ECO 550 Final Exam – Strayer New
ECO 550 Week 10
Chapter 9 through 17 Final Exam
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ECO 550 Final Exam
Solution
Chapter
9—Applications of Cost Theory
MULTIPLE
CHOICE
1. Evidence
from empirical studies of short-run cost-output relationships lends support to
the:
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a.
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existence of a non-linear cubic total cost
function
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b.
|
hypothesis that marginal costs first decrease,
then gradually increase over the normal operating range of the firm
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c.
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hypothesis that total costs increase quadratically
over the ranges of output examined
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d.
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hypothesis that total costs increase linearly over
the range of output examined
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e.
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none of the above
|
ANS: PTS: 1
2. The
short-run cost function is:
|
a.
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where all inputs to the production process are
variable
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b.
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relevant to decisions in which one or more inputs
to the production process are fixed
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c.
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not relevant to optimal pricing and production
output decisions
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d.
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crucial in making optimal investment decisions in
new production facilities
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e.
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none of the above
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ANS: PTS: 1
3. Theoretically,
in a long-run cost function:
|
a.
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all inputs are fixed
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b.
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all inputs are considered variable
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c.
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some inputs are always fixed
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d.
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capital and labor are always combined in fixed
proportions
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e.
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b and d
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ANS: PTS: 1
4. 4. Break-even analysis usually assumes all of the following except:
a. a. in the short run, there is no distinction between variable and
fixed costs.
b. b. revenue and cost curves are straight-lines throughout the
analysis.
c. c. there appears to be perfect competition since the price is
considered to remain the same regardless of quantity.
d. d. the straight-line cost curve implies that marginal cost is
constant.
e. e. both c and d
ANS:
PTS: 1
4.
5. What is another term meaning the degree of operating
leverage?
a.
a. The
measure of the importance of fixed cost.
b.
b. The
operating profit elasticity.
c.
c. The
measure of business risk.
d.
d. D.O.L.
e.
e. All
of the above.
ANS: PTS: 1
4.
6. In a
study of banking by asset size over time, we can find which asset sizes are
tending to become more prominent. The
size that is becoming more predominant is presumed to be least cost. This is
called:
a.
a. regression
to the mean analysis.
b.
b. breakeven
analysis.
c.
c. survivorship
analysis.
d.
d. engineering
cost analysis.
e.
e. a
Willie Sutton analysis.
ANS: PTS: 1
a.
7. George
Webb Restaurant collects on the average $5 per customer at its breakfast &
lunch diner. Its variable cost per customer averages $3, and its annual fixed
cost is $40,000. If George Webb wants to
make a profit of $20,000 per year at the diner, it will have to serve__________
customers per year.
b.
a. 10,000
customers
c.
b. 20,000
customers
d.
c. 30,000
customers
e.
d. 40,000
customers
f.
e. 50,000
customers
ANS: PTS: 1
8. In
determining the shape of the cost-output relationship only ____ depreciation is
relevant.
|
a.
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direct
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b.
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indirect
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c.
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usage
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d.
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time
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e.
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scheduled
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ANS: PTS: 1
9. Which
of the following is not a limitation of the survivor technique for
measuring the optimum size of firms within an industry?
|
a.
|
since the technique does not
employ actual cost data in the analysis, there is no way to assess the
magnitude of the cost differentials between firms of varying size and
efficiency.
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b.
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the managerial and
entrepreneurial aspects of the production process are not included in the
analysis
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c.
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because of legal factors,
the long-run cost curve derived by this technique may be distorted and may
not measure the cost curve postulated in economic theory
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d.
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a and b
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e.
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b and c
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ANS: PTS: 1
10. The
primary disadvantage of engineering methods for measuring cost functions is
that they deal with the managerial and entrepreneurial aspects of the
production process or plant.
|
a.
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true
|
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b.
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false
|
ANS: PTS: 1
11. A linear
total cost function implies that:
|
a.
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marginal costs are constant
as output increases
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b.
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average total costs are
continually decreasing as output increases
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c.
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a and b
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d.
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none of the above
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ANS: PTS: 1
12. A
____ total cost function implies that marginal costs ____ as output is
increased.
|
a.
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linear; increase linearly
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b.
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quadratic; increase linearly
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c.
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cubic; increase linearly
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d.
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a and b
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e.
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none of the above
|
ANS: PTS: 1
13. A
____ total cost function implies that marginal costs ____ as output is
increased.
|
a.
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linear; increase linearly
|
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b.
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quadratic; are constant
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c.
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cubic; increase linearly
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d.
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linear; are constant
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e.
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none of the above
|
ANS: PTS: 1
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