question
A cottage industry exists in the home-manufacture of 'country crafts'. Especially treasured are handmade quilts. If the fourth completed quilt took 30 hours to make, and the eighth quilt took 28 hours. What is the percentage learning? Hint: Percentage learning = 100% - (c 2/c 1)•100%.
a. 10%
b. 6.7%
c. 122%
d. 5%
e. 100%
a. 10%
b. 6.7%
c. 122%
d. 5%
e. 100%
answer
B
question
According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:
a. decreasing returns and declining average and marginal costs
b. increasing returns and declining average and marginal costs
c. increasing returns and increasing average and marginal costs
d. decreasing returns and increasing average and marginal costs
e. none of the above
a. decreasing returns and declining average and marginal costs
b. increasing returns and declining average and marginal costs
c. increasing returns and increasing average and marginal costs
d. decreasing returns and increasing average and marginal costs
e. none of the above
answer
B
question
Economies of scale exist whenever long-run average costs:
a. Increase as output is increased
b. Remain constant as output is increased
c. Decrease as output is increased
d. Decline and then rise as output is increased
e. None of the above
a. Increase as output is increased
b. Remain constant as output is increased
c. Decrease as output is increased
d. Decline and then rise as output is increased
e. None of the above
answer
C
question
For a short-run cost function which of the following statements is (are) not true?
a. The average fixed cost function is monotonically decreasing.
b. The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum.
c. The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum.
d. The marginal cost function intersects the average total cost function where the average total cost function is a minimum.
e. b and c
a. The average fixed cost function is monotonically decreasing.
b. The marginal cost function intersects the average fixed cost function where the average variable cost function is a minimum.
c. The marginal cost function intersects the average variable cost function where the average variable cost function is a minimum.
d. The marginal cost function intersects the average total cost function where the average total cost function is a minimum.
e. b and c
answer
B
question
If TC = 321 + 55Q - 5Q 2, then average total cost at Q = 10 is:
a. 102
b. 10.2
c. 37.1
d. 321
e. 371
a. 102
b. 10.2
c. 37.1
d. 321
e. 371
answer
C
question
Possible sources of economies of scale (size) within a production plant include:
a. specialization in the use of capital and labor
b. imperfections in the labor market
c. transportation costs
d. a and b
e. a and c
a. specialization in the use of capital and labor
b. imperfections in the labor market
c. transportation costs
d. a and b
e. a and c
answer
A
question
Regarding costs, accountants _____; economists _____.
a. identify stable and predictable costs for decision-making purposes; measure costs for financial reporting purposes
b. identify stable and predictable costs for financial reporting purposes; measure costs for decision making purposes
c. do not include opportunity costs; include opportunity costs
d. include opportunity costs; do not include opportunity costs
e. both b and c
f. both a and d
a. identify stable and predictable costs for decision-making purposes; measure costs for financial reporting purposes
b. identify stable and predictable costs for financial reporting purposes; measure costs for decision making purposes
c. do not include opportunity costs; include opportunity costs
d. include opportunity costs; do not include opportunity costs
e. both b and c
f. both a and d
answer
E
question
Regarding costs, which of the following statements is true?
