Question 1

One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to

Accepted Answer

A)  employ more specialized machinery. 
B)  obtain bulk purchase discounts. 
C)  employ a greater division of labor. 
D)  All of the above are correct. 
A)  employ more specialized machinery. 
B)  obtain bulk purchase discounts. 
C)  employ a greater division of labor. 
D)  All of the above are correct.

Question 2

If the firm produces 200,000 toothbrushes, its total cost is 300,00 and total variable cost is 200,000, what is the average fixed cost?

Accepted Answer

A)  $0.50 per unit 
B)  $1.00 per unit 
C)  $1.50 per unit 
D)  $2.00 per unit 
A)  $0.50 per unit 
B)  $1.00 per unit 
C)  $1.50 per unit 
D)  $2.00 per unit

Question 3

If long-run marginal cost is greater than long-run average cost, then the firm is experiencing decreasing returns to scale.

Accepted Answer

A) True 
 B)False

Question 4

If marginal cost is greater than average total cost, then average total cost is rising.

Accepted Answer

A) True 
 B)False

Question 5

A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost?

Accepted Answer

A)  $500 
B)  $250 
C)  $2 
D)  None of the above is correct. 
A)  $500 
B)  $250 
C)  $2 
D)  None of the above is correct.

Question 6

The process whereby firms reduce their production costs by taking advantage of international differences in the prices of inputs and international similarities in preferences is referred to as the

Accepted Answer

A)  strategic opportunity concept. 
B)  new international economics of scale. 
C)  global dictum. 
D)  transnational cost theorem. 
A)  strategic opportunity concept. 
B)  new international economics of scale. 
C)  global dictum. 
D)  transnational cost theorem.

Question 7

The value of the inputs owned and used by a firm is an explicit cost.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following costs are irrelevant in managerial decision making?

Accepted Answer

A)  Explicit costs. 
B)  Implicit costs. 
C)  Sunk costs. 
D)  All of these costs are relevant. 
A)  Explicit costs. 
B)  Implicit costs. 
C)  Sunk costs. 
D)  All of these costs are relevant.

Question 9

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 -0.10. What is the predicted short-run average variable cost after 10,000 units of a new product have been produced? The beginning short-run average total cost of the product is expected to be $1,000.

Accepted Answer

A)  $398 
B)  $1,000,000 
C)  $10,000,000 
D)  None of the above is correct. 
A)  $398 
B)  $1,000,000 
C)  $10,000,000 
D)  None of the above is correct.

Question 10

The long-run average cost curve is tangent to the lowest points on all possible short-run average total cost curves.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is a variable cost?

Accepted Answer

A)  Interest payments 
B)  Raw materials costs 
C)  Property taxes 
D)  All of the above are variable costs. 
A)  Interest payments 
B)  Raw materials costs 
C)  Property taxes 
D)  All of the above are variable costs.

Question 12

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

Accepted Answer

A)  2 
B)  4 
C)  8 
D)  11 
A)  2 
B)  4 
C)  8 
D)  11

Question 13

Use the following to answer questions below:
  
-Refer to the short-run per-unit cost curves graph. Which of the four curves represents average variable 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 14

Which of the following is an implicit cost?

Accepted Answer

A)  The salary earned by a corporate executive 
B)  Depreciation in the value of a company-owned car as it wears out 
C)  Property taxes 
D)  All of the above are implicit costs. 
A)  The salary earned by a corporate executive 
B)  Depreciation in the value of a company-owned car as it wears out 
C)  Property taxes 
D)  All of the above are implicit costs.

Question 15

When a firm designs a core product for the entire world that can be adapted in a number of ways to accommodate different types of markets, it is taking advantage of the

Accepted Answer

A)  strategic opportunity concept. 
B)  new international economies of scale. 
C)  global dictum. 
D)  transnational cost theorem. 
A)  strategic opportunity concept. 
B)  new international economies of scale. 
C)  global dictum. 
D)  transnational cost theorem.

