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Question1An example of implicit costs is the:Select one:A. bad-debt liabilities arising out of excessive sales on creditB. wages paid to the owners’ childrenC. opportunity cost of owner-supplied capital and labor that is notrecognized by accountantsD. prices paid for purchased inputsE. the alternative uses for money that could be borrowedQuestion2Short-run marginal cost eventually increases with increasing outputbecause:Select one:A. eventually marginal returns will diminishB. not all variable inputs increase at the same rateC. diseconomies of scale usually set in immediatelyD. of diseconomies of scopeE. eventually diseconomies of scale set inQuestion3The long-run average cost curve slopes downward if there are:Select one:A. some factors without diminishing marginal returnsB. economies of scope in the management of multiplant operationsC. economies of scaleD. diseconomies of scope in the management of multiplant operationsE. no factors without diminishing marginal returnsQuestion4Framjam Sports Equipment produces basketballs at its factory in Kentuckyand soccer balls at its factory in Illinois. At its current annual rate ofproduction, the cost of producing basketballs is $80,000 and the cost ofproducing soccer balls is $45,000. If the firm consolidates production at asingle location, the annual cost of production will be $100,000. What is thedegree of economies of scope in this case?Select one:A. 5B. 4C. 0.75D. 0.25E. none of the aboveQuestion5Ramblin’ Randy’s Dude Ranch’s daily total cost of accommodatingovernight guests is given by TC = 100 + 5Q. On the basis of thisinformation, the average fixed cost, when there are 25 overnight guests, is:Select one:A. $4B. $5C. $6D. $7E. $9Question6Hedge Fun is a landscaping firm that specializes in topiary. It contracts withthe owners of 125 local homes and provides its service at an annual fee of$1,300. Its average variable cost is $800, and its annual fixed cost is$28,000. What is the break-even level of output?Select one:A. 125B. 87C. 63D. 56E. none of the aboveQuestion7In the model of perfect competition, firms produce a:Select one:A. standardized product with considerable control over priceB. differentiated product with considerable control over priceC. standardized product with no control over priceD. differentiated product with no control over priceE. standardized or differentiated product with some control over priceQuestion8In the model of perfect competition, firms maximize profits by producingwhere:Select one:A. the difference between marginal revenue and marginal cost ismaximizedB. marginal revenue equals priceC. the difference between price and marginal cost is maximizedD. price equals marginal costE. the difference between price and marginal revenue is maximizedQuestion9If the perfectly competitive market demand for gym shoes is given by QD =100 – P and the market supply is given by QS 10 + 2P, then the equilibriumprice and quantity will be:Select one:A. P = 50 and Q = 50B. P = 40 and Q = 90C. P = 40 and Q = 60D. P = 30 and Q = 70E. P = 25 and Q = 75Question10If a representative firm with total cost given by TC = 20 + 20q + 5q2operates in a competitive industry where the short-run market demand andsupply curves are given by QD = 1,400 – 40P and QS = – 400 + 20P, itsshort-run profit-maximizing level of output is:Select one:A. 0 unitsB. 1 unitC. 2 unitsD. 4 unitsE. 6 unitsQuestion11At the profit-maximizing level of output for the monopolist:Select one:A. total revenue is equal to total costB. total costs are minimizedC. total revenue is maximizedD. marginal revenue is equal to marginal costE. average revenue is equal to average costQuestion12The Frank Failing Company has an average variable cost of $8, averagefixed cost of $16, marginal cost of $12, and elasticity of demand -3. Frankshould:Select one:A. shut downB. charge $8C. charge $16D. charge $18E. charge $36Question13Harriet Quarterly wants a 25 percent return on the $100 of assets she hasin her company. Her average variable costs are $50 per unit, and she hasno fixed costs. If she sells 10 units, what price should she charge?Select one:A. $52.50B. $62.50C. $75.00D. $87.50E. $125.00Question14If elasticity of demand is -2, marginal cost is $4, and average cost is $6, aprofit-maximizing markup price is:Select one:A. $4B. $6C. $8D. $10E. $12Question15If a firm in a monopolistically competitive industry is profit maximizing, itshould choose its level of advertising such that the marginal revenue of anadditional dollar of advertising:Select one:A. is equal to the elasticity of its demand curve minus 1B. is exactly $1C. increases revenues by $1D. is equal to 1 plus the elasticity of its demand curveE. is equal to the elasticity of its demand curve