Managerial Economics

If a firm produces 10 units, TC=$100. When the firm increase its output to 15 units, TC=$150. The firm's AVC equal to A $5 B $10 C $50 D $100

$10

If AVC=$5 and AFC=15, then AC= A $10 B $5 C $15 D $20

$20

If a firm produces 8 units of output with average fixed cost = $40 and average variable cost= $25, which is its total variable cost? A $320 B $200 C $650 D $1,000

$200

If AVC= $15 and AFC=$10, then ATC= A $10 B $5 C $15 D $25

$25

Total costs increase from $1,500 to $1,800 when a firm increases output from 40 to 50 units. Which of the following are true? A FC= $100 B MC= $300 C MC= $30 D FC= $400

$30

If the annual interest rate is 0%, the net present value of receiving $550 in the next year is A $550 B $551 C $549 D $500

$550

A publisher is deciding whether or not to invest in a new printer. The printer would cost $500, and it would increase cash flow by $600 for the next two years. What is the present value of the cash flows from the investment? A $1100 B $541 C $600 D $1041

1100

Firm X is producing 1000 units, selling them at $15 each. Variable costs are$3 per unit and the firm is making an accounting profit of $3000. What is the firm's total costs? A $10,000 B $11,000 C$12,000 D$13,000

12000

Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take the day off losing 8 hours of work. His hourly wage s $10. He estimates it will cost him around $20 for gas and parking at the game. Jim's total economic cost of attending the game equals A $80 B $ 40 C $60 D $140

140

A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal A 125 million B 45 million C 1 million D 170 million

170 million

Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit cost total $150,000 what is her economic profit? A $300,000 B $60,000 C $450,000 D $240,000

240,000

A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent $250,000/month. If the firm produces 1,000,000 units a month, the total fixed costs equal A $250,000 B $50,000 C $20,500 D $30,000

250,000

A firm's fixed but avoidable costs are $100,000 and its variable costs are $250 per unit. It produces 50,000 units and prices it at $400 per unit. In the long-run, how low can the price go before the firm decides to shut down? A $150 B $252 C $250.20 D $400

252

Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit cost total $150,000 what is her accounting profit? A $300,000 B $60,000 C $450,000 D $240,000

300,000

Firm X is producing 1000 units, selling them at $15 each. Variable costs are$3 per unit and the firm is making an accounting profit of $3000. What is the firm's total variable costs? A $1000 B $3000 C$5000 D$7000

3000

A business produces 4,000 units per month which it sells at $20/unit. Costs include: $10,000 on raw materials, $15,000 in wages for operators and $10,000 in wages to sales people. If the business is just breaking even, what are its fixed costs A $35,000 B $40,000 C $45,000 D $50,000

45000

A Buyer values a house at 525,000 and a seller calues that same house at 485,000$. If sales tax is 8% and is levied on the seller, then what would be the lowest price that the seller would be willing to sell at? A 527000$ B 523800$ C 525000$ D 500000$

523800

After graduating from college, Jim had two choices. He can either move to Florida, from Philadelphia, where he can work as an analyst and $60,000 or he can stay in Philadelphia and work in a car dealership earning $59,000. His opportunity cost of moving to Florida includes A the benefit he could received playing soccer B$59,000 C both a and b D none of the above

59000

Lucy invested $10,000 at the rate of 12%. According to the rule of 72, it would take ---- years for her money to double A 4 B 5 C 6 D 7

6

Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take the day off losing 8 hours of work. His hourly wage s $10. He estimates it will cost him around $20 for gas and parking at the game. Jim's accounting (out of pocket) cost of attending the game equals A $80 B $ 40 C $60 D $140

60

A business incurs the following costs per unit: Labor $5/unit; Materials $3/unit and rent $5000/month. If the firm produces 1000 units a month, the total variable costs equals A $5,000 B $8,000 C $13,000 D $10,000

