BUS2010 Cost Analysis Homework Assignment

NAME:_______________________________________________________________________________BUS2010 (Microeconomics)Cost Analysis Homework AssignmentAssignment Due On: Wednesday, November 16, 2016Please highlight the correct answer 1. Fixed Costs are expenses that:A)B)C)D) Do not change as production changes.Are contractual obligations such as a fixed rate commercial mortgage loan.The electricity bill is a fixed cost.Both A and B are correct. 2. Total Fixed Costs + Total Variable Costs = What?A)B)C)D) The Supply Curve.The Marginal Cost.Total Cost.None of the statements above are true. 3. The Marginal Product is:A)B)C)D) The extra output of producing one more of the product or service.Measures the quality of your product or service.These are the products or services that are not ready for sale.None of the statements above are true. 4. Which statement is most true when describing cutting your short-run costs?A)B)C)D) You will have the ability to alter all of your land, labor and capital costs quickly.You only have time to alter one variable of input regarding land, labor or capital.You have one year or less to change the cost structure of your businessYou have one year or more to change the cost structure of your business. 1 5. From 2008 to 2012, Chase Bank spent millions of dollars to upgrade its network ofphysical branch offices, automated teller machines, loan underwriting software, and they havespent even more money training their employees. They wanted to improve their customerservice and profitability. What kind of cost management philosophy is this?A)B)C)D) Managing Overall Short-run costs.Managing Overall Long-run costsStrictly Managing Variable costs.Strictly Managing Fixed costs. 6. If you started your own business and generated $100,000 in total revenues and incurred$50,000 in actual expenses that you paid for, then this means that you made $50,000 in netprofit. How would you classify the $50,000 of expenses?A)B)C)D) Implicit costsExplicit costsMarginal costVariable costs. 7. As you were working in your new business trying to make a profit, you passed up an offerfor a new job that would have paid you $75,000 per year in salary. From your point of view,what kind of a cost was the offer of $75,000 that you turned down?A)B)C)D) Marginal cost.Explicit cost.An Opportunity cost.A fixed cost. 8. Economic Profit is:A)B)C)D) Total revenues minus total expensesTotal revenue minus explicit and implicit costs.Total Revenue minus all marginal costs.Both A and C are true. 9. The law of diminishing returns would agree with what statement:A) You will get more output as you hire more workers.B) You will get more output as you hire more workers but if you hire too many workers,then each new hire will contribute proportionally less versus the existing workers.C) More workers mean more payroll expense, so the net profits will go down.D) This concept relates to the rate of return on investments.2 10. Both the Average Fixed Cost and Average Variable Cost are determined by dividing theTotal Fixed Cost and Total Variable Cost by the units of output that have been produced:A)B)C)D) This statement is true.This statement is false.This statement true only if you add Marginal Cost to the numerator.None of the statements above are true. 11. The Marginal Cost is:A)B)C)D) The change total cost divide by the change in quantity produced.The added cost of producing one more of the product or service.Both A and B are true.None of the statements above are true. 12. Average Total Cost is calculated by using which formula below?A)B)C)D) Average Fixed Costs + Average variable Cost.Total Cost divided by all fixed costs.Total Revenue divided by Total Cost.None of the statements above are true. 13. The current banking credit crunch and credit freeze in the U.S. economy is very bad.Banks are charging small businesses as much as 10 percent for a 30-day loan. The 30-dayinterest expense can best be classified as a:A)B)C)D) A marginal costA fixed costAn economic lossNone of the statements above are true. 14. If your average total cost-per-unit is rising as you increase production, then whatdefinition do we use to describe this situation.A)B)C)D) An Economic LossEconomies of scaleDiseconomy of scaleNone of the statements above are true. 3 15. If I hire so many new employees to the point where not all of them have a desk and theyare bumping into each other in a small office, then I have a situation of:A)B)C)D) Net loss.Economic net loss.Economies of scale.Diseconomies of scale. 16. A sunk cost is:A)B)C)D) Money that was wasted due primarily to bad management decisions.Money that is unrecoverable.Money spent that exceeded the expected marginal cost.Both A and C are true. 17. The fastest way to cut major costs for most firms in the short-run is to layoff employees:A)B)C)D) This statement is false.This statement is true.This statement is false and there is little evidence to support this claim.Economics recommends the ‘shut-down’ option. 18. There is such a thing as the Long-Run Average Total Cost Curve:A)B)C)D) This statement is false.This statement is true.This statement is false it is know as the Long-Run Supply CurveThis statement is false it is known as the Long-Run Cost Equilibrium Point. 19. When Marginal Cost equals Marginal Revenue, then:A)B)C)D) You have reached the profit maximization point.You have reached the break-even point.You have reached the lowest-cost production maximization point.All of the statements above are false. 20. Marginal Product is:A) Where MC = MRB) Where Total Revenues are maximized4 C) This is not part of microeconomic cost analysisD) All of the above statements are false. 5

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