Question 1

​A firm will shut down in the long-run if

Accepted Answer

A) P>AVC B) PATC A) P>AVC B) PATC

Question 2

​What are some of the solutions for a hold-up problem?

Accepted Answer

A) ​Mergers 
B) Contracts 
C) Exchange of 'hostages' 
D) ​All the above 
A) ​Mergers 
B) Contracts 
C) Exchange of 'hostages' 
D) ​All the above

Question 3

​Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-​If the price is $60 per unit,what is the break even amount of units for technology B?

Accepted Answer

A) ​50 
B) 60 
C) 70 
D) ​None-They would have to shut down 
A) ​50 
B) 60 
C) 70 
D) ​None-They would have to shut down

Question 4

​The break-even quantity is

Accepted Answer

A) ​Fixed Costs/Price 
B) Fixed Costs/Marginal Cost 
C) Fixed Costs/(Price - Marginal Costs) 
D) ​Contribution Margin/Fixed Costs 
A) ​Fixed Costs/Price 
B) Fixed Costs/Marginal Cost 
C) Fixed Costs/(Price - Marginal Costs) 
D) ​Contribution Margin/Fixed Costs

Question 5

​If a firm sells more than the break-even quantity,

Accepted Answer

A) ​It will make a profit 
B) It will only cover the variable costs 
C) It will make a loss 
D) ​A firm is unable to sell above the break-even quantity 
A) ​It will make a profit 
B) It will only cover the variable costs 
C) It will make a loss 
D) ​A firm is unable to sell above the break-even quantity

Question 6

​Use the following setup for the next question.
Pastry Paradise is looking to expand.It decides to take over Sweet Tooth,a competitive firm.The two firms have similar technology but different costs.Pastry Paradise has $1500 fixed costs and $1 marginal cost per unit produced.Sweet Tooth has $500 fixed costs but $5 marginal cost per unit produced.
-​If Pastry Paradise takes over Sweet Tooth,at what level of production would it be indifferent between which technology is used.

Accepted Answer

A) ​500 
B) 750 
C) 250 
D) ​125 
A) ​500 
B) 750 
C) 250 
D) ​125

Question 7

​Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-​What's the firm's current contribution margin?

Accepted Answer

A) ​$15 
B) $18 
C) $3 
D) ​$4 
A) ​$15 
B) $18 
C) $3 
D) ​$4

Question 8

​Use the following setup for question
A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000.
-​The break-even quantity is

Accepted Answer

A) ​10000 
B) 5,555 
C) 12,500 
D) ​5,000 
A) ​10000 
B) 5,555 
C) 12,500 
D) ​5,000

Question 9

​Lucy invested $10,000 at the rate of 12%.According to the rule of 72,it would take ______ years for her money to double

Accepted Answer

A) ​4 
B) 5 
C) 6 
D) ​7 
A) ​4 
B) 5 
C) 6 
D) ​7

Question 10

​Which of the following defines a sunk cost?

Accepted Answer

A) ​Cost of the next best alternative 
B) Cost of producing an additional unit 
C) An asset with no scrap value 
D) ​Total cost of producing a product 
A) ​Cost of the next best alternative 
B) Cost of producing an additional unit 
C) An asset with no scrap value 
D) ​Total cost of producing a product

Question 11

​In the short-run,a firm's decision to shut-down should not take into consideration

Accepted Answer

A) ​Avoidable costs 
B) Variable costs 
C) Fixed costs 
D) ​Marginal costs 
A) ​Avoidable costs 
B) Variable costs 
C) Fixed costs 
D) ​Marginal costs

Question 12

​Discontinuing a Generic Drug
Prescott Pharmaceuticals makes a number of generic versions of drugs.When Cymbalta (Duloxetine)lost its patent,Prescott invested $500,000 to obtain FDA approval and $100,000 to certify one of its production lines for its production.Production of the drug will cost $2,000,000.Marginal costs for the tablet are $0.10 and they sell for $0.40 per tablet.But many firms have entered and now make Duloxetine causing sales to fall off.Prescott anticipates that it could use this production line for other drugs losing patent protection shortly.If forecasted sales are 5 million tablets,what is the breakeven price? Should Prescott discontinue selling this product?

Accepted Answer

The marginal cost of $0.10 can be avoide

Question 13

​Use the following setup for question
A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000.
-​What's the firm's contribution margin per unit?

Accepted Answer

A) ​$12 
B) $10 
C) $8 
D) ​$4 
A) ​$12 
B) $10 
C) $8 
D) ​$4

Question 14

​A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000.At the current price of $10 it is producing 500 pairs.If the demand goes down,such that they can now only charge $8 per pair,should they continue production in the short run?

Accepted Answer

A) ​No because price has fallen 
B) Yes because price is still higher than marginal costs 
C) No because price is lower than average cost 
D) ​Yes because price is higher than marginal costs 
A) ​No because price has fallen 
B) Yes because price is still higher than marginal costs 
C) No because price is lower than average cost 
D) ​Yes because price is higher than marginal costs

Question 15

​Use the following setup for the next question.
A firm is deciding between two different sewing machines.Technology A has fixed costs of $500 and marginal costs of $50 whereas Technology B has fixed costs of $250 and marginal costs of $100.
-​If the price is $20 per unit,what is the break even amount of units for technology A?

