Question 1

If average variable cost is increasing with increases in output,total fixed cost will:

Accepted Answer

A)  increase with increases in output. 
B)  decrease with increases in output. 
C)  remain unchanged with increases in output. 
D)  increase initially and then decrease with increases in output. 
E)  decrease initially and then increase with increases in output. 
A)  increase with increases in output. 
B)  decrease with increases in output. 
C)  remain unchanged with increases in output. 
D)  increase initially and then decrease with increases in output. 
E)  decrease initially and then increase with increases in output. C

Question 2

Why Can't We Be Friends? operates a conflict settlement service for distressed couples.If it has no fixed costs and its monthly average variable cost of cases is given by AVC = 2.5Q + 500,the marginal cost at a caseload of 50 attempted reconciliations per month is:

Accepted Answer

A)  $500. 
B)  $550. 
C)  $600. 
D)  $625. 
E)  $750. 
A)  $500. 
B)  $550. 
C)  $600. 
D)  $625. 
E)  $750. E

Question 3

Trudeau's Body Shop incurs total costs given by TC = 2,400 + 100Q.If the price it charges for a paint job is $120,what is its break-even level of output?

Accepted Answer

A)  20 paint jobs. 
B)  40 paint jobs. 
C)  60 paint jobs. 
D)  90 paint jobs. 
E)  120 paint jobs. 
A)  20 paint jobs. 
B)  40 paint jobs. 
C)  60 paint jobs. 
D)  90 paint jobs. 
E)  120 paint jobs. E

Question 4

Bill's Mechanical Devices Inc.produces robots for the automotive industry.If its average variable costs are given by AVC = 25,its fixed costs are $2,500,and it charges $75 a robot,what is Bill's break-even level of output?

Accepted Answer

A)  25 robots. 
B)  33.3 robots. 
C)  50 robots. 
D)  75 robots. 
E)  100 robots. 
A)  25 robots. 
B)  33.3 robots. 
C)  50 robots. 
D)  75 robots. 
E)  100 robots.

Question 5

Brandy's Restaurant estimates that its total cost of providing Q meals per month is given by TC = 6,000 + 2Q.If Brandy charges $4 per meal,what is its break-even level of output?

Accepted Answer

A)  1,000 meals. 
B)  1,500 meals. 
C)  2,000 meals. 
D)  2,500 meals. 
E)  3,000 meals. 
A)  1,000 meals. 
B)  1,500 meals. 
C)  2,000 meals. 
D)  2,500 meals. 
E)  3,000 meals.

Question 6

If there is only one variable input,average variable cost can be defined as the:

Accepted Answer

A)  output's price divided by the input's average product. 
B)  output's price divided by the input's marginal product. 
C)  price of the variable input divided by its average product. 
D)  price of the variable input divided by its marginal product. 
E)  price of the variable input multiplied by its marginal product. 
A)  output's price divided by the input's average product. 
B)  output's price divided by the input's marginal product. 
C)  price of the variable input divided by its average product. 
D)  price of the variable input divided by its marginal product. 
E)  price of the variable input multiplied by its marginal product.

Question 7

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 125 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $800,and its annual fixed cost is $28,000.What is the break-even level of output?

Accepted Answer

A)  125. 
B)  87. 
C)  63. 
D)  56. 
E)  None of the above. 
A)  125. 
B)  87. 
C)  63. 
D)  56. 
E)  None of the above.

Question 8

Economies of scope exist when it is cheaper to produce:

Accepted Answer

A)  with a large fixed plant and equipment. 
B)  at increasing rates of output. 
C)  given quantities of two different products together than to produce the same quantities separately. 
D)  given quantities of two different products separately than to produce the same quantities together. 
E)  using more than one technique. 
A)  with a large fixed plant and equipment. 
B)  at increasing rates of output. 
C)  given quantities of two different products together than to produce the same quantities separately. 
D)  given quantities of two different products separately than to produce the same quantities together. 
E)  using more than one technique.

