Q = 4?
(iii)What is the firm's average total cost when Q = 7?
(iv)
What is the firm's marginal cost when Q = 9?
(v)
At what level of output does the firm begin to experience diminishing returns?

Accepted Answer

The answer of Farview Construction, Inc., has the following short-run...

Question 19

The brain drain refers to the emigration of highly skilled workers from their home countries.

Accepted Answer

A) True 
 B)False

Question 20

A firm has determined, from past experience, that the learning curve for a new electronic component has a log-linear form with a slope coefficient of -0.05. What is the predicted short-run average variable cost after 12,000 units of a new product have been produced? The beginning short-run average total cost of the product is expected to be $400.

Accepted Answer

A)  $250 
B)  $8,894 
C)  $4,800,000 
D)  None of the above is correct. 
A)  $250 
B)  $8,894 
C)  $4,800,000 
D)  None of the above is correct.

Which of the following values cannot be calculated at the firm's breakeven level of output?

A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average variable cost of $150. If the firm's cost and revenue curves are linear and output is equal to 500 units, what is the firm's degree of operating leverage?

The minimum short-run average total cost occurs at a level of output that is greater than that at which average variable cost is at a minimum.

Learning curves represent the relationship between

If an input is owned and used by a firm, then its

Use the following to answer questions below: -Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing decreasing returns to scale?

The law of diminishing returns is reflected in the downward-sloping portion of the short-run marginal cost curve.

Use the following to answer questions below: -Refer to the graph of the short-run total cost and total variable cost curves. At what level of output is marginal cost decreasing?

Use the following to answer questions below: -Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing constant returns to scale?

Total variable cost is equal to short-run total cost minus total fixed cost.

Economic cost is generally lower than accounting cost.

Which of the following would be referred to as "outsourcing"?

Use the following to answer questions below: -Refer to the short-run per-unit cost curves graph. Which of the four curves represents marginal cost?

While it may contribute to cost savings, logistics is not a source of competitive advantage.

A firm currently produces 2,500 units of output per week. After an additional worker is hired, output rises to 2,620 units per week. If the weekly wage paid to a worker is $480, what is the firm's short-run marginal cost?

Long-run average cost slopes downward over a range of output where a firm experiences decreasing returns to scale.

The brain drain refers to the emigration of highly skilled workers from their home countries.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters

Exam 8: Cost Theory and Estimation

Which of the following values cannot be calculated at the firm's breakeven level of output?

A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average variable cost of $150. If the firm's cost and revenue curves are linear and output is equal to 500 units, what is the firm's degree of operating leverage?

The minimum short-run average total cost occurs at a level of output that is greater than that at which average variable cost is at a minimum.

Learning curves represent the relationship between

If an input is owned and used by a firm, then its

Use the following to answer questions below: -Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing decreasing returns to scale?

The law of diminishing returns is reflected in the downward-sloping portion of the short-run marginal cost curve.

Use the following to answer questions below: -Refer to the graph of the short-run total cost and total variable cost curves. At what level of output is marginal cost decreasing?

Use the following to answer questions below: -Refer to the long-run average cost (LAC) curve graph. At which level of output is the firm experiencing constant returns to scale?

Total variable cost is equal to short-run total cost minus total fixed cost.

Economic cost is generally lower than accounting cost.

Which of the following would be referred to as "outsourcing"?

Use the following to answer questions below: -Refer to the short-run per-unit cost curves graph. Which of the four curves represents marginal cost?

While it may contribute to cost savings, logistics is not a source of competitive advantage.

A firm currently produces 2,500 units of output per week. After an additional worker is hired, output rises to 2,620 units per week. If the weekly wage paid to a worker is $480, what is the firm's short-run marginal cost?

Long-run average cost slopes downward over a range of output where a firm experiences decreasing returns to scale.

The brain drain refers to the emigration of highly skilled workers from their home countries.

The Nature and Scope of Managerial Economics

Demand, Supply, and Equilibrium Analysis

Optimization Techniques and New Management Tools

Demand Theory

Demand Estimation

Demand Forecasting

Production Theory and Estimation

Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Oligopoly and Firm Architecture

Game Theory and Strategic Behavior

Pricing Practices

Regulation and Antitrust: The Role of Government in the Economy

Risk Analysis

Long-Run Investment Decisions: Capital Budgeting

Filters