Question 1

Refer to the following table:   The optimal level of activity is:

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any of the activity levels. 
A) 2 
B) 3 
C) 4 
D) 5 
E) There is no optimal level in this case because marginal benefit does not equal marginal cost at any of the activity levels.

Question 2

If profits depend on both how much is produced output)and the level of quality,then a profit-maximizing firm should choose the levels of output and quality at which

Accepted Answer

A) The marginal revenue of output exceeds the marginal cost of output by the largest amount. 
B) The marginal revenue of quality exceeds the marginal cost of quality by the largest amount. 
C) The difference between the addition to total revenue and the addition to total cost of the last units of output and quality is the greatest. 
D) both a and b 
E) none of the above 
A) The marginal revenue of output exceeds the marginal cost of output by the largest amount. 
B) The marginal revenue of quality exceeds the marginal cost of quality by the largest amount. 
C) The difference between the addition to total revenue and the addition to total cost of the last units of output and quality is the greatest. 
D) both a and b 
E) none of the above

Question 3

A student taking economics,statistics,and finance has decided to spend 9 hours per week studying.The objective is to maximize the average grade,which means maximizing the total grade in the three courses.The table shows the student's estimate of the relation between time spent studying each course and the grade for each course.   Based on the above information,what is the maximum AVERAGE grade the student can earn if she studies 9 hours per week?

Accepted Answer

A) 80 
B) 80.3 
C) 82 
D) 78.3 
A) 80 
B) 80.3 
C) 82 
D) 78.3

Question 4

The decision rule for constrained optimization is to select the level for each activity at which

Accepted Answer

A) marginal benefit equals marginal cost for each activity. 
B) total benefit equals total cost for each activity. 
C) marginal benefit per dollar of marginal cost is equal across all activities. 
D) total benefit per dollar of total cost is equal across all activities. 
A) marginal benefit equals marginal cost for each activity. 
B) total benefit equals total cost for each activity. 
C) marginal benefit per dollar of marginal cost is equal across all activities. 
D) total benefit per dollar of total cost is equal across all activities.

Question 5

A metal refining plant emits sulfur dioxide into the air and has decided to install air scrubbers to reduce the amount of pollution.Each scrubber costs $180,000 and the Environmental Protection Agency EPA)fines the plant $5,000 for every part of pollution emitted per million.   Based on the information above,the first air scrubber __________ increases/decreases)the total cost of pollution by $______.

Accepted Answer

A) increases,$180,000 
B) increases,$530,000 
C) decreases,$ 70,000 
D) decreases,$250,000 
E) none of the above 
A) increases,$180,000 
B) increases,$530,000 
C) decreases,$ 70,000 
D) decreases,$250,000 
E) none of the above

Question 6

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll.The last doctor hired treated 1,600 extra patients in a year,while the last nurse hired treated 1,000 extra patients in a year.If doctors make $50,000 a year and nurses make $40,000 a year,then

Accepted Answer

A) the clinic could serve more patients by hiring more doctors and fewer nurses. 
B) the clinic could serve more patients by hiring fewer doctors and more nurses. 
C) the clinic is making the correct decision. 
D) the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses. 
E) a and d 
A) the clinic could serve more patients by hiring more doctors and fewer nurses. 
B) the clinic could serve more patients by hiring fewer doctors and more nurses. 
C) the clinic is making the correct decision. 
D) the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses. 
E) a and d

Question 7

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A:   If the decision maker is choosing 300 units of activity A,

Accepted Answer

A) this level maximizes net benefits. 
B) if the activity is increased by one unit,net benefits will increase by $20. 
C) if the activity is decreased by one unit,net benefits will decrease by $20. 
D) both b and c 
E) all of the above 
A) this level maximizes net benefits. 
B) if the activity is increased by one unit,net benefits will increase by $20. 
C) if the activity is decreased by one unit,net benefits will decrease by $20. 
D) both b and c 
E) all of the above

Question 8

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A:   If the decision maker is choosing 400 units of activity A,

Accepted Answer

A) this level maximizes net benefits. 
B) the activity could be reduced by one unit and net benefits will increase by $10. 
C) the activity could be reduced by one unit and net benefits will rise by $25. 
D) the activity could be increased by one unit and net benefits will increase by $15. 
E) the activity could be reduced by one unit and net benefits would decrease by $10. 
A) this level maximizes net benefits. 
B) the activity could be reduced by one unit and net benefits will increase by $10. 
C) the activity could be reduced by one unit and net benefits will rise by $25. 
D) the activity could be increased by one unit and net benefits will increase by $15. 
E) the activity could be reduced by one unit and net benefits would decrease by $10.

