Question 1

Economies of scope refers to the decrease in average total cost that can occur when a firm

Accepted Answer

A)  produces more than one product. 
B)  has monopoly power in world markets. 
C)  controls the raw materials used as inputs. 
D)  narrows the scope of its regional markets. 
A)  produces more than one product. 
B)  has monopoly power in world markets. 
C)  controls the raw materials used as inputs. 
D)  narrows the scope of its regional markets.

Question 2

One reason that a firm may experience decreasing returns to scale is that greater levels of output can result in

Accepted Answer

A)  a greater division of labor. 
B)  an increase in meetings and paperwork. 
C)  smaller inventories per unit of output. 
D)  All of the above are correct. 
A)  a greater division of labor. 
B)  an increase in meetings and paperwork. 
C)  smaller inventories per unit of output. 
D)  All of the above are correct.

Question 3

Short-run marginal cost is equal to

Accepted Answer

A)  the change in total cost divided by the change in output. 
B)  the change in total variable cost divided by the change in output. 
C)  the cost per unit of the variable input divided by the marginal product of the variable input. 
D)  All of the above are correct. 
A)  the change in total cost divided by the change in output. 
B)  the change in total variable cost divided by the change in output. 
C)  the cost per unit of the variable input divided by the marginal product of the variable input. 
D)  All of the above are correct.

Question 4

Which of the following is a business function that is a part of logistics?

Accepted Answer

A)  Purchasing 
B)  Transportation 
C)  Warehousing 
D)  All of the above are correct. 
A)  Purchasing 
B)  Transportation 
C)  Warehousing 
D)  All of the above are correct.

Question 5

The responsiveness or sensitivity of a firm's profits to changes in output is measured by a firm's

Accepted Answer

A)  operating leverage. 
B)  contribution margin per unit. 
C)  degree of operating leverage. 
D)  returns to scale. 
A)  operating leverage. 
B)  contribution margin per unit. 
C)  degree of operating leverage. 
D)  returns to scale.

Question 6

The law of diminishing returns begins at the level of output where

Accepted Answer

A)  marginal cost is at a minimum. 
B)  average variable cost is at a minimum. 
C)  average fixed cost is at a maximum. 
D)  None of the above is correct. 
A)  marginal cost is at a minimum. 
B)  average variable cost is at a minimum. 
C)  average fixed cost is at a maximum. 
D)  None of the above is correct.

Question 7

A firm that has total fixed costs of $2,000 sells its output for $25 per unit and has an average variable cost of $20. If the firm's cost and revenue curves are linear and output is equal to 600 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.

Question 8

Industries where the long-run average cost curve has a positive slope over a wide range of output are referred to as natural monopolies.

Accepted Answer

A) True 
 B)False

Question 9

The degree of operating leverage is equal to the ratio of the firm's total fixed cost to total variable cost.

Accepted Answer

A) True 
 B)False

Question 10

Bob and Bill are college students. They are trying to decide what to do over the next summer. Bob's father has suggested that they both come and work at his plastics manufacturing company where each will earn $3,600 over the summer. Bill's father, 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 25 percent, so each $1.00 of revenue would involve a variable cost of $0.80. 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 $2,400.
(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 Bob and Bill are college students. They...

Question 11

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. In addition, assume that when the firm hires 9 works, its output level is only 190. What is the marginal cost when 10 workers are hired (assume the short-run)?

Accepted Answer

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

Question 12

If TC=20+10Q-2Q^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=20+10Q-2Q^²+Q^³, find total variable cost, average...

Question 13

The contribution margin per unit is equal to the

Accepted Answer

A)  difference between price and average variable cost. 
B)  difference between total revenue and total cost. 
C)  difference between price and average total cost. 
D)  price of a good. 
A)  difference between price and average variable cost. 
B)  difference between total revenue and total cost. 
C)  difference between price and average total cost. 
D)  price of a good.

Question 14

If the firm produces 200,000 toothbrushes, its total cost is 400,00 and total fixed cost is 100,000, what is the average variable 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 15

The contribution margin per unit is equal to price minus short-run average variable cost.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an assumption of linear breakeven analysis?

Accepted Answer

A)  Output price is constant. 
B)  Average variable cost is constant. 
C)  Average fixed cost is constant. 
D)  All of the above are assumptions of linear breakeven analysis. 
A)  Output price is constant. 
B)  Average variable cost is constant. 
C)  Average fixed cost is constant. 
D)  All of the above are assumptions of linear breakeven analysis.