a. costs appropriate for financial reporting purposes are appropriate for decision-making purposes
b. none of these is true
c. the relevant cost in economic decision making is the initial cost
d. sunk costs should always be considered in making operating decisions
e. costs can be measured in different ways
a. costs appropriate for financial reporting purposes are appropriate for decision-making purposes
b. none of these is true
c. the relevant cost in economic decision making is the initial cost
d. sunk costs should always be considered in making operating decisions
e. costs can be measured in different ways
answer
E
question
Suppose that total cost is given by TC = 200 + 5Q - 0.4Q 2 + 0.001Q 3
a. Fixed cost (FC) is $200
b. Variable cost (VC) is 5Q - 0.4Q2 + 0.001Q3
c. Average variable cost (AVC) is 5 - 0.4Q + 0.001Q2
d. Marginal cost (MC) is 5 - 0.8Q +.003Q2
e. All of the above are correct
a. Fixed cost (FC) is $200
b. Variable cost (VC) is 5Q - 0.4Q2 + 0.001Q3
c. Average variable cost (AVC) is 5 - 0.4Q + 0.001Q2
d. Marginal cost (MC) is 5 - 0.8Q +.003Q2
e. All of the above are correct
answer
E
question
The cost function is:
a. a means for expressing output as a function of cost
b. a schedule or mathematical relationship showing the total cost of producing various quantities of output
c. similar to a profit and loss statement
d. incapable in being developed from statistical regression analysis
e. none of the above
a. a means for expressing output as a function of cost
b. a schedule or mathematical relationship showing the total cost of producing various quantities of output
c. similar to a profit and loss statement
d. incapable in being developed from statistical regression analysis
e. none of the above
answer
B
question
The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
a. transportation costs
b. imperfections in the labor market
c. imperfections in the capital markets
d. problems of coordination and control encountered by management
e. All of the above
a. transportation costs
b. imperfections in the labor market
c. imperfections in the capital markets
d. problems of coordination and control encountered by management
e. All of the above
answer
D
question
The relevant cost in economic decision-making is the opportunity cost of the resources rather than the outlay of funds required to obtain the resources.
a. false
b. true
a. false
b. true
answer
B
question
The three concepts of optimal capacity utilization are:
a. optimal plant size for a given output rate
b. optimal cost of manufacturing
c. optimal plant size
d. optimal output for a given plant size
e. all of these except b
f. all of these except c
a. optimal plant size for a given output rate
b. optimal cost of manufacturing
c. optimal plant size
d. optimal output for a given plant size
e. all of these except b
f. all of these except c
answer
A
question
What method of inventory valuation should be used for economic decision-making problems?
a. current replacement cost
b. original cost
c. cost or market, whichever is lowere
d. historical cost
e. book value
a. current replacement cost
b. original cost
c. cost or market, whichever is lowere
d. historical cost
e. book value
answer
A
question
Which of the following is true with regards to a long-run cost function?
a. The shape of the firm's long-run cost function is important in decisions to expand the scale of operations
b. The long-run average cost curve is U-shaped
c. The long-run average cost curve is flatter than the short-run average cost curve.
d. The curve consists of the lower boundary of all the short-run cost curves
e. All of the above
a. The shape of the firm's long-run cost function is important in decisions to expand the scale of operations
b. The long-run average cost curve is U-shaped
c. The long-run average cost curve is flatter than the short-run average cost curve.
d. The curve consists of the lower boundary of all the short-run cost curves
e. All of the above
answer
E
question
Which of the following statements about cost functions is true?
a. Variable costs will always increase in direct proportion to the quantity of output produced.
b. The less capital equipment employed in the production process relative to labor and other inputs, the longer will be the period of time required to increase significantly the scale of operation.
c. The shape of the firm's long-run cost function is important in decisions to expand the scale of operations.
d. none of the above
a. Variable costs will always increase in direct proportion to the quantity of output produced.
b. The less capital equipment employed in the production process relative to labor and other inputs, the longer will be the period of time required to increase significantly the scale of operation.
c. The shape of the firm's long-run cost function is important in decisions to expand the scale of operations.
d. none of the above
answer
C
question
Which of the following statements concerning the short-run average cost curve of economic theory is true?
a. It is ∪-shaped
b. It is ∩-shaped
c. It is L-shaped
d. It is ∧-shaped
e. It is M-shaped
a. It is ∪-shaped
b. It is ∩-shaped
c. It is L-shaped
d. It is ∧-shaped
e. It is M-shaped
answer
A
question
____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.
.a. Opportunity costs
b. Marginal costs
c. Relevant costs
d. Sunk costs
e. None of the above
.a. Opportunity costs
b. Marginal costs
c. Relevant costs
d. Sunk costs
e. None of the above
answer
D
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