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Theoretically, in a long-run cost function:
Theoretically, in a long-run cost function:
Theoretically, in a long-run cost function:
Answer
| all inputs are fixed | ||
| all inputs are considered variable | ||
| some inputs are always fixed | ||
| capital and labor are always combined in fixed proportions |
Question 2
The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
Answer
| percentage; sales; percentage; EBIT | ||
| unit; sales; unit; EBIT | ||
| percentage; EBIT; percentage; sales | ||
| unit; EBIT; unit; sales |
Question 3
In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
Answer
| variable margin per unit | ||
| variable cost ratio | ||
| contribution margin per unit | ||
| target margin per unit |
Question 4
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.
Answer
| 10,000 customers | ||
| 20,000 customers | ||
| 30,000 customers | ||
| 40,000 customers | ||
| 50,000 customers |
Question 5
Break-even analysis usually assumes all of the following except:
Answer
| in the short run, there is no distinction between variable and fixed costs. | ||
| revenue and cost curves are straight-lines throughout the analysis. | ||
| there appears to be perfect competition since the price is considered to remain the same regardless of quantity. | ||
| the straight-line cost curve implies that marginal cost is constant. |
Question 6
In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer
| one minus the variable cost ratio | ||
| contribution margin per unit | ||
| selling price per unit | ||
| standard deviation of unit sales |
Question 7
A “search good” is:
Answer
| One that depends on how the product behaves over time | ||
| A product whose quality is only found out over time by finding how durable it is | ||
| Like a peach that can be examined for flaws | ||
| Like a used car, since it is easy to determine its inherent quality |
Question 8
In the short-run for a purely competitive market, a manufacturer will stop production when:
Answer
| the total revenue is less than total costs | ||
| the contribution to fixed costs is zero or less | ||
| the price is greater than AVC | ||
| operating at a loss |
Question 9
The main difference between perfect competition and monopolistic competition is:
Answer
| The number of sellers in the market | ||
| The ease of entry and exit in the industry | ||
| The degree of information about market price | ||
| The degree of product differentiation | ||
| Whether it is the short run or the long run |
Question 10
Experience goods are products or services
Answer
| that the customer already knows | ||
| whose performance is highly unusual | ||
| whose quality is undetectable when purchased | ||
| not likely to cause repeat purchases |
Question 11
What is the profit maximization point for a firm in a purely competitive environment?
Answer
| The output where P = MC | ||
| The output where P < MC | ||
| The output where P > MC | ||
| The output where MR = MC | ||
| The output where AVC < P |
Question 12
Uncertainty includes all of the following except ____.
Answer
| unknown effects of deliberate actions | ||
| incomplete information as to the type of competitor | ||
| random disturbances | ||
| unverifiable claims | ||
| accidents due to weather hazards |
Question 13
Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
Answer
| deliver high quality products consistent with expectations | ||
| not attempt to establish any warranty enforcement mechanisms | ||
| offer several prices and qualities | ||
| produce only one quality |
Question 14
The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer
| pure competition | ||
| monopolistic competition | ||
| oligopoly | ||
| pure monopoly |
Question 15
In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates.
Answer
| similar, similar | ||
| elastic, lower | ||
| elastic, higher | ||
| inelastic, lower | ||
| inelastic, higher |
Question 16
In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
Answer
| price would equal average cost. | ||
| price would exceed average cost. | ||
| price would be below average cost. | ||
| price would be at the profit maximizing level for natural monopoly |
Question 17
Declining cost industries
Answer
| have upward rising AC curves. | ||
| have upward rising demand curves. | ||
| have ∩-shaped total costs. | ||
| have diseconomies of scale. | ||
| have marginal cost curves below their average cost curve. |
Question 18
____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility’s plant over a larger number of units of output.
Answer
| Peak load pricing | ||
| Inverted block pricing | ||
| Block pricing | ||
| First degree price discrimination |
Question 19
The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:
Answer
| inverted block pricing | ||
| second-degree price discrimination | ||
| peak-load pricing | ||
| first-degree price discrimination | ||
| none of the above |
Question 20
A cartel is a situation where firms in the industry
Answer
| have an agreement to restrict output. | ||
| agree to produce identical products. | ||
| obey the rules of dominant firm price leadership. | ||
| experience the pain of a kinked demand curve. | ||
| have a barometric price leader |
Question 21
“Conscious parallelism of action” among oligopolistic firms is an example of ____.
Answer
| intense rivalry | ||
| a formal collusive agreement | ||
| informal, or tacit, cooperation | ||
| a cartel |
Question 22
Some industries that have rigid prices. In those industries, we tend to
Answer
| find that output is also rigid over the business cycle | ||
| find that output varies greatly over the business cycle | ||
| find the employment in these industries is quite stable over the business cycle | ||
| find that the rate of return is negative in boom times |
Question 23
In a kinked demand market, whenever one firm decides to lower its price,
Answer
| other firms will automatically follow. | ||
| none of the other firms will follow. | ||
| one half of the firms follow and one half of the firms don’t follow the price cut. | ||
| other firms all decide to exit the industry | ||
| all of the other firms raise their prices. |
Question 24
Even ideal cartels tend to be unstable because
Answer
| firms typically prefer competition to collusion as competition, because it leads to more profits. | ||
| collusion leads to lowest possible overall profits in the industry. | ||
| oligopolistic managers are extremely risk loving. | ||
| firms can benefit by secretly selling more than they promised the other firms |
Question 25
In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm’s ____ will not change.
Answer
| price | ||
| output | ||
| marketing strategy | ||
| inventory |
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