Question 1

In the long run

Accepted Answer

A) fixed costs tend to be greater than variable costs. 
B) variable costs tend to be greater than fixed costs. 
C) all costs are fixed costs. 
D) all costs are variable costs. 
A) fixed costs tend to be greater than variable costs. 
B) variable costs tend to be greater than fixed costs. 
C) all costs are fixed costs. 
D) all costs are variable costs.

Question 2

Among the problems encountered when time series analysis is used to estimate cost functions is

Accepted Answer

A) that technological changes may have occurred. 
B) that accounting changes may have occurred during the period analyzed. 
C) that some costs are recorded on the books of account at a time other than when they are incurred. 
D) All of the above 
A) that technological changes may have occurred. 
B) that accounting changes may have occurred during the period analyzed. 
C) that some costs are recorded on the books of account at a time other than when they are incurred. 
D) All of the above

Question 3

For each of the following cost functions,if possible,find minimum AC and minimum AVC.
a.TC = 20,000 + 10 Q
b.TC = 18,000 + Q + 0.2 Q2

Accepted Answer

a.Set MC = AC.10 = (20,000/Q)+ 10 In thi

Question 4

Fred's Widget Company has purchased $500,000 in equipment,which can be sold for a salvage value of $300,000 at any time.The best interest rate on alternative investments is 5%.What is the cost of using this machinery for one year? How would your answer be different if the machinery had not yet been purchased?

Accepted Answer

Short-run cost = $15

Question 5

If a firm's rent increases,it will affect its cost structure in which of the following ways?

Accepted Answer

A) AVC will increase. 
B) MC will increase. 
C) TFC will increase. 
D) All of the above will increase. 
A) AVC will increase. 
B) MC will increase. 
C) TFC will increase. 
D) All of the above will increase.

Question 6

The distinction between sunk and incremental costs is most helpful in answering which question?

Accepted Answer

A) How many more people should be added to the production process? 
B) What is the correct price to charge? 
C) Should we begin to build a new factory? 
D) Should we continue developing a new software application that we began last year? 
A) How many more people should be added to the production process? 
B) What is the correct price to charge? 
C) Should we begin to build a new factory? 
D) Should we continue developing a new software application that we began last year?

Question 7

Which of the following is a relevant cost?

Accepted Answer

A) replacement cost 
B) sunk cost 
C) historical cost 
D) fixed cost 
E) All of the above are relevant. 
A) replacement cost 
B) sunk cost 
C) historical cost 
D) fixed cost 
E) All of the above are relevant.

Question 8

Long-run cost functions are estimated using

Accepted Answer

A) time-series regression analysis. 
B) cross-sectional regression analysis. 
C) cost accounting data. 
D) None of the above 
A) time-series regression analysis. 
B) cross-sectional regression analysis. 
C) cost accounting data. 
D) None of the above

Question 9

The law of diminishing returns begins first to affect a firm's short-run cost structure when

Accepted Answer

A) average variable cost begins to increase. 
B) marginal cost begins to increase. 
C) average cost begins to increase. 
D) average fixed cost begins to decrease. 
A) average variable cost begins to increase. 
B) marginal cost begins to increase. 
C) average cost begins to increase. 
D) average fixed cost begins to decrease.

Question 10

Which of the following is a reason for economies of scale?

Accepted Answer

A) Fixed costs are spread out as volume increases. 
B) The law of diminishing returns does not take effect. 
C) Input productivity increases as a result of greater specialization. 
D) There is greater savings in transportation costs. 
A) Fixed costs are spread out as volume increases. 
B) The law of diminishing returns does not take effect. 
C) Input productivity increases as a result of greater specialization. 
D) There is greater savings in transportation costs.

Question 11

Given the production function Q = 21X + 9X2 - X3,where Q = Output,and X = Input
a.At what value of X does Stage II of the production function begin?
b.At what value of X does Stage III of the production function begin?
c.At what value of X does diminishing returns set in?

Accepted Answer

a.Stage II begins when AP is a

Question 12

When a firm experiences increasing returns to scale

Accepted Answer

A) its AFC will decrease. 
B) its AFC will increase. 
C) its AC will increase. 
D) its AC will decrease. 
A) its AFC will decrease. 
B) its AFC will increase. 
C) its AC will increase. 
D) its AC will decrease.

Question 13

In estimating short-run cost functions,one must adjust for

Accepted Answer

A) price level changes. 
B) accounting procedure changes. 
C) product heterogeneity. 
D) All of the above 
A) price level changes. 
B) accounting procedure changes. 
C) product heterogeneity. 
D) All of the above

Question 14

Economists consider which of the following costs to be irrelevant to a short-run business decision?

Accepted Answer

A) opportunity cost 
B) out-of-pocket cost 
C) historical cost 
D) replacement cost 
A) opportunity cost 
B) out-of-pocket cost 
C) historical cost 
D) replacement cost

Question 15

Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?

