Question 1

Economies of scale exist whenever long-run average costs:

Accepted Answer

A)  Increase as output is increased 
B)  Remain constant as output is increased 
C)  Decrease as output is increased 
D)  Decline and then rise as output is increased 
E)  None of the above 
A)  Increase as output is increased 
B)  Remain constant as output is increased 
C)  Decrease as output is increased 
D)  Decline and then rise as output is increased 
E)  None of the above C

Question 2

The Jones Company has the following cost schedule: $$\begin{array} { c c } 
\begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
( \$ )
\end{array} \
\hline 0 & 3000 \
50 & 3750 \
100 & 4275 \
150 & 4675 \
200 & 5000 \
250 & 5300 \
300 & 5700 \
350 & 6250 \
400 & 7050 \
450 & 8225
\end{array}$$ Prepare (a)average total cost and (b)marginal cost schedules for the firm.

Accepted Answer

$\begin{array}{rccc}
&&(a)&(b)\
&&\text { Average}\
\underline{\text { Output }} & \underline{\text { Total Cost } }& 
\underline{\text { Total Cost }}& \underline{\text { Marginal Cost }}\ 
0&\$3000&--&--\
50 & 3750 & \$ 75.00 / \text { unit } & \$ 15.00 \text { /unit } \
100 & 4275 & 42.75 & 10.50 \
150 & 4675 & 31.17 & 8.00 \
200 & 5000 & 25.00 & 6.50 \
250 & 5300 & 21.20 & 6.00 \
300 & 5700 & 19.00 & 8.00 \
350 & 6250 & 17.86 & 11.00 \
400 & 7050 & 17.63 & 16.00 \
450 & 8225 & 18.28 & 23.50
\end{array}$

Question 3

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

Accepted Answer

A)  decreasing returns and declining average and marginal costs 
B)  increasing returns and declining average and marginal costs 
C)  increasing returns and increasing average and marginal costs 
D)  decreasing returns and increasing average and marginal costs 
E)  none of the above 
A)  decreasing returns and declining average and marginal costs 
B)  increasing returns and declining average and marginal costs 
C)  increasing returns and increasing average and marginal costs 
D)  decreasing returns and increasing average and marginal costs 
E)  none of the above B

Question 4

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Accepted Answer

A)  Opportunity costs 
B)  Marginal costs 
C)  Relevant costs 
D)  Sunk costs 
E)  None of the above 
A)  Opportunity costs 
B)  Marginal costs 
C)  Relevant costs 
D)  Sunk costs 
E)  None of the above

Question 5

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Accepted Answer

A)  It is L-shaped 
B)  It is ∩-shaped 
C)  It is ∪-shaped 
D)  It is ∧-shaped 
E)  It is M-shaped 
A)  It is L-shaped 
B)  It is ∩-shaped 
C)  It is ∪-shaped 
D)  It is ∧-shaped 
E)  It is M-shaped

Question 6

Which of the following statements about cost functions is true?

Accepted Answer

A)  Variable costs will always increase in direct proportion to the quantity of output produced. 
B)  The less capital equipment employed in the production process relative to labor and other inputs,the longer will be the period of time required to increase significantly the scale of operation. 
C)  The shape of the firm's long-run cost function is important in decisions to expand the scale of operations. 
D)  none of the above 
A)  Variable costs will always increase in direct proportion to the quantity of output produced. 
B)  The less capital equipment employed in the production process relative to labor and other inputs,the longer will be the period of time required to increase significantly the scale of operation. 
C)  The shape of the firm's long-run cost function is important in decisions to expand the scale of operations. 
D)  none of the above

Question 7

What method of inventory valuation should be used for economic decision-making problems?

Accepted Answer

A)  book value 
B)  original cost 
C)  current replacement cost 
D)  cost or market,whichever is lower 
E)  historical cost 
A)  book value 
B)  original cost 
C)  current replacement cost 
D)  cost or market,whichever is lower 
E)  historical cost

Question 8

A firm has determined that its variable costs are given by the following relationship:
VC = .05Q3 ? 5Q2 + 500Q
where Q is the quantity of output produced.

Accepted Answer

None

Question 9

Possible sources of economies of scale (size)within a production plant include:

Accepted Answer

A)  specialization in the use of capital and labor 
B)  imperfections in the labor market 
C)  transportation costs 
D)  a and b 
E)  a and c 
A)  specialization in the use of capital and labor 
B)  imperfections in the labor market 
C)  transportation costs 
D)  a and b 
E)  a and c

Question 10

For a short-run cost function which of the following statements is (are)not true?

Accepted Answer

A)  The average fixed cost function is monotonically decreasing. 
B)  The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum. 
C)  The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum. 
D)  The marginal cost function intersects the average total cost function where the average total cost function is a minimum. 
E)  b and c 
A)  The average fixed cost function is monotonically decreasing. 
B)  The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum. 
C)  The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum. 
D)  The marginal cost function intersects the average total cost function where the average total cost function is a minimum. 
E)  b and c

Question 11

If TC = 321 + 55Q - 5Q2,then average total cost at Q = 10 is:

Accepted Answer

A)  10.2 
B)  102 
C)  37.1 
D)  371 
E)  321 
A)  10.2 
B)  102 
C)  37.1 
D)  371 
E)  321

Question 12

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Accepted Answer

\[\begin{array} { r c r r r r r r r } 
\

Question 13

Which of the following is true with regards to a long-run cost function?