Question 9

The Wilson Corporation produces output according to Q = 4(KL)1/2,where K is the amount of capital used and L is the amount of labor employed.If capital costs $2 per unit and labor costs $8 per unit,Wilson's minimized long-run average total cost is:

Accepted Answer

A)  $2. 
B)  $2Q. 
C)  $10. 
D)  $10Q. 
E)  $22. 
A)  $2. 
B)  $2Q. 
C)  $10. 
D)  $10Q. 
E)  $22.

Question 10

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the marginal cost function is:

Accepted Answer

A)  MC = 100. 
B)  MC = 10Q. 
C)  MC = 10Q2. 
D)  MC = 100Q. 
E)  MC = 100 + 5Q2. 
A)  MC = 100. 
B)  MC = 10Q. 
C)  MC = 10Q2. 
D)  MC = 100Q. 
E)  MC = 100 + 5Q2.

Question 11

Whenever average variable cost is declining with increases in output:

Accepted Answer

A)  marginal cost is always declining as average total cost declines. 
B)  average total cost at first decreases and then increases with output. 
C)  marginal cost is always declining as average total cost increases. 
D)  marginal cost at first decreases and then increases with output. 
E)  marginal cost at first increases and then decreases with output. 
A)  marginal cost is always declining as average total cost declines. 
B)  average total cost at first decreases and then increases with output. 
C)  marginal cost is always declining as average total cost increases. 
D)  marginal cost at first decreases and then increases with output. 
E)  marginal cost at first increases and then decreases with output.

Question 12

Gerry works 40 hours a week managing Gerry's Market,without drawing a salary.He could earn $600 a week doing the same work for Jean.Gerry's Market owes its bank $100,000,and Gerry has invested $100,000 of his own money.If Gerry's accounting profits are $1,000 per week while the interest on his bank debt is $200 per week,his economic profits are:

Accepted Answer

A)  $0 per week. 
B)  $200 per week. 
C)  $400 per week. 
D)  $800 per week. 
E)  $1,000 per week. 
A)  $0 per week. 
B)  $200 per week. 
C)  $400 per week. 
D)  $800 per week. 
E)  $1,000 per week.

Question 13

Short-run marginal cost eventually increases with increasing output because:

Accepted Answer

A)  eventually marginal returns will diminish. 
B)  not all variable inputs increase at the same rate. 
C)  diseconomies of scale usually set in immediately. 
D)  of diseconomies of scope. 
E)  eventually diseconomies of scale set in. 
A)  eventually marginal returns will diminish. 
B)  not all variable inputs increase at the same rate. 
C)  diseconomies of scale usually set in immediately. 
D)  of diseconomies of scope. 
E)  eventually diseconomies of scale set in.

Question 14

Minimum efficient scale is the output at which:

Accepted Answer

A)  long-run average cost is first minimized. 
B)  long-run average cost first equals long-run marginal cost. 
C)  short-run average cost equals long-run average cost for the first time. 
D)  short-run marginal cost equals long-run marginal cost for the first time. 
E)  diseconomies are first overcome and then economies of scale set in. 
A)  long-run average cost is first minimized. 
B)  long-run average cost first equals long-run marginal cost. 
C)  short-run average cost equals long-run average cost for the first time. 
D)  short-run marginal cost equals long-run marginal cost for the first time. 
E)  diseconomies are first overcome and then economies of scale set in.

Question 15

Break-even analysis usually assumes:

Accepted Answer

A)  marginal revenue is declining with output. 
B)  all costs are variable. 
C)  managers wish to minimize fixed costs. 
D)  marginal costs are increasing with output. 
E)  average variable costs are constant. 
A)  marginal revenue is declining with output. 
B)  all costs are variable. 
C)  managers wish to minimize fixed costs. 
D)  marginal costs are increasing with output. 
E)  average variable costs are constant.

