Question 1

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Accepted Answer

A)   It is L-shaped
B)   It is ∩-shaped
C)   It is ∪-shaped
D)   It is ∧-shaped
E)   It is M-shaped

Question 2

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

Accepted Answer

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 B

Question 3

Possible sources of economies of scale (size) within a production plant include:

Accepted Answer

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

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Regarding costs,which of the following statements is true?

Accepted Answer

A)   ​costs can be measured in different ways
B)   ​costs appropriate for financial reporting purposes are appropriate for decision-making purposes
C)   ​the relevant cost in economic decision making is the initial cost
D)   ​sunk costs should always be considered in making operating decisions
E)   ​none of these is true

Question 6

What method of inventory valuation should be used for economic decision-making problems?

Accepted Answer

A)   book value
B)   original cost
C)   current replacement cost
D)   cost or market,whichever is lower
E)   historical cost

Question 7

Which of the following statements about cost functions is true?

Accepted Answer

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

Question 8

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Accepted Answer

\[\begin{array} { r c r r r r r r r }
\...

Question 9

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Accepted Answer

A)   Opportunity costs
B)   Marginal costs
C)   Relevant costs
D)   Sunk costs
E)   None of the above

Question 10

Economies of scale exist whenever long-run average costs:

Accepted Answer

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 C

Question 11

For a short-run cost function which of the following statements is (are) not true?

Accepted Answer

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

Question 12

The cost function is:

Accepted Answer

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

Question 13

A firm has determined that its variable costs are given by the following relationship:
VC = .05Q3 ? 5Q2 + 500Q
where Q is the quantity of output produced.

Accepted Answer

None...

Question 14

The Jones Company has the following cost schedule: $$\begin{array} { c c } 
\begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
( \$ )
\end{array} \
\hline 0 & 3000 \
50 & 3750 \
100 & 4275 \
150 & 4675 \
200 & 5000 \
250 & 5300 \
300 & 5700 \
350 & 6250 \
400 & 7050 \
450 & 8225
\end{array}$$ Prepare (a)average total cost and (b)marginal cost schedules for the firm.

Accepted Answer

$\begin{array}{rccc}
&&(a)&(b)\
&&\text { Average}\
\underline{\text { Output }} & \underline{\text { Total Cost } }& 
\underline{\text { Total Cost }}& \underline{\text { Marginal Cost }}\ 
0&\$3000&--&--\
50 & 3750 & \$ 75.00 / \text { unit } & \$ 15.00 \text { /unit } \
100 & 4275 & 42.75 & 10.50 \
150 & 4675 & 31.17 & 8.00 \
200 & 5000 & 25.00 & 6.50 \
250 & 5300 & 21.20 & 6.00 \
300 & 5700 & 19.00 & 8.00 \
350 & 6250 & 17.86 & 11.00 \
400 & 7050 & 17.63 & 16.00 \
450 & 8225 & 18.28 & 23.50
\end{array}$

Question 15

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q2 + 0.001Q3

Accepted Answer

A)   Fixed cost (F
C)  is $200
B)   Variable cost (V
C)  is 5Q - 0.4Q2 + 0.001Q3
C)   Average variable cost (AV
C)  is 5 - 0.4Q + 0.001Q2
D)   Marginal cost (M
C)  is 5 - 0.8Q +.003Q2
E)   All of the above are correct

Question 16

The existence of diseconomies of scale (size) for the firm is hypothesized to result from:

Accepted Answer

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

Question 17

Which of the following is true with regards to a long-run cost function?

Accepted Answer

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

Question 18

If TC = 321 + 55Q - 5Q2,then average total cost at Q = 10 is:

Accepted Answer

A)   10.2
B)   102
C)   37.1
D)   371
E)   321

Exam 8: Cost Analysis

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Correct Answer
verified

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

Correct Answer
verified
B

Possible sources of economies of scale (size) within a production plant include:

Correct Answer
verified

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.

Correct Answer
verified

Regarding costs,which of the following statements is true?

Correct Answer
verified

What method of inventory valuation should be used for economic decision-making problems?

Correct Answer
verified

Which of the following statements about cost functions is true?

Correct Answer
verified

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Correct Answer
verified
\[\begin{array} { r c r r r r r r r }
\...
View Answer

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Correct Answer
verified

Economies of scale exist whenever long-run average costs:

Correct Answer
verified
C

For a short-run cost function which of the following statements is (are) not true?

Correct Answer
verified

The cost function is:

Correct Answer
verified

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ ? 5Q² + 500Q where Q is the quantity of output produced.

Correct Answer
verified
None...
View Answer

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q² + 0.001Q³

Correct Answer
verified

The existence of diseconomies of scale (size) for the firm is hypothesized to result from:

Correct Answer
verified

Which of the following is true with regards to a long-run cost function?

Correct Answer
verified

If TC = 321 + 55Q - 5Q²,then average total cost at Q = 10 is:

Correct Answer
verified

Exam 8: Cost Analysis

Which of the following statements concerning the short-run average cost curve of economic theory is true?

Correct AnswerverifiedShow Answer

According to the theory of cost,specialization in the use of variable resources in the short-run results initially in:

Correct AnswerverifiedB

Possible sources of economies of scale (size) within a production plant include:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Regarding costs,which of the following statements is true?

Correct AnswerverifiedShow Answer

What method of inventory valuation should be used for economic decision-making problems?

Correct AnswerverifiedShow Answer

Which of the following statements about cost functions is true?

Correct AnswerverifiedShow Answer

During the last few days the Superior Company has been running into problems with its computer system.The last run of the production cost schedule resulted in the incomplete listing shown below.From your knowledge of cost theory,fill in the blanks.

Correct Answerverified\[\begin{array} { r c r r r r r r r } \...View AnswerShow Answer

____ are defined as costs which are incurred regardless of the alternative action chosen in a decision-making problem.

Correct AnswerverifiedShow Answer

Economies of scale exist whenever long-run average costs:

Correct AnswerverifiedC

For a short-run cost function which of the following statements is (are) not true?

Correct AnswerverifiedShow Answer

The cost function is:

Correct AnswerverifiedShow Answer

A firm has determined that its variable costs are given by the following relationship: VC = .05Q3 ? 5Q2 + 500Q where Q is the quantity of output produced.

Correct AnswerverifiedNone...View AnswerShow Answer

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q2 + 0.001Q3

Correct AnswerverifiedShow Answer

The existence of diseconomies of scale (size) for the firm is hypothesized to result from:

Correct AnswerverifiedShow Answer

Which of the following is true with regards to a long-run cost function?

Correct AnswerverifiedShow Answer

If TC = 321 + 55Q - 5Q2,then average total cost at Q = 10 is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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B

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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\[\begin{array} { r c r r r r r r r }
\...
View Answer

Correct Answer
verified

Correct Answer
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C

Correct Answer
verified

Correct Answer
verified

A firm has determined that its variable costs are given by the following relationship: VC = .05Q³ ? 5Q² + 500Q where Q is the quantity of output produced.

Correct Answer
verified
None...
View Answer

Suppose that total cost is given by TC = 200 + 5Q - 0.4Q² + 0.001Q³

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If TC = 321 + 55Q - 5Q²,then average total cost at Q = 10 is:

Correct Answer
verified