8000

Which of the following describes a firm? A purchases labor hours from workers B borrows capital from investors C combines labor and capital to create production, moving them from their low value use to high value use D all of the above

All of the Above

An advantage of capitalism A it allows the market to self-regulate and clear itself B it allows a person to follow his or her own self interest C it allows voluntary transactions, which create wealth D all of the above

All of the above

Government can intervene in the market through A price floors B price ceilings C taxes D all of the above

All of the above

Price ceilings cause A some suppliers to drop out of the market B a decrease in the total production in the market C the creation of the black market D all of the above

All of the above

Which of the following defines a sunk cost? A cost of the next best alternative B cost of producing an additional unit C an asset with no scrap value D total cost of producing a product

An asset with no scrap value

Wealth is created when A assets move from lower value use to higher value use B assets move from higher value use to lower value use C assets move from individuals who are willing to pay less for them to individuals who are willing to pay more D both A and C

Assets move from lower value use to higher value use

The fixed-cost fallacy occurs when A a firm considers sunk costs in making decisions B a firm ignores relevant costs C a firm considers overhead or depreciation costs in making decisions D both a & c

Both A & C

Rent Controls A are an example of price floors B are an example of price ceilings C destroys wealth by preventing the movement of apartments to higher-valued use D both B and C

Both B and C

Price ceilings are primarily intended to help A no one B consumers C producers D government

Consumers

A firm sells 1000 units per week. It charges $70 per unit, the average variable costs are $25, and the average costs are $65. In the long run, the firm should A shut down since price is greater than average cost B continue operating price is higher than average cost, its making profit C continue operating as the firm is covering all the variable costs and some of the fixed costs D shut-down because it is cost effective to pay off the remaining fixed costs

Continue operating price is higher than average cost, its making profit

Variable costs are A costs that vary with output B no important in decision making C costs that do not vary with output D equal to total costs

Costs that vary with output

Government can A create wealth by not interfering in the markets in any way what so ever B not affect wealth in the markets C create wealth by enforcing property rights and contracts D create wealth by making choice decisions for the market

Create wealth by enforcing property rights and contracts

You are sick and tired of your old wardrobe. You decide to donate it to a charity of your choice. Your action A created wealth by moving the clothes from lower value use to higher value use B destroys wealth since you lose clothes C creates wealth by making you feel richer D all of the above

Creates wealth by moving the clothes from lower value use to higher value use

Projects with a positive NPV create A economic profit since they earn a return higher than the company's cost of capital B economic profit since they earn a return lower than the company's cost of capital C accounting profits only since they earn a return higher than the company's cost of capital D accounting profits only since they earn a return lower than the company's cost of capital

Economic profit since they earn a return higher than the company's cost of capital

In the short-run, a firm's decision to shut-down should not take into consideration A avoidable costs B variable costs C fixed costs D marginal costs

Fixed costs

When economists speak of "marginal", they mean A opportunity B scarcity C incremental D unimportant

Incremental

Price gouging A outlaw trade at prices above a certain price level B outlaw trade at prices below a certain price level C is an act of charging a high price to take advantage of shortages created by natural disasters D none of the above

Is an act of charging a high price to take advantage of shortages created by natural disasters

The opportunity cost of an action A is equal to the marginal cost of an action B is equal to explicit cost C is equal to the cost of the next best alternative forgone D is the total cost of the action

Is equal to the cost of the next best opportunity forgone

Marginal Revenue A is the additional revenue earned by selling one more unit B is always equal to total revenue C is the difference between total revenue and total costs D none of the above

Is the additional revenue earned by selling one more unit

Marginal cost A is the incremental cost incurred by producing an addition unit of output B is the total cost of production C is the total fixed cost of production D none of the above

Is the incremental cost incurred by producing an addition unit of output

If a firm sells more than the break-even quantity A it will make profit B it will only cover the variable costs C it will make a loss D a firm is unable to sell above the break-even quantity

It will make a profit

A consumer values a car at 30,000$ and a producer values the same car at 20,000$. The transaction will not take place if a tax is imposed A Equal to the seller surplus B smaller than the total surplus C larger than the total surplus D Smaller than the buyer surplus

Larger than the total surplus

A good policy -------- and a bad policy -------. A moves an asset to higher value use; moves an asset to lower value use. B moves an asset to lower value use; moves an asset to higher value use C refrains from any government intervention; concentrates on government intervention D concentration on government intervention; refrains from government intervention

Moves an asset to higher value use; moves an asset to lower value use.