Question 9

The optimal level of pollution reduction is that level at which

Accepted Answer

A) the total benefits of pollution reduction exceeds the total cost of pollution reduction by the largest amount. 
B) the total benefits of pollution reduction equal the total cost of pollution reduction. 
C) the marginal benefit of pollution reduction exceeds the marginal cost of pollution reduction by the largest amount. 
D) the additional benefit of the last unit of pollution reduction equals the additional cost of the last unit of pollution reduction. 
E) both a and d 
A) the total benefits of pollution reduction exceeds the total cost of pollution reduction by the largest amount. 
B) the total benefits of pollution reduction equal the total cost of pollution reduction. 
C) the marginal benefit of pollution reduction exceeds the marginal cost of pollution reduction by the largest amount. 
D) the additional benefit of the last unit of pollution reduction equals the additional cost of the last unit of pollution reduction. 
E) both a and d

Question 10

A housecleaning company receives $25 for each house cleaned.The table below gives the relation between the number of workers and the number of houses that can be cleaned per week.   Based on the above info,if the wage rate of a housecleaner is $130,what is the maximum amount of profit the company can earn?

Accepted Answer

A) $ 20 
B) $150 
C) $230 
D) $750 
E) none of the above 
A) $ 20 
B) $150 
C) $230 
D) $750 
E) none of the above

Question 11

A grocery store hires cashiers and baggers.Cashiers earn $8 an hour; baggers earn $4 an hour.The manager,who wants to maximize the number of customers served given a fixed payroll,expects the following productivity from cashiers and baggers:   Given the above information,with a payroll of $32 per hour),how should the manager allocate this budget?

Accepted Answer

A) Hire three cashiers and two baggers 
B) Hire two cashiers and four baggers 
C) Hire two cashiers and three baggers 
D) Hire four cashiers and one bagger 
A) Hire three cashiers and two baggers 
B) Hire two cashiers and four baggers 
C) Hire two cashiers and three baggers 
D) Hire four cashiers and one bagger

Question 12

A metal refining plant emits sulfur dioxide into the air and has decided to install air scrubbers to reduce the amount of pollution.Each scrubber costs $180,000 and the Environmental Protection Agency EPA)fines the plant $5,000 for every part of pollution emitted per million.   Based on the information above,how many air scrubbers should the plant install in order to minimize the total cost of pollution?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 13

A radio manufacturer is experiencing theft problems at its warehouse and has decided to hire security guards to reduce the thefts.The firm wants to minimize the net cost of warehouse thefts.   Given the above info,in order to minimize the NET cost of theft,a firm should choose the level of theft prevention at which

Accepted Answer

A) theft is eliminated. 
B) the marginal benefit of theft equals the marginal cost of the theft. 
C) the total benefit of theft prevention equals the total cost of the theft prevention. 
D) the marginal benefit of theft prevention equals the marginal cost of preventing theft. 
E) the total cost of theft prevention equals the total cost of preventing theft. 
A) theft is eliminated. 
B) the marginal benefit of theft equals the marginal cost of the theft. 
C) the total benefit of theft prevention equals the total cost of the theft prevention. 
D) the marginal benefit of theft prevention equals the marginal cost of preventing theft. 
E) the total cost of theft prevention equals the total cost of preventing theft.

Question 14

A dentist's office,which wants to serve the maximum number of patients given a fixed payroll,currently has two dentists and four dental hygienists.Dentists earn $60,000 a year and hygienists earn $15,000 a year.If the office is hiring the optimal combination of dentists and hygienists,and the last dentist hired served 120 additional patients,how many patients will the last hygienist hired add?

Accepted Answer

A) 30 
B) 60 
C) 120 
D) 240 
A) 30 
B) 60 
C) 120 
D) 240

Question 15

A local charity has decided to solicit donations door-to-door.The table below shows estimated donations for each hour a volunteer spends in the city,in the suburbs,and on campus.   Given the above information,how should a volunteer allocate 10 hours in order to maximize the amount of total donations?

Accepted Answer

A) 3 hours in the city,4 hours in the suburbs,3 hours on campus 
B) 4 hours in the city,3 hours in the suburbs,3 hours on campus 
C) 5 hours in the city,4 hours in the suburbs,1 hours on campus 
D) 6 hours in the city,4 hours in the suburbs,0 hours on campus 
A) 3 hours in the city,4 hours in the suburbs,3 hours on campus 
B) 4 hours in the city,3 hours in the suburbs,3 hours on campus 
C) 5 hours in the city,4 hours in the suburbs,1 hours on campus 
D) 6 hours in the city,4 hours in the suburbs,0 hours on campus

Question 16

A restaurant hires cooks and waiters.Cooks earn $10 an hour; waiters earn $5 an hour.The manager,who wants to maximize the number of meals served given a fixed payroll of $45 per hour,expects the following from cooks and waiters:   Given the above information,at the optimal choice,the last dollar spent on hiring waiters yielded

Accepted Answer

A) 6 additional meals. 
B) 16 additional meals. 
C) 80 additional meals. 
D) 60 additional meals. 
E) none of the above 
A) 6 additional meals. 
B) 16 additional meals. 
C) 80 additional meals. 
D) 60 additional meals. 
E) none of the above