Question 16

Pace's total cost of producing CO2 cartridges is given by TC = 0.5X 3 - 24X 2 + 144X.The level of output that minimizes average total cost is:

Accepted Answer

A)  12 cartridges. 
B)  10 cartridges. 
C)  18 cartridges. 
D)  20 cartridges. 
E)  24 cartridges. 
A)  12 cartridges. 
B)  10 cartridges. 
C)  18 cartridges. 
D)  20 cartridges. 
E)  24 cartridges.

Question 17

If a firm is choosing cost-minimizing combinations of inputs,marginal cost can be defined as the price of any:

Accepted Answer

A)  input divided by its average product. 
B)  variable input divided by its average product. 
C)  fixed input divided by its average product. 
D)  variable input divided by its marginal product. 
E)  fixed input divided by its marginal product. 
A)  input divided by its average product. 
B)  variable input divided by its average product. 
C)  fixed input divided by its average product. 
D)  variable input divided by its marginal product. 
E)  fixed input divided by its marginal product.

Question 18

Bringing Up Baby (BUB)produces step-by-step manuals for child rearing.If BUB's total cost of producing manuals is given by TC = 0.004Q3 - 0.1Q2 + 0.5Q + 250,the marginal cost of producing the 50th manual is:

Accepted Answer

A)  $5.50. 
B)  $20.50. 
C)  $20.95. 
D)  $21.50. 
E)  $21.95. 
A)  $5.50. 
B)  $20.50. 
C)  $20.95. 
D)  $21.50. 
E)  $21.95.

Question 19

The opportunity cost doctrine says that opportunity costs:

Accepted Answer

A)  and economic costs differ by the amount of implicit costs. 
B)  should always be greater than explicit costs. 
C)  should usually be greater than explicit costs. 
D)  and the firm's production costs determine the firm's economic cost of production. 
E)  can never be properly figured by accountants. 
A)  and economic costs differ by the amount of implicit costs. 
B)  should always be greater than explicit costs. 
C)  should usually be greater than explicit costs. 
D)  and the firm's production costs determine the firm's economic cost of production. 
E)  can never be properly figured by accountants.

Question 20

Lot's Wife Manufacturing produces rear-view video systems for buses.The firm's cost function is TC = 2,000 + 120Q.If the systems sell for $145,what is the break-even rate of production?

Accepted Answer

A)  200. 
B)  120. 
C)  80. 
D)  55. 
E)  None of the above. 
A)  200. 
B)  120. 
C)  80. 
D)  55. 
E)  None of the above.

If average variable cost is increasing with increases in output,total fixed cost will:

Why Can't We Be Friends? operates a conflict settlement service for distressed couples.If it has no fixed costs and its monthly average variable cost of cases is given by AVC = 2.5Q + 500,the marginal cost at a caseload of 50 attempted reconciliations per month is:

Trudeau's Body Shop incurs total costs given by TC = 2,400 + 100Q.If the price it charges for a paint job is $120,what is its break-even level of output?

Bill's Mechanical Devices Inc.produces robots for the automotive industry.If its average variable costs are given by AVC = 25,its fixed costs are $2,500,and it charges $75 a robot,what is Bill's break-even level of output?

Brandy's Restaurant estimates that its total cost of providing Q meals per month is given by TC = 6,000 + 2Q.If Brandy charges $4 per meal,what is its break-even level of output?

If there is only one variable input,average variable cost can be defined as the:

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 125 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $800,and its annual fixed cost is $28,000.What is the break-even level of output?