One Lesson of business A is tracing the consequences of a policy B promoting a policy C moving assets from lower to higher value uses, therby creating wealth D none of the above

Moving assets from lower to higher value uses, thereby creating wealth.

A firm wishes to shut down an office and fire 100 employees. The company will save $3000 per month per employee. It is estimated that each employee contributes $4,100 to the company. The firm rents office space for this group of employees at $1500. What should the company do? A Fire the employees and save $1500 on rent B not fire the employees keeping them generates a profit of $1100 per employee C not fire the employees since keeping them generates a profit of $1085 per employee D none of the above

Not fire the employees since keeping them generates a profit of $1085 per employee

Which of the following is FALSE? A Increase production if MR>MC B produce where MR=MC C average cost it total cost per unit of production D produce where MR=AC

Produce where MR=AC

the difference between the minimum price the producer is willing to accept and the price the producer actually receives for a product is referred to as A market surplus B Market shortage C consumer surplus D producer surplus

Producer surplus

Price floors are primarily intended to help A no one B consumers C producers D government

Producers

For a restaurant, all the following are examples variable costs, except A labor cost B cost of raw materials C rents on dining space D none - all of them are variable cost

Rents on dining space

An airline's flight is about to take off. It has a few empty seats left aboard. If it lowers its prices, it can fill the remaining seats and fly at full capacity. What should be done? A sell the additional standby seats at a discount since the marginal costs of the additional passenger are almost zero and fly at full capacity B sell the additional standby seats without discount C don't offer the additional seats for any price D none of the above

Sell the additional standby seats at a discount since the marginal costs of the additional passenger are almost zero and fly at full capacity

According to the Net Present Value (NPV) rule, managers choose to invest if A the NPV of the project is less than zero B the NPV of the project if greater than zero C the NPV of the project is equal to zero D the NPV of the project is equal to the cost of capital

The NPV of the project is greater than zero

An individual's value for a good or service is the A the amount of money he or she used to pay for a good B the amount of money he or she is willing to pay for it C the amount of money he or she has to spend on Goods D none of the above

The amount of money he or she is willing to pay for it

Cruise liners offer last minute deals because A the marginal cost is higher than the marginal revenue since fixed costs are sunk B the marginal cost of an additional passenger are very low at that point and companies gain by lowering prices C the average cost of an additional passenger is very low at that point and companies gain by lowering prices D all of the above

The marginal cost of an additional passenger are very low at that point and companies gain by lowering prices

A manager of a clothing firm is deciding whether to add another factory in addition to one already in production. The manager would compare A the total revenue gained from the two factories to the total costs of running the two factories B the marginal revenue expected from the second factory to the total costs of running the two factories C the marginal revenue expected from the second factory to the marginal cost of the second factory D The total revenue gained from the two factories to the marginal costs of running the two factories.

The marginal revenue expected from the second factory to the marginal cost of the second factory

Wealthy professors are more likely to shop at high end stores with shorter wait times at the cashier than poor students because A they value the item more than the student B they like wasting money C The opportunity cost of waiting in a cashier line is higher for professors than for undergraduate students D They like to show off

The opportunity cost of waiting in a cashier line is higher for professors than for undergraduate students

Marginal revenue is A the cost of producing an additional unit of output B the total revenue gained from production C the revenue from selling an additional unit of output D none of the above

The revenue from selling an additional unit of output

Average cost of production is A total variable cost divided by total units produced B total fixed cost divided by total units produced C total cost divided by total units produced D equal to marginal cost

