Economics Multiple Choice

| November 24, 2016

Question
Question 1.1. A production function (Points : 1)

a. tells you how inputs are affected by output b. tells you how output varies as inputs vary c. assumues that the sate of technology is given d. b+c e. none of the above

Question 2.2. The short run for a company is (Points : 1)

a. less than one year b. more than one year but less than tree years c. defined by calendar time elapsed d. none of the above

Question 3.3.

In the production function: Q=2.6L.5 *k.4*M.1, returns to scale implied are:

(Points : 1)

a. 2.6 times the amount of inputs b. increasing returns c. a+b d. None of the above

Question 4.4.

Given the production function: Q=6L2M2 -.10L3M3, where L=units of labor and M=units of material. How many units of L maximize Q, given M=10 is fixed?

(Points : 1)

a. L=360 b. L=4 c. L=3600

Question 5.5. Given the production function in 4 above, the number of units of labor (L) that maximizes marginal product of labor given M=10 is (Points : 1)

a. L=4 b. L=0 c. L=10 d. L=2 e. None of the above

Question 6.6. A company should use all resources available to reduce the number of defects produced to zero. (Points : 1)

True False

Question 7.7. The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns. b. is a mathematical theorem that can be logically proved or disproved c. is the rate at which one input may be substituted for another input in the production process d. None of the above

Question 8.8. The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y d. None of the above

Question 9.9. The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above e. none of the above

Question 10.10. Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained d. a and b e. a and c

Question 11.11. Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost b. variable cost c. marginal rate of technical substitution d. total cost e. none of the above

Question 12.12. In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1 b. the average product of labor (L) is equal to ?2 c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent d. a and b e. a and c

Question 13.13. The short-run cost function is: (Points : 1)

a. where all inputs to the production process are available b. relevant to decisions in which one or more inputs to the production process are fixed c. not relevant to optimal pricing and production output decision facilities d. crucial in making optimal investment decisions in new production facilities e. none of the above

Question 14.14. Theoretically, in a long-run cost function: (Points : 1)

a. all inputs are fixed b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions

Question 15.15. A linear total cost function implies that: (Points : 1)

a. marginal costs are constant as output increases b. average total costs are continually decreasing as output increases c. a and b d. none of the above

Question 16.16. Production elasticity (Points : 1)

a. measure how a % change in output affect the % change in an input b. is not important for a company that makes a physical product c. measure the % change in output for a % change in an input d. is given by the exponent on the input in a linear production function

Question 17.17. How do you determine the optimal amount of labor to use when labor is the only variable input? (Points : 1)

a. MPL=CL b. MPL=MPK c. MPL/MPK=1 d. None of above

Question 18.18. The optimal usage of two variable inputs is determined by: (Points : 1)

a. The Iso-quant for the production process b. MPK=MRTS C. MPK=MCL d. None of above

Question 19.19.

Productive activity includes all but

(Points : 1)

a. stockbrokers b. loan officers at a bank c. work around the house, which you perform d. the service industries e. none above

Question 20.20.

In a company fixed costs are $ 1300.00 per month, variable cost is $ 9.00 per hour and price charged per hour is $ 15.00 (This is a service company). Break even number of hours per month are about:

(Points : 1)

a. 650 b. 216 c. 422 d. None of above

Question 21.21. Given information in question 20 above, the degree of operating leverage at 480 hours of service sold is about: (Points : 1)

a. 2.62 b. 1.82 c. 11.82 d. 4.62 e. None of above

Question 22.22. An individual’s annual income is $100,000. The person is considering opening their own business. Expected revenues for the business, if they open it, is 2 million the first year. Salaries for employees are expected to be 1.5 million. Operating expenses (rent, supplies, etc. ) are expected to be $250,000. To start the business the individual must borrow $500,000 from the bank at an interest rate of 15%. Equipment will cost $50,000. At the end of the year, the value of the equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year.The pre-tax accounting profit will be: (Points : 1)

a. -28,000 b. 26,000 c. 50,100 d. None of above

Question 23.23. Continue with question 23, The economic profit will be: (Points : 1)

a. 50,100 b. 80,000 c. 122,000 d. None of above

Question 24.24. If expected sales is 2,300 units and the standard deviation is 150. What is the probability of an operating loss? (Points : 1)

a. 2.28% b. 15.87% c. 50% d. Not enough information

Question 25.25. Economic cost do not include the explicit costs, but only opportunity costs. (Points : 1)

True False

Question 26.26. A learning curve tells you (Points : 1)

a. How a 1% increase in output affects unit costs b. How a 10% invrease in output affects total cost c. How total cost decrease as output doubles d. How unit costs decrease as output doubles e. None of the above

Question 27.27. Given a 50% learning curve, where the first unit costs is $1,000, the cost of the 4th unit would be: (Points : 1)

a. $800 b. $250 c. $500 d. $400 e. None of above

Question 28.28. Theoretically , in a long-run cost function: (Points : 1)

a. all inputs are fixed b. all inputs are considered variable c. some inputs are always fixed d. capital and labor are always combined in fixed proportions e. b and d

Question 29.29. What method of inventory valuation should be used for economic decision-making problems? (Points : 1)

a. Book value b. Original cost c. Current replacement cost d. Cost or market, whichever is lower e. Historical cost

Question 30.30. The degree of operating leverage is equal to the ______ change in __________ divided by the _______ change in _____. (Points : 1)

a. percentage; sales; percentage; EBIT b. unit; sales; unit; EBIT c. percentage; EBIT; percentage; sales d. unit; EBIT; unit; sales e. None of above

Question 31.31. In the linear breakeven model, the breakeven sales volume (in dollars) is equal to fixed costs divided by: (Points : 1)

a. unit selling price less unit variable cost b. contribution margin per unit c. contribution margin per unit d. target margin per unit e. none of the abovea,b and c all are correct

Question 32.32. In the linear break-even model, the difference between selling price per unit and variable cost per unit is referred to as: (Points : 1)

a. variable margin per unit b. variable cost ratio c. contribution margin per unit d. target margin per unit e. None of the above

Question 33.33. The rate at which one input X may be substituted for another input Y in a production process, while output remains constant, is: (Points : 1)

a. the slope of the isoquant curve b. the marginal rate of technical substitution c. Equal to MPX/MPY d. all of the above e. none of the above

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