Question 17

Your firm has estimated the total variable cost and total fixed cost functions to be
TVC=-60Q+10Q^²,TFC=500.
 If your firm is selling the product for $300, what is the break-even output?
 At what output does the firm maximize its profits?

Accepted Answer

The answer of Your firm has estimated the total variable...

Question 18

The firm increased production by 5 units and the total variable cost increased from $3,000 to $4,500. What is the marginal cost associated with this increase in production?

Accepted Answer

A)  $300 
B)  $500 
C)  $1,500 
D)  $4,500 
A)  $300 
B)  $500 
C)  $1,500 
D)  $4,500

Question 19

Logistics is also referred to as

Accepted Answer

A)  supply chain management. 
B)  revenue management. 
C)  total quality management. 
D)  None of the above is correct. 
A)  supply chain management. 
B)  revenue management. 
C)  total quality management. 
D)  None of the above is correct.

Question 20

The new firm has entered a business and estimates its learning curve to be
 
 $$A C = 200 Q ^ { - 3 }$$ 
where Q is the cumulative total product. What is the difference between average cost of the 100th and the 10st product?

Accepted Answer

Economies of scope refers to the decrease in average total cost that can occur when a firm

One reason that a firm may experience decreasing returns to scale is that greater levels of output can result in

Short-run marginal cost is equal to

Which of the following is a business function that is a part of logistics?

The responsiveness or sensitivity of a firm's profits to changes in output is measured by a firm's

The law of diminishing returns begins at the level of output where

A firm that has total fixed costs of $2,000 sells its output for $25 per unit and has an average variable cost of $20. If the firm's cost and revenue curves are linear and output is equal to 600 units, what is the firm's degree of operating leverage?

Industries where the long-run average cost curve has a positive slope over a wide range of output are referred to as natural monopolies.

The degree of operating leverage is equal to the ratio of the firm's total fixed cost to total variable cost.

If TC=20+10Q-2Q^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 contribution margin per unit is equal to the

If the firm produces 200,000 toothbrushes, its total cost is 400,00 and total fixed cost is 100,000, what is the average variable cost?

The contribution margin per unit is equal to price minus short-run average variable cost.

Which of the following is not an assumption of linear breakeven analysis?

Your firm has estimated the total variable cost and total fixed cost functions to be TVC=-60Q+10Q^²,TFC=500. If your firm is selling the product for $300, what is the break-even output? At what output does the firm maximize its profits?

The firm increased production by 5 units and the total variable cost increased from $3,000 to $4,500. What is the marginal cost associated with this increase in production?

Logistics is also referred to as

The new firm has entered a business and estimates its learning curve to be $A C = 200 Q ^ { - 3 }$ where Q is the cumulative total product. What is the difference between average cost of the 100^th and the 10^st product?

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

Economies of scope refers to the decrease in average total cost that can occur when a firm

One reason that a firm may experience decreasing returns to scale is that greater levels of output can result in

Short-run marginal cost is equal to

Which of the following is a business function that is a part of logistics?

The responsiveness or sensitivity of a firm's profits to changes in output is measured by a firm's

The law of diminishing returns begins at the level of output where

A firm that has total fixed costs of $2,000 sells its output for $25 per unit and has an average variable cost of $20. If the firm's cost and revenue curves are linear and output is equal to 600 units, what is the firm's degree of operating leverage?

Industries where the long-run average cost curve has a positive slope over a wide range of output are referred to as natural monopolies.

The degree of operating leverage is equal to the ratio of the firm's total fixed cost to total variable cost.

If TC=20+10Q-2Q^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 contribution margin per unit is equal to the

If the firm produces 200,000 toothbrushes, its total cost is 400,00 and total fixed cost is 100,000, what is the average variable cost?

The contribution margin per unit is equal to price minus short-run average variable cost.

Which of the following is not an assumption of linear breakeven analysis?

Your firm has estimated the total variable cost and total fixed cost functions to be TVC=-60Q+10Q^²,TFC=500. If your firm is selling the product for $300, what is the break-even output? At what output does the firm maximize its profits?

The firm increased production by 5 units and the total variable cost increased from $3,000 to $4,500. What is the marginal cost associated with this increase in production?

Logistics is also referred to as

The new firm has entered a business and estimates its learning curve to be AC=200Q−3A C = 200 Q ^ { - 3 }AC=200Q−3 where Q is the cumulative total product. What is the difference between average cost of the 100th and the 10st product?

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

The new firm has entered a business and estimates its learning curve to be $A C = 200 Q ^ { - 3 }$ where Q is the cumulative total product. What is the difference between average cost of the 100^th and the 10^st product?