Question 17

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

Accepted Answer

A) is making the correct decision because the dollar expenditure $4800)is equal for vans and employees. 
B) should use more vans and fewer employees because the last van added 480 packages while the last employee only added 450 packages. 
C) should use fewer vans and more employees because the last dollar spent on vans yielded 1.2 additional packages delivered,while the last dollar spent on employees yielded 1.5 packages delivered. 
D) could deliver more packages for the same budget by using fewer vans and more employees. 
E) both c and d 
A) is making the correct decision because the dollar expenditure $4800)is equal for vans and employees. 
B) should use more vans and fewer employees because the last van added 480 packages while the last employee only added 450 packages. 
C) should use fewer vans and more employees because the last dollar spent on vans yielded 1.2 additional packages delivered,while the last dollar spent on employees yielded 1.5 packages delivered. 
D) could deliver more packages for the same budget by using fewer vans and more employees. 
E) both c and d

Question 18

marginal cost is greater than marginal benefit at the current activity level,the decision maker can increase net benefit by decreasing the activity because

Accepted Answer

A) total benefit will rise by more than total cost will rise. 
B) marginal cost is rising faster than marginal benefit is falling. 
C) net benefit is upward sloping at this point. 
D) total cost will fall by more than total benefit will fall. 
A) total benefit will rise by more than total cost will rise. 
B) marginal cost is rising faster than marginal benefit is falling. 
C) net benefit is upward sloping at this point. 
D) total cost will fall by more than total benefit will fall.

Question 19

Refer to the following table:   What is the net benefit of the 6th unit of the activity?

Accepted Answer

A) -39 
B) 0 
C) 45 
D) 50 
E) none of the above 
A) -39 
B) 0 
C) 45 
D) 50 
E) none of the above

Question 20

Your firm sells club soda in both grocery stores and convenience stores.You have a budget of $550 for store displays,and must decide how to allocate this budget between grocery stores and convenience stores to maximize the total number of sales.The following table shows the total number of units that can be sold in grocery stores and convenience stores,according to the number of displays in each type of store.Displays in grocery stores cost $150 each and displays in convenience stores cost $100 each.   Given the above information,to maximize the total number of sales,you should choose

Accepted Answer

A) 3 grocery store displays and 2 convenience store displays. 
B) 3 grocery store displays and 3 convenience store displays. 
C) 3 grocery store displays and 4 convenience store displays. 
D) 1 grocery store display and 4 convenience store displays. 
A) 3 grocery store displays and 2 convenience store displays. 
B) 3 grocery store displays and 3 convenience store displays. 
C) 3 grocery store displays and 4 convenience store displays. 
D) 1 grocery store display and 4 convenience store displays.

Refer to the following table: The optimal level of activity is:

If profits depend on both how much is produced output)and the level of quality,then a profit-maximizing firm should choose the levels of output and quality at which

The decision rule for constrained optimization is to select the level for each activity at which

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A: If the decision maker is choosing 300 units of activity A,

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A: If the decision maker is choosing 400 units of activity A,

The optimal level of pollution reduction is that level at which

A local charity has decided to solicit donations door-to-door.The table below shows estimated donations for each hour a volunteer spends in the city,in the suburbs,and on campus. Given the above information,how should a volunteer allocate 10 hours in order to maximize the amount of total donations?

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

marginal cost is greater than marginal benefit at the current activity level,the decision maker can increase net benefit by decreasing the activity because

Refer to the following table: What is the net benefit of the 6th unit of the activity?

Managers, profits, and Markets

Demand, supply, and Market Equilibrium

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 3: Marginal Analysis for Optimal Decision Making

Refer to the following table: The optimal level of activity is:

If profits depend on both how much is produced output)and the level of quality,then a profit-maximizing firm should choose the levels of output and quality at which

The decision rule for constrained optimization is to select the level for each activity at which

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A: If the decision maker is choosing 300 units of activity A,

Refer to the figure below,which shows marginal benefits MB)and marginal cost MC)of activity A: If the decision maker is choosing 400 units of activity A,

The optimal level of pollution reduction is that level at which

A local charity has decided to solicit donations door-to-door.The table below shows estimated donations for each hour a volunteer spends in the city,in the suburbs,and on campus. Given the above information,how should a volunteer allocate 10 hours in order to maximize the amount of total donations?

A package delivery service currently has 12 vans and 16 employees.Vans cost $400 per week and employees earn $300 per week.The last van added 480 packages delivered to total output,while the last employee added 450 packages.The firm

marginal cost is greater than marginal benefit at the current activity level,the decision maker can increase net benefit by decreasing the activity because

Refer to the following table: What is the net benefit of the 6th unit of the activity?

Managers, profits, and Markets

Demand, supply, and Market Equilibrium

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters