Economics Multiple Choice problems

Managers in determining the rate of output which maximizes profits must consider
Respuesta
a. total cost function
b. sunk costs
c. total variable cost function
d. alternatives b and c

At an automobile assembly plant XYZ the progress ratio of 0.9 is used as a metric for learning. At the plant workers assembled 1,000 cars of model BW, and the average total cost is $25,000. What is the learning rate or experience rate?
Respuesta
a. 1%
b. 9%
c. 8%
d. 10%

If a firm doubles the amount of inputs used in production and as a result output has more than doubled, then the firm is experiencing
Respuesta
a. constant returns to scale
b. diseconomies of scale
c. diminishing returns to scale
d. economies of scale

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.
The total fixed cost function (TFC) is:
Respuesta
a. 2Q – 10 + 200/Q
b. 4Q - 10
c. 200/Q
d. 200
Pregunta 7

Which of the following costs are ignored when making managerial decisions?
Respuesta
a. marginal costs
b. sunk costs
c. relevant costs
d. incremental costs

Average total costs is minimum when
Respuesta
a. marginal cost is declining
b. average cost equals marginal cost
c. average total cost is greater than marginal cost
d. marginal costs is greater than average total costs

The percentage change in profits that occurs from a one percent change in sales is known as
Respuesta
a. output elasticity
b. degree of operating leverage
c. cost elasticity
d. sales elasticity

If a firm has increasing marginal cost then the firm’s
Respuesta
a. total cost must be increasing
b. total fixed cost is decreasing
c. average total cost must be increasing
d. average variable cost must be increasing

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.
The average variable cost function (AVC) is:
Respuesta
a. 200/Q
b. 2Q – 10 +200/Q
c. 2Q - 10
d. 2Q+ 200/Q

At an automobile assembly plant XYZ the progress ratio of 0.9 is used as a metric for learning. At the plant workers assembled 1,000 cars of model BW, and the average total cost is $25,000. What would be the expected cost per car for the 4,000th car?
Respuesta
a. 20,250
b. 18,225
c. 21,402
d. $22,500

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.
The average fixed cost (AFC) is
Respuesta
a. 200/Q
b. 4Q - 10
c. -10Q + 200
d. 2Q – 10 + 200/Q

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.
The average total cost function (ATC) will be
Respuesta
a. 2Q – 10 + 200/Q
b. 4Q - 10
c. 100
d. 200/Q

Managers of a firm in which diseconomies of scale are taking place should
Respuesta
a. lower the prices of their products in the market to offset competition
b. increase the amount of inputs used in the production process
c. reduce worker’s salaries in order to reduce cost
d. reduce the scale of production in order to cut back on average total cost

The minimum efficient scale of output occurs when:
Respuesta
a. short-run total cost is minimum
b. short-run average total cost is minimum
c. long-run marginal cost is minimum
d. long-run average total cost is minimum

In the long run the desired plant size for a firm will be the one that has
Respuesta
a. minimum average total cost of producing the desired target level of output
b. the largest capacity of producing the maximum amount of output
c. largest capacity of producing output at lowest fixed cost
d. the lowest average fixed cost

A firm has the following cost function: TC = 2Q2 – 10Q + 200. What output level should the firm produce in order to minimize average total cost (ATC)?
Respuesta
a. 8
b. 20
c. 25
d. 10

The breakeven point of a firm occurs at the level of output where
Respuesta
a. price equals marginal cost
b. total revenue equals total cost
c. marginal revenue equals marginal cost
d. marginal cost equals average variable cost

Company XYZ produces a product Alpha that has a degree of operating leverage of +3.5. Suppose a new order is received, and, the rate of output is increased by 10 percent. The percentage effect that this increase in output will have on the profit made from producing and selling commodity Alpha will be
Respuesta
a. 3.5 percent
b. less than 3.5 percent
c. more than3.5 percent but less than 35 percent
d. 35 percent

At the level of output where marginal cost equals average variable cost
Respuesta
a. average total cost is decreasing
b. average variable cost is decreasing
c. average total cost is minimum
d. average variable cost is increasing

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.
The marginal cost function (MC) is:
Respuesta
a. – 10Q + 200.
b. 2Q – 10 + 200/Q
c. 200/Q
d. 4Q - 10

The firm reaches breakeven point when
Respuesta
a. price equals average variable cost
b. Price equals average total cost
c. price equals marginal cost
d. the contribution margin per unit is zer

If the degree of operating leverage (DOL) is equal to +3 then
Respuesta
a. a one percent rise in price will increase sales by 3 percent
b. a one percent rise in price will increase profits by 3 percent
c. a one percent rise in sales will increase operational costs by 3 percent
d. a one percent rise in sales will increase profits by 3 percent

Company XYZ produces cellular phones brand GREENBERRY, at an annual rate of 500,000 units. Its total fixed costs are $6 million per year, and at is current rate of output, its total variable costs for the year will be 80 million. The price of the GREENBERRY is $450. What is the degree of operating leverage for the GREENBERRY?
Respuesta
a. 2
b. 1.5
c. 2.8
d. 1.04

Diseconomies of scale occur when a firm has
Respuesta
a. constant returns to scale
b. increasing long-run average costs
c. decreasing long-run prices
d. decreasing long-run average costs

Normal economic profits
Respuesta
a. are irrelevant to managers in the decision making process
b. occur when explicit costs are deducted from revenues
c. are affected by economic costs
d. are not important in real investment decisions

If a firm has implicit costs that are greater than zero but its economic profits is exactly zero
Respuesta
a. the firm will shut down some of its production facilities due to inefficiency
b. accounting profits are greater than zero
c. inputs in the production process are used inefficiently
d. alternatives (a) and (b)

Which of the following alternatives represent economic costs?
Respuesta
a. implicit costs
b. explicit costs
c. b and c
d. sunk costs