Accepted Answer

A) accounting cost vs.direct cost 
B) historical cost vs.replacement cost 
C) sunk cost vs.fixed cost 
D) variable cost vs.incremental cost 
A) accounting cost vs.direct cost 
B) historical cost vs.replacement cost 
C) sunk cost vs.fixed cost 
D) variable cost vs.incremental cost

Question 16

Which of the following distinctions does not help to explain the difference between relevant and irrelevant cost?

Accepted Answer

A) historical vs.replacement cost 
B) sunk vs.incremental cost 
C) variable vs.fixed cost 
D) out-of-pocket vs.opportunity cost 
E) All help to explain the difference. 
A) historical vs.replacement cost 
B) sunk vs.incremental cost 
C) variable vs.fixed cost 
D) out-of-pocket vs.opportunity cost 
E) All help to explain the difference.

Question 17

When a firm increased its output by one unit,its AC rose from $45 to $50.This implies that its MC is

Accepted Answer

A) $5. 
B) between $45 and $50. 
C) greater than $50. 
D) Cannot be determined from the above information 
A) $5. 
B) between $45 and $50. 
C) greater than $50. 
D) Cannot be determined from the above information

Question 18

Which of the following actions has the best potential for experiencing economies of scope?

Accepted Answer

A) producing a product that has appeal to a wider segment of the market 
B) producing computers and software 
C) producing spaghetti and soft drinks 
D) producing cars and trucks 
A) producing a product that has appeal to a wider segment of the market 
B) producing computers and software 
C) producing spaghetti and soft drinks 
D) producing cars and trucks

Question 19

Carefully explain the difference between diseconomies of scale and diminishing returns.

Accepted Answer

Diseconomies of scale means that,in the

Question 20

When a firm's MC curve shifts to the right,it implies that

Accepted Answer

A) new firms are entering the market. 
B) labor productivity is decreasing. 
C) labor productivity is increasing. 
D) the firm's overhead costs are decreasing. 
A) new firms are entering the market. 
B) labor productivity is decreasing. 
C) labor productivity is increasing. 
D) the firm's overhead costs are decreasing.

In the long run

Among the problems encountered when time series analysis is used to estimate cost functions is

For each of the following cost functions,if possible,find minimum AC and minimum AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q²

If a firm's rent increases,it will affect its cost structure in which of the following ways?

The distinction between sunk and incremental costs is most helpful in answering which question?

Which of the following is a relevant cost?

Long-run cost functions are estimated using

The law of diminishing returns begins first to affect a firm's short-run cost structure when

Which of the following is a reason for economies of scale?

Given the production function Q = 21X + 9X² - X³,where Q = Output,and X = Input a.At what value of X does Stage II of the production function begin? b.At what value of X does Stage III of the production function begin? c.At what value of X does diminishing returns set in?

When a firm experiences increasing returns to scale

In estimating short-run cost functions,one must adjust for

Economists consider which of the following costs to be irrelevant to a short-run business decision?

Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?

Which of the following distinctions does not help to explain the difference between relevant and irrelevant cost?

When a firm increased its output by one unit,its AC rose from $45 to $50.This implies that its MC is

Which of the following actions has the best potential for experiencing economies of scope?

Carefully explain the difference between diseconomies of scale and diminishing returns.

When a firm's MC curve shifts to the right,it implies that

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

Exam 7: The Theory and Estimation of Cost Appendices 7A,7B,and 7C

In the long run

Among the problems encountered when time series analysis is used to estimate cost functions is

For each of the following cost functions,if possible,find minimum AC and minimum AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q2

If a firm's rent increases,it will affect its cost structure in which of the following ways?

The distinction between sunk and incremental costs is most helpful in answering which question?

Which of the following is a relevant cost?

Long-run cost functions are estimated using

The law of diminishing returns begins first to affect a firm's short-run cost structure when

Which of the following is a reason for economies of scale?

Given the production function Q = 21X + 9X2 - X3,where Q = Output,and X = Input a.At what value of X does Stage II of the production function begin? b.At what value of X does Stage III of the production function begin? c.At what value of X does diminishing returns set in?

When a firm experiences increasing returns to scale

In estimating short-run cost functions,one must adjust for

Economists consider which of the following costs to be irrelevant to a short-run business decision?

Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?

Which of the following distinctions does not help to explain the difference between relevant and irrelevant cost?

When a firm increased its output by one unit,its AC rose from $45 to $50.This implies that its MC is

Which of the following actions has the best potential for experiencing economies of scope?

Carefully explain the difference between diseconomies of scale and diminishing returns.

When a firm's MC curve shifts to the right,it implies that

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

For each of the following cost functions,if possible,find minimum AC and minimum AVC. a.TC = 20,000 + 10 Q b.TC = 18,000 + Q + 0.2 Q²

Given the production function Q = 21X + 9X² - X³,where Q = Output,and X = Input a.At what value of X does Stage II of the production function begin? b.At what value of X does Stage III of the production function begin? c.At what value of X does diminishing returns set in?