Question 16

Barb and Cheryl are college students. They are trying to decide what to do over the next summer. Barb's mother has suggested that they both come and work at her plastics manufacturing company where each will earn $5,250 over the summer. Cheryl's mother, who runs the local farmer's market, suggests that they go to a local resort area and sell fresh fruit and vegetables to tourists. Their markup on the produce would be one-third, so each $1.00 of revenue would involve a variable cost of $0.75. In addition to purchasing the produce, they would have to rent a location. The cost to rent a small roadside stand for the summer is $2,500.
(i)How many dollars worth of produce will they have to sell in order to break even in an accounting sense?
(ii)How many dollars worth of produce will they have to sell in order to break even in an economic sense?

Accepted Answer

The answer of Barb and Cheryl are college students. They...

Question 17

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 increasing 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 18

Consider a scenario where the firm hires only two inputs, labor and capital. Assume that the price of labor (the wage rate) is $30 and the price of capital (the rental cost of capital) is $10. Also, assume that the current level of output is 200 and the level of employment is 10. What is the average variable cost at this time?

Accepted Answer

The answer of Consider a scenario where the firm hires...

Question 19

The following figure best represents which of the following firms?

Accepted Answer

A)  Perfectly competitive firm. 
B)  Natural monopoly. 
C)  Imperfectly competitive firm. 
D)  Not enough information. 
A)  Perfectly competitive firm. 
B)  Natural monopoly. 
C)  Imperfectly competitive firm. 
D)  Not enough information.

Question 20

If TC=90+5Q-10Q^²+Q^³, find total variable cost, average variable cost and marginal cost functions.
 At what level of output is the average variable cost the lowest?
 At what level of output is the marginal cost the lowest?

Accepted Answer

The answer of If TC=90+5Q-10Q^²+Q^³, find total variable cost, average...

One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to

If the firm produces 200,000 toothbrushes, its total cost is 300,00 and total variable cost is 200,000, what is the average fixed cost?

If long-run marginal cost is greater than long-run average cost, then the firm is experiencing decreasing returns to scale.

If marginal cost is greater than average total cost, then average total cost is rising.

A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost?

The process whereby firms reduce their production costs by taking advantage of international differences in the prices of inputs and international similarities in preferences is referred to as the

The value of the inputs owned and used by a firm is an explicit cost.

Which of the following costs are irrelevant in managerial decision making?

The long-run average cost curve is tangent to the lowest points on all possible short-run average total cost curves.

Which of the following is a variable cost?

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

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

Which of the following is an implicit cost?

When a firm designs a core product for the entire world that can be adapted in a number of ways to accommodate different types of markets, it is taking advantage of the

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 increasing returns to scale?

The following figure best represents which of the following firms?

If TC=90+5Q-10Q^²+Q^³, find total variable cost, average variable cost and marginal cost functions. At what level of output is the average variable cost the lowest? At what level of output is the marginal cost the lowest?

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

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Exam 8: Cost Theory and Estimation

One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to

If the firm produces 200,000 toothbrushes, its total cost is 300,00 and total variable cost is 200,000, what is the average fixed cost?

If long-run marginal cost is greater than long-run average cost, then the firm is experiencing decreasing returns to scale.

If marginal cost is greater than average total cost, then average total cost is rising.

A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost?

The process whereby firms reduce their production costs by taking advantage of international differences in the prices of inputs and international similarities in preferences is referred to as the

The value of the inputs owned and used by a firm is an explicit cost.

Which of the following costs are irrelevant in managerial decision making?

The long-run average cost curve is tangent to the lowest points on all possible short-run average total cost curves.

Which of the following is a variable cost?

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

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

Which of the following is an implicit cost?

When a firm designs a core product for the entire world that can be adapted in a number of ways to accommodate different types of markets, it is taking advantage of the

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 increasing returns to scale?

The following figure best represents which of the following firms?

If TC=90+5Q-10Q^²+Q^³, find total variable cost, average variable cost and marginal cost functions. At what level of output is the average variable cost the lowest? At what level of output is the marginal cost the lowest?

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