Deck 3: Optimization Techniques and New Management Tools

Question 1

Use the information in the table below to determine the average cost of producing 4 units of output.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\text { Total Cost } & 10 & 11 & 13 & 16 & 20 & 25 & 31 & 38 & 48\end{array}$$

A) 20
B) 4
C) 5
D) 2.5

Answer 1

5

Question 2

Use the information in the table below to determine the average variable cost of producing 5 units of output.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\text { Total Cost } & 10 & 11 & 13 & 16 & 20 & 25 & 31 & 38 & 48\end{array}$$

A) 25
B) 15
C) 5
D) 3

Answer 2

3

Question 3

Use the information in the table below to determine the average fixed cost of producing 2 units of output.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\text { Total Cost } & 10 & 11 & 13 & 16 & 20 & 25 & 31 & 38 & 48\end{array}$$

A) 13
B) 6.5
C) 5
D) 2

Answer 3

5

Question 4

Use the information in the table below to determine the marginal cost of producing the sixth unit of output.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\text { Cost } & 10 & 11 & 13 & 16 & 20 & 25 & 31 & 38 & 48\end{array}$$

A) 6
B) 31
C) 6/31
D) 31/6

Question 5

Use the following to answer questions below :

-Refer to the total cost graph. What is average total cost equal to when Q = 6?

A) 60
B) 50
C) 10
D) 5

Question 6

Use the following to answer questions below :

-Refer to the total cost graph. What is average variable cost equal to when Q = 2?

A) 15
B) 20
C) 30
D) 40

Question 7

Use the following to answer questions below :

-Refer to the total cost graph. At approximately what level of output is average total cost at a minimum?

A) 0
B) 5
C) 8
D) 10

Question 8

Use the following to answer questions below :

-Refer to the total cost graph. What is average fixed cost equal to when Q = 5?

A) 2
B) 10
C) 11
D) 55

Question 9

Use the following to answer questions below :

-Refer to the total cost graph. What is the marginal cost of producing the second unit of output?

A) 40
B) 30
C) 20
D) 10

Question 10

Use the following to answer questions below :

-Refer to the total cost graph. Which of the following levels of output is closest to the inflection point?

A) 2
B) 5
C) 10
D) 11

Question 11

If marginal cost (MC) is $12 and average variable cost (AVC) is $10, then AVC

A) is at a minimum.
B) is at a maximum.
C) is increasing.
D) is decreasing.

Question 12

If marginal cost (MC) is $10 and average variable cost (AVC) is $10, then AVC

A) is at a minimum.
B) is at a maximum.
C) is increasing.
D) is decreasing.

Question 13

If marginal cost (MC) is $10 and average variable cost (AVC) is $12, then AVC

A) is at a minimum.
B) is at a maximum.
C) is increasing.
D) is decreasing.

Question 14

Use the information about marginal cost (MC) and marginal revenue (MR) that is presented in the table below to determine the profit-maximizing level of output.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \\M C & 10 & 11 & 13 & 16 & 20 & 25 & 31 & 38 & 48 \\M R & 50 & 45 & 40 & 35 & 30 & 25 & 20 & 15 & 10\end{array}$$

A) 1
B) 3
C) 6
D) 9

Question 15

Use the information about marginal revenue (MR) that is presented in the table below to determine the total revenue when output is equal to 6.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \\M R & 50 & 45 & 40 & 35 & 30 & 25 & 20 & 15 & 10\end{array}$$

A) 25
B) 30
C) 150
D) 225

Question 16

Use the information about marginal revenue (MR) that is presented in the table below to determine the level of output that maximizes total revenue.
$$\begin{array} { l r r r r r r r r r } \text { Output } & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \\M R & 50 & 40 & 30 & 20 & 10 & 0 & - 10 & - 20 & - 30\end{array}$$

A) 1
B) 6
C) 9
D) There is not enough information to determine the answer.

Question 17

Use the following to answer questions below:

-Refer to the total revenue graph. The level of output where marginal revenue is equal to zero is

A) 0
B) 2
C) 5
D) 10

Question 18

Use the following to answer questions below:

-Refer to the total revenue graph. Marginal revenue is decreasing when output is equal to

A) 2
B) 5
C) 7
D) All of the above are correct.

Question 19

Use the following to answer questions below:

-Refer to the total revenue graph. If marginal cost is equal to 10 at all levels of output, then which of the following output levels will yield the highest level of profit?

A) 2
B) 4
C) 5
D) 7

Question 20

Suppose that a firm's total revenue function is defined as TR = 200Q - 20Q². What is average revenue equal to when 1 unit of output is produced?

A) 180
B) 20
C) 200
D) 220

Question 21

Relationships between economic variables can be expressed in the form of

A) a graph.
B) an equation.
C) a table.
D) Any of the above is correct.

Question 22

The optimal solution to a problem is best defined as the solution that

A) is superior to any other possible solution.
B) costs less than any other possible solution.
C) generates more revenue than any other possible solution.
D) corresponds to the inflection point on a total product or total cost curve.

Question 23

Differential calculus can be used to solve problems in cases where economic relationships are expressed in the form of

A) a graph.
B) a table.
C) an equation.
D) Any of the above is correct.

Question 24

Average cost is defined as

A) total cost divided by marginal cost.
B) total cost divided by total output.
C) total output times cost per unit.
D) total output times marginal cost.

Question 25

The marginal cost when output = 10 is equal to

A) the slope of a line drawn tangent to the total cost curve where output = 10.
B) the total cost of 10 units of output divided by 10.
C) the average cost of 10 units of output.
D) the slope of a ray drawn from the origin to the point on the total cost curve where output = 10.

Question 26

If a firm's total revenue function is a straight line that begins at the origin, then

A) marginal revenue is zero.
B) average revenue is zero.
C) marginal revenue is equal to average revenue.
D) All of the above are true.

Question 27

If marginal revenue is equal to zero, then

A) total revenue is zero.
B) average revenue is zero.
C) total revenue is at a maximum or a minimum.
D) average revenue is at a maximum or a minimum.

Question 28

If average cost is at a minimum, then

A) it is equal to marginal cost.
B) total cost is also at a minimum.
C) profit is at a maximum.
D) All of the above are true.

Question 29

The level of output where a straight line drawn from the origin is tangent to the total cost curve is where

A) total cost is at a minimum.
B) average cost is equal to marginal cost.
C) profit is at a maximum.
D) All of the above are correct.

Question 30

The economic concept that corresponds most closely to a "derivative" in calculus is the concept of

A) an average value.
B) a total value.
C) a marginal value.
D) economic profit.

Question 31

The marginal principle asserts that, in general, when net benefit is maximized

A) total benefit will be equal to total cost.
B) average benefit will be equal to average cost.
C) marginal benefit will be equal to marginal cost.
D) average cost will be above total cost but below average benefit.

Question 32

When total revenue is at a maximum

A) average revenue is at a maximum.
B) marginal revenue is at a maximum.
C) average revenue is equal to zero.
D) None of the above is correct.

Question 33

If both average cost (AC) and marginal cost (MC) are U shaped, then

A) AC will reach a minimum at a level of output that is less than that at which MC reaches a minimum.
B) the total cost curve will be a straight line.
C) AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum.
D) both AC and MC will reach a minimum at the same level of output.

Question 34

If a firm's marginal revenue is greater than its marginal cost, then the firm should

A) increase output to increase profit.
B) decrease output to increase profit.
C) keep output the same.
D) collect additional information before taking any action.

Question 35

If a firm's average cost is equal to its average revenue, then

A) profit is at a maximum.
B) profit is at a minimum.
C) profit is equal to zero.
D) the firm is in equilibrium.

Question 36

The inflection point refers to the point on a total cost curve where

A) average cost is at a minimum.
B) average cost is at a maximum.
C) marginal cost is at a minimum.
D) marginal cost is at a maximum.

Question 37

If an average curve has a negative slope, then the corresponding

A) marginal curve is below the average curve.
B) total curve has a negative slope.
C) marginal curve is above the average curve.
D) total curve has a positive slope.

Question 38

If a firm's total cost curve is defined by a straight line that has a positive intercept that is equal to fixed costs, then

A) average cost is equal to marginal cost for all levels of output.
B) average cost is negatively sloped and marginal cost is horizontal.
C) both average cost and marginal cost are negatively sloped, but they are not equal to each other.
D) both average cost and marginal cost are horizontal, and average cost is below marginal cost at all levels of output.

Question 39

If a firm is producing a level of output where marginal cost is equal to marginal revenue, then

A) profit is at a maximum if marginal cost has a negative slope and marginal revenue is horizontal.
B) profit is at a minimum if marginal cost has a negative slope and marginal revenue is horizontal.
C) profit is at a maximum if average revenue is greater than average cost.
D) profit is at a minimum if average revenue is greater than average cost.

Question 40

The optimal amount of pollution to society is where

A) the total cost of pollution is equal to zero.
B) the total benefit of pollution is equal to zero.
C) the marginal benefit of pollution equals the marginal cost of pollution.
D) there is no pollution at all.

Question 41

Which of the following factors does not improve management practices?

A) Competition in the product market
B) Export orientation
C) Family-run business structure
D) Production exclusively for the domestic market

Question 42

Given the total cost schedule below, for which unit is the marginal cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Cost } & 20 & 30 & 35 & 36 & 40 & 48 & 63 \\\hline\end{array}$$

A) 2nd
B) 3rd
C) 4th
D) 5th

Question 43

Given the total cost schedule below, for which unit is the marginal cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Cost } & 10 & 25 & 30 & 34 & 35 & 40 & 50 \\\hline\end{array}$$

A) 2nd
B) 3rd
C) 4th
D) 5th

Question 44

Given the total cost schedule below, at what level of output is the average cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Cost } & 50 & 70 & 60 & 70 & 80 & 110 & 140 \\\hline\end{array}$$

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

Question 45

Given the total cost schedule below, at what level of output is the average cost the lowest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Output } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Cost } & 10 & 20 & 24 & 27 & 40 & 55 & 90 \\\hline\end{array}$$

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

Question 46

Given the total product schedule below, at what level of labor is the average product the highest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Units of Labor } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Product } & 0 & 2 & 5 & 9 & 11 & 13 & 14 \\\hline\end{array}$$

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

Question 47

Given the total product schedule below, for which unit of labor is the marginal product of labor the highest?
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Units of Labor } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Total Product } & 0 & 2 & 5 & 9 & 14 & 21 & 25 \\\hline\end{array}$$

A) 2nd
B) 3rd
C) 4th
D) 5th

Question 48

If average cost is increasing with an additional unit of output, this means that

A) marginal cost is increasing.
B) marginal cost is decreasing.
C) marginal cost is flat.
D) total cost is decreasing.

Question 49

Average cost equals

A) total cost minus fixed cost.
B) marginal cost plus variable cost.
C) total cost divided by number labor units used in production.
D) total cost divided by the output.

Question 50

Constrained optimization refers to the fact that

A) the firm need to impose restrictions on itself for sustainable growth.
B) the resources the firm has are limited.
C) the objectives the firm has are limited.
D) the firm has only limited demand and should be limit production.

Question 51

According to a 1998 survey of AMA sent to global corporations, what was the most important objective the global corporations believe they face?

A) Customer service.
B) Foreign language training.
C) Outsourcing and contracting.
D) Political lobbying.

Question 52

Six sigma quality refers to around how many defects per million units produced?

A) 3
B) 53
C) 103
D) 1003

Question 53

What does benchmarking refer to?

A) Keeping high level of production quality in factories abroad.
B) Making sure that the quality of products or processes is as good or better than in previous year.
C) Setting a level of quality that is acceptable and making sure it is met.
D) Finding out how other firms are doing something better, then copying and improving.

Question 54

Constantly improving the quality of products and processes so as to consistently deliver increasing value to customers is known as

A) Reengineering.
B) Benchmarking.
C) Total quality management.
D) Just-in-time management.

Question 55

What did Mobil Corporation (now Exxon-Mobil) examined when trying to reduce the time spent at the gas pump at its 8,000 service stations?

A) Plane refueling process.
B) Team Penske auto-racing pit stops.
C) Military drills.
D) Their competitors.

Question 56

Reengineering involves

A) analyzing big data set to improve old firm's processes.
B) investing into individual and collective learning of the firm
C) slight improvement of the current firm's processes limiting any associated risk.
D) radical redesign of the firm's processes to achieve major gains in efficiency.

Question 57

Forming of temporary strategic alliances with other firms is called

A) broadbanding.
B) networking.
C) virtual integration.
D) direct business integration.

Question 58

What does SWOT stand for?

A) Social, Winning, Opponents, Trust
B) Strengths, Weaknesses, Odds, Threat
C) Strengths, Weaknesses, Opportunities, Threats
D) Social, Winning, Outreach, Trust

Question 59

Economic relationship can be expressed as

A) equations.
B) graphs.
C) tables.
D) all of the above.

Question 60

If output equals 10 and average cost is 20, what is the total cost?

A) 2
B) 30
C) 100
D) 200

Question 61

Economic relationships can be expressed as equations, graphs, and schedules.

Question 62

If an economic relationship is complex, it must generally be expressed as an equation.

Question 63

Differential calculus can be applied directly to the graph of an economic relationship.

Question 64

The optimal solution to a problem refers to the best solution.

Question 65

For any given total function, the total is always larger than the average and the average is always larger than the marginal.

Question 66

The form of the relationship between total, average, and marginal functions is the same whether it is applied to total revenue, product, cost, or profit.

Question 67

Total cost is equal to average cost times marginal cost.

Question 68

Average revenue is equal to marginal revenue between zero units of output and 1 unit of output.

Question 69

If total cost is increasing, marginal cost is positive.

Question 70

If total revenue is decreasing, average revenue is negative.

Question 71

If total profit is at a maximum, marginal profit is zero.

Question 72

The concept that corresponds most closely to the derivative is the concept of an average value.

Question 73

Marginal cost is plotted (as an approximation) halfway between successive units of output.

Question 74

If an average value is equal to its corresponding marginal value, the average value must be at either a maximum or a minimum.

Question 75

Average revenue reaches a maximum at the same level of sales that total revenue reaches a maximum.

Question 76

Marginal revenue reaches a maximum at the same level of output that total revenue reaches a maximum.

Question 77

If a straight line that is tangent to total cost passes through the origin of a graph, then the slope of the line is equal to average cost at the point of tangency.

Question 78

If a straight line that is tangent to total cost passes through the origin of a graph, then the slope of the line is equal to marginal cost at the point of tangency.

Question 79

If a straight line that intersects a total cost line passes through the origin of a graph, then the slope of the straight line is equal to marginal cost at the point of intersection.

Question 80

If a firm's marginal revenue is negative, then total revenue will decrease if the firm sells more output.