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If the degree of operating leverage (DOL) is equal to +2 thenAnswera. a one percent rise in price will increase profits by 2 percentb. a one percent rise in sales will increase profits by 2 percentc.
If the degree of operating leverage (DOL) is equal to +2 thenAnswera. a one percent rise in price will increase profits by 2 percentb. a one percent rise in sales will increase profits by 2 percentc. a one percent rise in sales will increase operational costs by 2 percentd. a one percent rise in price will increase sales by 2 percentAt 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?Answera. 21,402b. 20,250c. 18,225d. $22,500If a firm doubles the amount of inputs used in production and as a result output has more than doubled, then the firm is experiencingAnswera. diminishing returns to scaleb. economies of scalec. constant returns to scaled. diseconomies of scaleSuppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.The total fixed cost function (TFC) is:Answera. 200b. 200/Qc. 4Q - 10d. 2Q – 10 + 200/QIf a firm has increasing marginal cost then the firm’sAnswera. total fixed cost is decreasingb. average total cost must be increasingc. total cost must be increasingd. average variable cost must be increasingIn the long run the desired plant size for a firm will be the one that hasAnswera. largest capacity of producing output at lowest fixed costb. the lowest average fixed costc. minimum average total cost of producing the desired target level of outputd. the largest capacity of producing the maximum amount of outputA firm has the following cost function: TC = 2Q2 – 10Q + 200. What output level should the firm produce in order to minimize average total cost (ATC)?Answera. 10b. 25c. 20d. 8Company 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 beAnswera. 35 percentb. 3.5 percentc. more than3.5 percent but less than 35 percentd. less than 3.5 percentSuppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.The average total cost function (ATC) will beAnswera. 200/Qb. 2Q – 10 + 200/Qc. 4Q - 10d. 100Normal economic profitsAnswera. are affected by economic costsb. are irrelevant to managers in the decision making processc. occur when explicit costs are deducted from revenuesd. are not important in real investment decisionsManagers of a firm in which diseconomies of scale are taking place shouldAnswera. increase the amount of inputs used in the production processb. reduce worker’s salaries in order to reduce costc. reduce the scale of production in order to cut back on average total costd. lower the prices of their products in the market to offset competitionSuppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.The average fixed cost (AFC) isAnswera. 4Q - 10b. -10Q + 200c. 2Q – 10 + 200/Qd. 200/QDiseconomies of scale occur when a firm hasAnswera. decreasing long-run pricesb. decreasing long-run average costsc. increasing long-run average costsd. constant returns to scaleAt 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?Answera. 10%b. 9%c. 8%d. 1%Which of the following costs are ignored when making managerial decisions?Answera. relevant costsb. incremental costsc. marginal costsd. sunk costsAt the level of output where marginal cost equals average variable costAnswera. average total cost is minimumb. average variable cost is increasingc. average variable cost is decreasingd. average total cost is decreasingWhich of the following costs does not depend upon output?Answera. average total costsb. marginal costsc. fixed costsd. variable costsSuppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.The average variable cost function (AVC) is:Answera. 200/Qb. 2Q – 10 +200/Qc. 2Q - 10d. 2Q+ 200/QThe breakeven point of a firm occurs at the level of output whereAnswera. marginal cost equals average variable costb. marginal revenue equals marginal costc. total revenue equals total costd. price equals marginal costIf 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 isAnswera. $100b. $200c. $150d. $300If a firm has implicit costs that are greater than zero but its economic profits is exactly zeroAnswera. the firm will shut down some of its production facilities due to inefficiencyb. accounting profits are negativec. inputs in the production process are used inefficientlyd. accounting profits are greater than zeroManagers, in the decision making process, will always take into accountAnswera. relevant costsb. average fixed costc. sunk costsd. historical costsThe percentage change in profits that occurs from a one percent change in sales is known asAnswera. output elasticityb. degree of operating leveragec. cost elasticityd. sales elasticityWhich of the following alternatives represent economic costs?Answera. the sum of implicit and explicit costsb. sunk costsc. implicit costsd. explicit costsThe firm reaches breakeven point whenAnswera. price equals average variable costb. price equals marginal costc. Price equals average total costd. the contribution margin per unit is zeroManagers in determining the rate of output which maximizes profits must considerAnswera. variable costsb. fixed costsc. sunk costsd. fixed and variable costsCompany 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?Answera. 2.8b. 2c. 1.04d. 1.5Average total costs is minimum whenAnswera. marginal cost is decliningb. marginal costs is greater than average total costsc. average total cost is greater than marginal costd. average cost equals marginal costSuppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.The marginal cost function (MC) is:Answera. 200/Qb. 2Q – 10 + 200/Qc. – 10Q + 200.d. 4Q - 10The minimum efficient scale of output occurs when:Answera. short-run average total cost is minimumb. long-run marginal cost is minimumc. short-run total cost is minimumd. long-run average total cost is minimum
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