Total cost divided by total units produced

Total costs increase from $1500 to $1800 when a firm increases output from 40 to 50 units. Which of the following are true? A VC rise by $300 B VC rise by $1,800 C VC rise by $1,500 D VC rise by $0

VC rise by $300

In the long run, all costs are A fixed cost B variable cost C sunk cost D marginal cost

Variable cost

A student is trying to decide whether to study for the upcoming exam or play video games. The optimal amount of time spent studying is A where the total benefit of studying is equal to the total cost of studying B where the marginal benefit of studying is equal to the total cost of studying C where the marginal benefit of studying equals the marginal cost of studying D where the total benefit of studying equals the total cost of studying

Where the marginal benefit of studying equals the marginal cost of studying

Which of the following will increase the break-even quantity? A a decrease in overall fixed cost B a decrease in the marginal cost C a decrease in the price level D an increase in price level

a decrease in the price level

Accountants and Economists differ in their calculations of profits in that; A economists consider sunk costs B accountants consider implicit costs only C accountants consider explicit costs only D all of the above

accountants consider explicit costs only

Which of the following variables are needed to determine the break-even quantity? A marginal costs B fixed costs C selling price D all of the above

all of the above

Total cost divided by the number of units produced is called: A marginal cost B average cost C total cost D variable cost

average cost

The difference between the maximum price the consumer is willing to pay and the price the consumer actually pays for a product is referred to as A market surplus B market shortage C consumer surplus D producer surplus

consumer surplus

Fixed costs are A costs that vary with output B always equal to marginal costs C costs that do not vary with output D equal to total costs

costs that do not vary with output

Which of the following statements is true? A economic profits ignore implicit costs B economic profits include implicit costs C accounting profits include all of the opportunity costs D economists consider sunk costs in their decisions making

economic profits include implicit costs

Economists argue that A accounting costs include all types of costs, even implicit costs B every decision has an opportunity cost C some decisions have opportunity costs, while others don't D economic decisions should include sunk cost

every decision has an opportunity cost

The break even quantity is A fixed cost/price B fixed cost/marginal cost C fixed cost/(price-marginal cost) D contribution margin/fixed cost

fixed cost/(price-marginal cost)

Managers undertake an investment only if A marginal revenue is greater than zero B marginal cost is less than marginal revenue C marginal revenue is greater than marginal costs D investment decisions do not depend on marginal analysis

marginal revenue is greater than marginal costs

An example of price floor is A minimum wages B rent controls in New York C both A and B D none of the above

minimum wages

Lucy can bake 200 cookies in an hour or watch her faviorite tv show. If she chooses to watch her show, the cookies are an example of A unlimited resource B limited wants C opportunity cost D none

opportunity cost

All of the following costs are included in the calculation of accounting profit, except A Interest payments on borrowed funds B costs paid to suppliers for product ingredients C opportunity cost of capital D depreciation expenses related to investments in buildings and equipment

opportunity cost of capital

At the current level of production, if the firm's MR>MC, then the firm should A produce more B the company is maximizing profit at this output C producing less D none of the above

produce more

Marginal cost is A the cost of producing an additional unit of output B the total cost of production C the revenue from selling an additional unit of output D None of the above

the cost of producing an additional unit of output

The lower the interest rates A the more value individuals place on future dollars B the less value individuals place on future dollars C less investments take place D does not affect the investment strategy

the more value individuals place on future value

Total surplus or gains created from trade equal A seller surplus B buyer surplus C the summation of seller and buyer surplus D profits earned by a firm

the summation of seller and buyer surplus

Break-even quantity is a point where A the level of profit is maximized B the level of cost is minimized C only variable costs are covered D there are zero profits

there are zero profits

People tend to eat more at all you can eat buffets than they would at any other restaurants. This is so because the cost of consuming an additional item at an all you can eat buffet is A negative B zero C positive D none

zero