# ECO – Quiz 30 Questions Answers

The minimum efficient scale of output occurs when: 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 minimumCompany 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? a. 1.04 b. 2 c. 1.5 d. 2.8 Which of the following alternatives represent economic costs? a. implicit costs b. sunk costs c. explicit costs d. b and cManagers, in the decision making process, will always take into account a. historical costs b. relevant costs c. sunk costs d. average fixed cost Suppose that a company has the following total cost function: TC = 2Q2 â 10Q + 200. The marginal cost function (MC) is:a. â 10Q + 200. b. 200/Q c. 2Q â 10 + 200/Q d. 4Q – 10 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? a. \$22,500 b. 18,225 c. 20,250 d. 21,402 Which of the following costs does not depend upon output? a. average total costs b. variable costs c. fixed costs d. marginal costs 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 a. diminishing returns to scale b. constant returns to scale c. economies of scale d. diseconomies of scale Suppose that a company has the following total cost function: TC = 2Q2 â 10Q + 200. The average variable cost function (AVC) is:a. 2Q â 10 +200/Q b. 200/Q c. 2Q+ 200/Q d. 2Q â 10The breakeven point of a firm occurs at the level of output where a. marginal cost equals average variable cost b. price equals marginal cost c. total revenue equals total cost d. marginal revenue equals marginal cost Managers of a firm in which diseconomies of scale are taking place should a. reduce workerâs salaries in order to reduce cost b. reduce the scale of production in order to cut back on average total cost c. lower the prices of their products in the market to offset competition d. increase the amount of inputs used in the production process If a firm has implicit costs that are greater than zero but its economic profits is exactly zero a. alternatives (a) and (b) b. accounting profits are greater than zero c. the firm will shut down some of its production facilities due to inefficiency d. inputs in the production process are used inefficiently Suppose that a company has the following total cost function: TC = 2Q2 â 10Q + 200. The average fixed cost (AFC) isa. 2Q â 10 + 200/Q b. -10Q + 200 c. 4Q – 10 d. 200/QIf a firm has increasing marginal cost then the firmâs a. average total cost must be increasing b. average variable cost must be increasing c. total cost must be increasing d. total fixed cost is decreasing The firm reaches breakeven point when a. the contribution margin per unit is zero b. price equals marginal cost c. price equals average variable cost d. Price equals average total costAt the level of output where marginal cost equals average variable cost a. average variable cost is increasing b. average total cost is decreasing c. average total cost is minimum d. average variable cost is decreasing 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? a. 8% b. 10% c. 1% d. 9% Normal economic profits a. are affected by economic costs b. occur when explicit costs are deducted from revenues c. are irrelevant to managers in the decision making process d. are not important in real investment decisions In the long run the desired plant size for a firm will be the one that has a. the largest capacity of producing the maximum amount of output b. minimum average total cost of producing the desired target level of output c. the lowest average fixed cost d. largest capacity of producing output at lowest fixed costA firm has the following cost function: TC = 2Q2 â 10Q + 200. What output level should the firm produce in order to minimize average total cost (ATC)? a. 10 b. 25 c. 20 d. 8 If the fixed cost of producing a product is \$1,500 and the price is \$10 with an average variable cost of \$5, the breakeven output level is a. \$200 b. \$100 c. \$150 d. \$300Diseconomies of scale occur when a firm has a. decreasing long-run average costs b. increasing long-run average costs c. constant returns to scale d. decreasing long-run prices The percentage change in profits that occurs from a one percent change in sales is known as a. degree of operating leverage b. output elasticity c. cost elasticity d. sales elasticity Suppose that a company has the following total cost function: TC = 2Q2 â 10Q + 200. The average total cost function (ATC) will bea. 200/Q b. 4Q – 10 c. 2Q â 10 + 200/Q d. 100 Which of the following costs are ignored when making managerial decisions? a. sunk costs b. relevant costs c. marginal costs d. incremental costs Managers in determining the rate of output which maximizes profits must consider a. sunk costs b. alternatives b and c c. total variable cost function d. total cost functionIf the degree of operating leverage (DOL) is equal to +3 then a. a one percent rise in price will increase profits by 3 percent b. a one percent rise in sales will increase operational costs by 3 percent c. a one percent rise in price will increase sales by 3 percent d. a one percent rise in sales will increase profits by 3 percentCompany 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 a. more than3.5 percent but less than 35 percent b. 3.5 percent c. less than 3.5 percent d. 35 percentAverage total costs is minimum when a. marginal costs is greater than average total costs b. average cost equals marginal cost c. marginal cost is declining d. average total cost is greater than marginal cost Suppose that a company has the following total cost function: TC = 2Q2 â 10Q + 200. The total fixed cost function (TFC) is:a. 200/Q b. 4Q – 10 c. 200 d. 2Q â 10 + 200/Q