Economies of scope exist when it is cheaper to produce:

The Wilson Corporation produces output according to Q = 4(KL)^1/2,where K is the amount of capital used and L is the amount of labor employed.If capital costs $2 per unit and labor costs $8 per unit,Wilson's minimized long-run average total cost is:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the marginal cost function is:

Whenever average variable cost is declining with increases in output:

Short-run marginal cost eventually increases with increasing output because:

Minimum efficient scale is the output at which:

Break-even analysis usually assumes:

Pace's total cost of producing CO₂ cartridges is given by TC = 0.5X ³ - 24X ² + 144X.The level of output that minimizes average total cost is:

If a firm is choosing cost-minimizing combinations of inputs,marginal cost can be defined as the price of any:

Bringing Up Baby (BUB)produces step-by-step manuals for child rearing.If BUB's total cost of producing manuals is given by TC = 0.004Q³ - 0.1Q² + 0.5Q + 250,the marginal cost of producing the 50th manual is:

The opportunity cost doctrine says that opportunity costs:

Lot's Wife Manufacturing produces rear-view video systems for buses.The firm's cost function is TC = 2,000 + 120Q.If the systems sell for $145,what is the break-even rate of production?

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

Exam 6: The Analysis of Costs

If average variable cost is increasing with increases in output,total fixed cost will:

Why Can't We Be Friends? operates a conflict settlement service for distressed couples.If it has no fixed costs and its monthly average variable cost of cases is given by AVC = 2.5Q + 500,the marginal cost at a caseload of 50 attempted reconciliations per month is:

Trudeau's Body Shop incurs total costs given by TC = 2,400 + 100Q.If the price it charges for a paint job is $120,what is its break-even level of output?

Bill's Mechanical Devices Inc.produces robots for the automotive industry.If its average variable costs are given by AVC = 25,its fixed costs are $2,500,and it charges $75 a robot,what is Bill's break-even level of output?

Brandy's Restaurant estimates that its total cost of providing Q meals per month is given by TC = 6,000 + 2Q.If Brandy charges $4 per meal,what is its break-even level of output?

If there is only one variable input,average variable cost can be defined as the:

Hedge Fun is a landscaping firm that specializes in topiary.It contracts with the owners of 125 local homes and provides its service at an annual fee of $1,300.Its average variable cost is $800,and its annual fixed cost is $28,000.What is the break-even level of output?

Economies of scope exist when it is cheaper to produce:

The Wilson Corporation produces output according to Q = 4(KL)1/2,where K is the amount of capital used and L is the amount of labor employed.If capital costs $2 per unit and labor costs $8 per unit,Wilson's minimized long-run average total cost is:

The following figure represents the short-run total cost function for the Fidget Company,which produces widgets.The equation for the marginal cost function is:

Whenever average variable cost is declining with increases in output:

Short-run marginal cost eventually increases with increasing output because:

Minimum efficient scale is the output at which:

Break-even analysis usually assumes:

Pace's total cost of producing CO2 cartridges is given by TC = 0.5X 3 - 24X 2 + 144X.The level of output that minimizes average total cost is:

If a firm is choosing cost-minimizing combinations of inputs,marginal cost can be defined as the price of any:

Bringing Up Baby (BUB)produces step-by-step manuals for child rearing.If BUB's total cost of producing manuals is given by TC = 0.004Q3 - 0.1Q2 + 0.5Q + 250,the marginal cost of producing the 50th manual is:

The opportunity cost doctrine says that opportunity costs:

Lot's Wife Manufacturing produces rear-view video systems for buses.The firm's cost function is TC = 2,000 + 120Q.If the systems sell for $145,what is the break-even rate of production?

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Appendix Problems

Filters

The Wilson Corporation produces output according to Q = 4(KL)^1/2,where K is the amount of capital used and L is the amount of labor employed.If capital costs $2 per unit and labor costs $8 per unit,Wilson's minimized long-run average total cost is:

Pace's total cost of producing CO₂ cartridges is given by TC = 0.5X ³ - 24X ² + 144X.The level of output that minimizes average total cost is:

Bringing Up Baby (BUB)produces step-by-step manuals for child rearing.If BUB's total cost of producing manuals is given by TC = 0.004Q³ - 0.1Q² + 0.5Q + 250,the marginal cost of producing the 50th manual is: