Question: In a company that is experiencing economies of scale, which of the following is true?
A
Average total cost is decreasing
B
Fixed cost is decreasing
C
Average marginal cost is decreasing
D
Marginal cost is higher than average marginal cost
Question: What is the definition of market equilibrium?
A
The price at which elasticity of demand is unit elastic
B
The price and quantity at which all consumer surplus is extracted from buyers
C
The price at which quantity supplied equals quantity demanded
D
All of the above
Question: It costs your company $200 to produce pens and pencils together. To produce the same amount of pens and pencils separately costs $100 for the pens and $120 for the
A
Diseconomies of scope
B
Economies of scope
C
Increasing returns to scale
D
Constant returns to scale
Question: Management at the East Alabama Motor Speedway estimates that the "Friday Night Fanatics" would continue to enthusiastically pack the house (every ticket would be s
______ portion of their ______ curve.
A
Inelastic, supply
B
Elastic, supply
C
Inelastic, demand
D
Elastic, demand
Question: If a firm's average cost is falling (economies of scale) with output, then
A
Marginal cost is less than average cost
B
Marginal cost is rising
C
Marginal cost is greater than average cost
D
Average cost is rising as a function of output
Question: A company currently sells 60,000 units a month at $10 per unit. The variable cost per unit is $6. The company decided to raise the price about 10%. How much change i
A
- 48,000
B
- 12,000
C
- 8,000
D
+ 12,000
Question: A spirits manufacturer is considering two potential production investments.
Option A costs an initial $2 billion and will involve variable costs (labor and material) of $5 per bottle of spirits. Option B costs an initial $4 billion an
an annual capital charge equal to 10 percent of the initial costs, what is the average fixed cost at production level of 20,000,000 bottles per year for the
A
$3
B
$20
C
$23
D
$10
A
Configuration A
B
Configuration B
C
Configuration C
D
None of the configurations
Question: The U.S. Government bought 112,000 acres of land in southeastern Colorado in 1968 for $17,500,000. The cost of using this land today excl
A
Is zero, because they already own the land
B
Is zero, because the land represents a sunk cost
C
Is equal to the market value of the land
D
Depends on the value to society of black-tailed prairie dogs
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Question: If a firm is earning an abnormally high rate of return on invested capital
A
The firm is earning positive economic profits
B
The firm has zero economic profits
C
The firm’s accounting and economic profits are equal
D
The firm’s accounting profits are zero
Question: The fixed cost of Boeing's new aircraft, the 797, is $6 billion. The average variable cost is $100,000,000. The sales price is $ 140,000,000. W
A
100
B
125
C
150
D
175
Question: Which of the following would be considered an extent decision?
A
A business is considering diversifying into a new line of business
B
A business is considering shutting down operations
C
A business is considering the sale of an underperforming line of business
D
A business manager is trying to decide how many workers to hire for a new line of business
Question: You run a small auto service shop. Your fixed expenses per week are $1,000 and your average customer invoice is $500 with an associated m
breakeven quantity?
A
2 cars
B
3.33 cars
C
5 cars
D
10 cars
Question: Which of the following will NOT cause the demand curve for turkey meat to shift?
A
Rising chicken and pork prices
B
Recent news indicating cancer-fighting properties of turkey meat
C
Sudden decrease in price
D
Thanksgiving
Question: Dr. Octavio is an ophthalmologist who performs both cataract and LASIK surgeries. If a competitor starts offering LASIK surgery as well, c
charge for LASIK, this price decrease
A
Increases the opportunity cost of performing cataract surgeries
B
Increases the demand for LASIK surgery
C
Reduces the opportunity cost of performing cataract surgeries
D
Increases the demand for cataract surgeries, if cataract and LASIK surgeries are substitutes
Question: Which of the following statements is true?
A
A firm's accounting costs are the same as its economic costs if the firm is earning a normal
rate of return
B
A firm's accounting costs are larger than its economic costs
C
A firm’s accounting costs take account of implicit costs of capital
D
A firm's accounting costs are smaller than its economic costs
Question: A brewery is considering two potential production investments.
Option A costs an initial $2 million and will involve constant marginal cost of $5
Option B costs an initial $4 million and will involve constant marginal cost of $3
In order to make the calculations simple, assume that the annual capital cost is 10% of the total investment. At what production quantity per year woul
investment opportunities?
A
20,000
B
100,000
C
200,000
D
150,000
Question: Smitty's Hot Boiled Peanuts recently reported that its revenue increased from the previous quarter along with its profits. What is the most lik
change Smitty’s made was in its price?
A
Price decreased and demand was inelastic
B
Price increased and demand was inelastic
C
Demand was unit elastic
D
Price increased and demand was elastic
Question: As a shoe company produces more shoes, the average total cost of each shoe produced decreases. This is because
A
Total fixed costs are decreasing as more shoes are produced
B
Average variable cost is decreasing as more shoes are produced
C
There are scale economies
D
Total variable cost is decreasing as more shoes are produced
Question: In the long run, which of the following outcomes is most likely for a firm?
A
Zero accounting profits but positive economic profits
B
Zero accounting profits
C
Positive accounting profits and positive economic profits
D
Zero economic profits but positive accounting profits
Question: Which of the following would most likely make the demand for an item more elastic?
A
Buyers perceive there to be few close substitutes for the item
B
The item represents a small fraction of consumers' budgets
C
There are no costs of switching to competitors' products
D
Buyers have NOT had time to adjust to the price change
Question: Christine has purchased five bananas and is considering the purchase of a sixth. It is likely she will purchase the sixth banana if
A
The marginal value she gets from the sixth banana is lower than its price
B
The marginal benefit of the sixth banana exceeds its price
C
The average value of the sixth banana exceeds the price
D
The total personal value of six bananas exceeds the total expenditure to purchase six bananas
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Question: A company currently sells 60,000 units a month at $10 per unit. The marginal cost is constant at $6 up to 100,000 units per
month. The company is considering raising the price by 10% to $11. If the price elasticity of demand is constant and ______ in that price
range, then profits would increase if they raise the price to $11.
A
Equal to -3.0
B
Equal to -2.8
C
Equal to -2.6
D
Equal to -2.4
E
None of the above
Question: When demand for a product falls, which of the following events would you NOT necessarily expect to occur?
A
A decrease in the quantity of the product supplied
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B
A decrease in its price
C
A decrease in the supply of the product
D
A leftward shift of the demand curve