Accepted Answer

A) ​50 
B) 60 
C) 70 
D) ​None-They would have to shut down 
A) ​50 
B) 60 
C) 70 
D) ​None-They would have to shut down

Question 16

​Funding a Missile Program
Merowak Missiles is proposing to develop its next generation Democratizer Offensive Weapon System II (DOWS II)for the US military.It expects to have to sink $1 billion into R&D and design,spend $0.5 billion building the tools and production facility that are unique to DOWS II production.It houses these in standard factory floor space that costs $1 million.Each missile has a marginal cost of $2,000.The Pentagon is considering ordering 1 million of these missiles.What is the average cost per missile that Merowak could bid for the contract?

Accepted Answer

Fixed costs are the $1 billion R&D and d

Question 17

​Break-even quantity is a point where

Accepted Answer

A) ​the level of profit is maximized 
B) the level of cost is minimized 
C) Only variable costs are covered 
D) ​There are zero profits 
A) ​the level of profit is maximized 
B) the level of cost is minimized 
C) Only variable costs are covered 
D) ​There are zero profits

Question 18

​A firm's sunk costs are $100,000 and its marginal costs are $250 per unit.It produces 500,000 units and prices it at $400 per unit. ,How low can price go before the firm decides to shut down?

Accepted Answer

A) ​$150 
B) $250 
C) $250.20 
D) ​$400 
A) ​$150 
B) $250 
C) $250.20 
D) ​$400

Question 19

​Contribution margin is

Accepted Answer

A) ​the contribution of each unit sold towards covering the fixed costs 
B) the contribution of each unit sold towards covering the variable costs 
C) the contribution of each unit sold towards covering the average variable costs 
D) ​All of the above 
A) ​the contribution of each unit sold towards covering the fixed costs 
B) the contribution of each unit sold towards covering the variable costs 
C) the contribution of each unit sold towards covering the average variable costs 
D) ​All of the above

Question 20

A firm's fixed but avoidable costs are $100,000 and its variable costs are $250 per unit.It produces 50,000 units and prices it at $400 per unit.In the long-run,how low can price go before the firm decides to shut down?

Accepted Answer

A) ​$150 
B) $252 
C) $250.20 
D) ​$400 
A) ​$150 
B) $252 
C) $250.20 
D) ​$400

A firm will shut down in the long-run if

What are some of the solutions for a hold-up problem?

The break-even quantity is

If a firm sells more than the break-even quantity,

Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -The break-even quantity is

Lucy invested $10,000 at the rate of 12%.According to the rule of 72,it would take ______ years for her money to double

Which of the following defines a sunk cost?

In the short-run,a firm's decision to shut-down should not take into consideration

Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -What's the firm's contribution margin per unit?

A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000.At the current price of $10 it is producing 500 pairs.If the demand goes down,such that they can now only charge $8 per pair,should they continue production in the short run?

Break-even quantity is a point where

A firm's sunk costs are $100,000 and its marginal costs are $250 per unit.It produces 500,000 units and prices it at $400 per unit. ,How low can price go before the firm decides to shut down?

Contribution margin is

A firm's fixed but avoidable costs are $100,000 and its variable costs are $250 per unit.It produces 50,000 units and prices it at $400 per unit.In the long-run,how low can price go before the firm decides to shut down?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 4: Investment Decisions: Look Ahead and Reason Back

​A firm will shut down in the long-run if

​What are some of the solutions for a hold-up problem?

​The break-even quantity is

​If a firm sells more than the break-even quantity,

​Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -​The break-even quantity is

​Lucy invested $10,000 at the rate of 12%.According to the rule of 72,it would take ______ years for her money to double

​Which of the following defines a sunk cost?

​In the short-run,a firm's decision to shut-down should not take into consideration

​Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -​What's the firm's contribution margin per unit?

​A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000.At the current price of $10 it is producing 500 pairs.If the demand goes down,such that they can now only charge $8 per pair,should they continue production in the short run?

​Break-even quantity is a point where

​A firm's sunk costs are $100,000 and its marginal costs are $250 per unit.It produces 500,000 units and prices it at $400 per unit. ,How low can price go before the firm decides to shut down?

​Contribution margin is

A firm's fixed but avoidable costs are $100,000 and its variable costs are $250 per unit.It produces 50,000 units and prices it at $400 per unit.In the long-run,how low can price go before the firm decides to shut down?

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

A firm will shut down in the long-run if

What are some of the solutions for a hold-up problem?

The break-even quantity is

If a firm sells more than the break-even quantity,

Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -The break-even quantity is

Lucy invested $10,000 at the rate of 12%.According to the rule of 72,it would take ______ years for her money to double

Which of the following defines a sunk cost?

In the short-run,a firm's decision to shut-down should not take into consideration

Use the following setup for question A firm's fixed costs are $10 million.It sets the price at $1800 per unit and has marginal costs of $1,000. -What's the firm's contribution margin per unit?

A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000.At the current price of $10 it is producing 500 pairs.If the demand goes down,such that they can now only charge $8 per pair,should they continue production in the short run?

Break-even quantity is a point where

A firm's sunk costs are $100,000 and its marginal costs are $250 per unit.It produces 500,000 units and prices it at $400 per unit. ,How low can price go before the firm decides to shut down?

Contribution margin is