Accepted Answer

A)  The shape of the firm's long-run cost function is important in decisions to expand the scale of operations 
B)  The long-run average cost curve is U-shaped 
C)  The long-run average cost curve is flatter than the short-run average cost curve. 
D)  The curve consists of the lower boundary of all the short-run cost curves 
E)  All of the above 
A)  The shape of the firm's long-run cost function is important in decisions to expand the scale of operations 
B)  The long-run average cost curve is U-shaped 
C)  The long-run average cost curve is flatter than the short-run average cost curve. 
D)  The curve consists of the lower boundary of all the short-run cost curves 
E)  All of the above

Question 14

The cost function is:

Accepted Answer

A)  a means for expressing output as a function of cost 
B)  a schedule or mathematical relationship showing the total cost of producing various quantities of output 
C)  similar to a profit and loss statement 
D)  incapable in being developed from statistical regression analysis 
E)  none of the above 
A)  a means for expressing output as a function of cost 
B)  a schedule or mathematical relationship showing the total cost of producing various quantities of output 
C)  similar to a profit and loss statement 
D)  incapable in being developed from statistical regression analysis 
E)  none of the above

Question 15

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q2 + 0.001Q3

Accepted Answer

A)  Fixed cost (F
C) is $200 
B)  Variable cost (V
C) is 5Q - 0.4Q2 + 0.001Q3 
C)  Average variable cost (AV
C) is 5 - 0.4Q + 0.001Q2 
D)  Marginal cost (M
C) is 5 - 0.8Q +.003Q2 
E)  All of the above are correct 
A)  Fixed cost (F
C) is $200 
B)  Variable cost (V
C) is 5Q - 0.4Q2 + 0.001Q3 
C)  Average variable cost (AV
C) is 5 - 0.4Q + 0.001Q2 
D)  Marginal cost (M
C) is 5 - 0.8Q +.003Q2 
E)  All of the above are correct

Question 16

The existence of diseconomies of scale (size)for the firm is hypothesized to result from:

Accepted Answer

A)  transportation costs 
B)  imperfections in the labor market 
C)  imperfections in the capital markets 
D)  problems of coordination and control encountered by management 
E)  All of the above 
A)  transportation costs 
B)  imperfections in the labor market 
C)  imperfections in the capital markets 
D)  problems of coordination and control encountered by management 
E)  All of the above

Question 17

The relevant cost in economic decision-making is the opportunity cost of the resources rather than the outlay of funds required to obtain the resources.

Accepted Answer

A) True 
 B)False

Question 18

Regarding costs,which of the following statements is true?

Accepted Answer

A)  ​costs can be measured in different ways 
B)  ​costs appropriate for financial reporting purposes are appropriate for decision-making purposes 
C)  ​the relevant cost in economic decision making is the initial cost 
D)  ​sunk costs should always be considered in making operating decisions 
E)  ​none of these is true 
A)  ​costs can be measured in different ways 
B)  ​costs appropriate for financial reporting purposes are appropriate for decision-making purposes 
C)  ​the relevant cost in economic decision making is the initial cost 
D)  ​sunk costs should always be considered in making operating decisions 
E)  ​none of these is true

Economies of scale exist whenever long-run average costs:

The Jones Company has the following cost schedule: Output (Units) Total Cost (\ ) 0 3000 50 3750 100 4275 150 4675 200 5000 250 5300 300 5700 350 6250 400 7050 450 8225 Prepare (a)average total cost and (b)marginal cost schedules for the firm.

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Which of the following statements about cost functions is true?

What method of inventory valuation should be used for economic decision-making problems?

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ ? 5Q² + 500Q where Q is the quantity of output produced.

Possible sources of economies of scale (size)within a production plant include:

For a short-run cost function which of the following statements is (are)not true?

If TC = 321 + 55Q - 5Q²,then average total cost at Q = 10 is:

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Which of the following is true with regards to a long-run cost function?

The cost function is:

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q² + 0.001Q³

The existence of diseconomies of scale (size)for the firm is hypothesized to result from:

The relevant cost in economic decision-making is the opportunity cost of the resources rather than the outlay of funds required to obtain the resources.

Regarding costs,which of the following statements is true?

Introduction and Goals of the Firm

Fundamental Economic Concepts

Demand Analysis

Estimating Demand

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

Exam 8: Cost Analysis

Economies of scale exist whenever long-run average costs:

The Jones Company has the following cost schedule: Output (Units) Total Cost (\ ) 0 3000 50 3750 100 4275 150 4675 200 5000 250 5300 300 5700 350 6250 400 7050 450 8225 Prepare (a)average total cost and (b)marginal cost schedules for the firm.

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Which of the following statements about cost functions is true?

What method of inventory valuation should be used for economic decision-making problems?

A firm has determined that its variable costs are given by the following relationship: VC = .05Q3 ? 5Q2 + 500Q where Q is the quantity of output produced.

Possible sources of economies of scale (size)within a production plant include:

For a short-run cost function which of the following statements is (are)not true?

If TC = 321 + 55Q - 5Q2,then average total cost at Q = 10 is:

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Which of the following is true with regards to a long-run cost function?

The cost function is:

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q2 + 0.001Q3

The existence of diseconomies of scale (size)for the firm is hypothesized to result from:

The relevant cost in economic decision-making is the opportunity cost of the resources rather than the outlay of funds required to obtain the resources.

Regarding costs,which of the following statements is true?

Introduction and Goals of the Firm

Fundamental Economic Concepts

Demand Analysis

Estimating Demand

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ ? 5Q² + 500Q where Q is the quantity of output produced.

If TC = 321 + 55Q - 5Q²,then average total cost at Q = 10 is:

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q² + 0.001Q³