Question 1

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 2

A business produces 5,000 units per month.Costs include: $12,000 on raw materials,$20,000 on operators and $14,000 on sales people.Other costs of running the factory were $50,000 for rent and $30,000 on other fixed overheads.In order to break even the selling price per unit will have to be:

Accepted Answer

A) $25.20 
B) $29.60 
C) $20.30 
D) $28 
A) $25.20 
B) $29.60 
C) $20.30 
D) $28

Question 3

If the annual interest rate is 5%,the net present value of receiving $550 in the next year is:

Accepted Answer

A) $550 
B) $523.80 
C) $577.50 
D) $500 
A) $550 
B) $523.80 
C) $577.50 
D) $500

Question 4

A firm sells1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.The firm should

Accepted Answer

A) Shut-down as the firm is making a loss of $10,000 per week 
B) Shut-down as the firm cannot cover the fixed costs 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) Shut-down because it is cost effective to pay off the remaining fixed costs 
A) Shut-down as the firm is making a loss of $10,000 per week 
B) Shut-down as the firm cannot cover the fixed costs 
C) Continue operating as the firm is covering all the variable costs and some of the fixed costs 
D) Shut-down because it is cost effective to pay off the remaining fixed costs

Question 5

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

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 6

Use the following information to answer the next two questions:
A publisher is deciding whether to invest in a new printer that needs an initial investment of $500.This will increase cash flows in the first year by $600 for the next two years.
-If the interest rate is 10% then the net present value of these cash flows is

Accepted Answer

A) $1041.32 
B) $541.32 
C) $1090.91 
D) $590.91 
A) $1041.32 
B) $541.32 
C) $1090.91 
D) $590.91

Question 7

Consider a firm that produces 500,000 units per year.The firm's fixed costs are $100,000,marginal costs are $250 and the price per unit is $400.In the long-run,how low can price go before it is profitable to shut down?

Accepted Answer

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

Question 8

Use the following information to answer the next four questions:
A clothing manufacturing firm is deciding whether to invest in a new technology that needs an initial investment of $45,000.This will increase cash flows in the first year by $25,000 and $30,000 in the second year.The firm's current fixed costs are $9,000 and marginal cost is $15.The firm currently charges $18 per unit.
-If the interest rate is 5% then the net present value of these cash flows is

Accepted Answer

A) $6,020.41 
B) $7,380.95 
C) -$7,380.95 
D) $10,000 
A) $6,020.41 
B) $7,380.95 
C) -$7,380.95 
D) $10,000

Question 9

Use the following information to answer Questions 33 - 35
Sarah's Machinery Company is deciding to dump their current technology A for a new technology B with small fixed costs but big marginal costs.The current technology has fixed costs of $500 and marginal costs of $50 whereas the new technology has fixed costs of $250 and marginal costs of $100.
-What is the total cost at the break-even quantity calculated above?

Accepted Answer

A) $750 
B) $850 
C) $950 
D) $1050 
A) $750 
B) $850 
C) $950 
D) $1050

Question 10

Assume a firm has the following cost and revenue characteristics at its current level of output: price=$10.00,average variable cost=$8.00 and average fixed cost =$4.00.This firm is

Accepted Answer

A) incurring a loss of $2.00 per unit and should shut down. 
B) realizing only a normal profit. 
C) realizing an economic profit of $2.00 per unit. 
D) incurring a loss per unit of $2.00,but should continue to operate in the short run. 
A) incurring a loss of $2.00 per unit and should shut down. 
B) realizing only a normal profit. 
C) realizing an economic profit of $2.00 per unit. 
D) incurring a loss per unit of $2.00,but should continue to operate in the short run.

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

A business produces 5,000 units per month.Costs include: $12,000 on raw materials,$20,000 on operators and $14,000 on sales people.Other costs of running the factory were $50,000 for rent and $30,000 on other fixed overheads.In order to break even the selling price per unit will have to be:

If the annual interest rate is 5%,the net present value of receiving $550 in the next year is:

A firm sells1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.The firm should

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

Consider a firm that produces 500,000 units per year.The firm's fixed costs are $100,000,marginal costs are $250 and the price per unit is $400.In the long-run,how low can price go before it is profitable to shut down?

Assume a firm has the following cost and revenue characteristics at its current level of output: price=$10.00,average variable cost=$8.00 and average fixed cost =$4.00.This firm is

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Muchdecisions

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 Indirect 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 5: Investment Decisions: Look Ahead and Reason Back

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

A business produces 5,000 units per month.Costs include: $12,000 on raw materials,$20,000 on operators and $14,000 on sales people.Other costs of running the factory were $50,000 for rent and $30,000 on other fixed overheads.In order to break even the selling price per unit will have to be:

If the annual interest rate is 5%,the net present value of receiving $550 in the next year is:

A firm sells1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.The firm should

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

Consider a firm that produces 500,000 units per year.The firm's fixed costs are $100,000,marginal costs are $250 and the price per unit is $400.In the long-run,how low can price go before it is profitable to shut down?

Assume a firm has the following cost and revenue characteristics at its current level of output: price=$10.00,average variable cost=$8.00 and average fixed cost =$4.00.This firm is

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Muchdecisions

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 Indirect 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