Midterm Exam.pdf - M I DT E R M E X A M Due Nov 18 at...

This preview shows page 1 out of 13 pages.

Unformatted text preview: M I DT E R M E X A M Due Nov 18 at 11:59pm Time Limit 120 Minutes Points 100 Questions 25 Instructions Covers Weeks 1, 2, 3, and 4. Two-hour time limit. Complete by Sunday, 11:59 p.m. ET. (test engine locks at this time, regardless of your start time; plan accordingly). A empt History LATEST Attempt Time Score Attempt 1 113 minutes 60 out of 100 Score for this quiz: 60 out of 100 Submitted Nov 18 at 9:54pm This attempt took 113 minutes. Question 1 4 / 4 pts A security system company’s total production costs depend on the number of systems produced according to the following equation: Total Costs = $10,000,000 + $2000*quantity produced. What is the average total cost of production when 20,000 units are produced? 4,500 3,500 Correct! 2,500 1,500 Question 2 4 / 4 pts Which of the following is the reason for the existence of consumer surplus? Consumers can purchase goods that they “want” in addition to what they “need” Consumers can occasionally purchase products for less than their production cost Some consumers receive temporary discounts that result in below-market prices Correct! Some consumers are willing to pay more than the market price Question 3 4 / 4 pts A spirits manufacturer is considering two potential production investments. Option A costs an initial $2 billion and will involve variable costs (labor and material) of $5 per bottle of spirits. Option B costs an initial $4 billion and will involve variable costs (labor and material) of $3 per bottle of spirits. Assuming an annual capital charge equal to 10 percent of the initial costs, what is the average fixed cost at production level of 20,000,000 bottles per year for the Option B facility? $3 Correct! $20 $23 $10 Question 4 0 / 4 pts If a firm is earning an abnormally high rate of return on invested capital Correct Answer The firm is earning positive economic profits The firm has zero economic profits You Answered The firm’s accounting and economic profits are equal The firm’s accounting profits are zero Question 5 4 / 4 pts You run a small auto service shop. Your fixed expenses per week are $1,000 and your average customer invoice is $500 with an associated marginal cost of $300. What is your weekly breakeven quantity? 2 cars 3.33 cars Correct! 5 cars 10 cars Question 6 4 / 4 pts If supply falls in a perfectly competitive market, we can expect all of the following EXCEPT Price to rise The equilibrium quantity bought and sold to fall Quantity demanded to fall Correct! Demand to fall Question 7 4 / 4 pts Configuration A Correct! Configuration B Configuration C None of the configurations Question 8 4 / 4 pts To maximize profits, you should produce at the point where You maximize the amount by which marginal revenue exceeds marginal costs You minimize total costs You maximize total benefit Correct! Marginal benefits and marginal costs are just equal Question 9 4 / 4 pts $20,000 Correct! $10,000 $70,000 $30,000 Question 10 4 / 4 pts Mr. D's Barbeque of Pickwick, TN, produces 10,000 dry-rubbed rib slabs per year. Annually, Mr. D's fixed costs are $50,000. The average variable cost per slab is a constant $2. Suppose Mr. D smoked 10% more ribs. Total cost would fall, but by less than 10% Correct! Average total cost would drop Total costs would rise by 10% Marginal cost would be negative Question 11 4 / 4 pts According to the law of demand When demand increases, prices go up When supply increases, demand increases a corresponding amount When supply decreases, demand decreases a corresponding amount Correct! When price decreases, quantity demanded increases Question 12 0 / 4 pts What is the definition of market equilibrium? The price at which elasticity of demand is unit elastic The price and quantity at which all consumer surplus is extracted from buyers Correct Answer You Answered The price at which quantity supplied equals quantity demanded All of the above Question 13 0 / 4 pts To mitigate the loss from post-investment holdup, vulnerable parties should avoid Correct Answer Specific investments Detailed contracts Leasing rather than purchasing You Answered All of the above Question 14 0 / 4 pts If the price of CD players decreases, what can we expect to happen in the market for compact discs? You Answered The equilibrium price of compact discs will fall Correct Answer The equilibrium price of compact discs will rise The equilibrium price of compact discs will stay the same None of the above Question 15 4 / 4 pts What is the net present value of a project that requires a $100 investment today and returns $50 at the end of the first year and $80 at the end of the second year? Assume a discount rate of 10%. $10.52 Correct! $11.57 $18.18 $30.00 Question 16 4 / 4 pts A brewery is considering two potential production investments. Option A costs an initial $2 million and will involve constant marginal cost of $5 Option B costs an initial $4 million and will involve constant marginal cost of $3 In order to make the calculations simple, assume that the annual capital cost is 10% of the total investment. At what production quantity per year would the brewery be indifferent between these two investment opportunities? 20,000 Correct! 100,000 200,000 150,000 Question 17 0 / 4 pts Which of the following would most likely make the demand for an item more elastic? You Answered Buyers perceive there to be few close substitutes for the item The item represents a small fraction of consumers' budgets Correct Answer There are no costs of switching to competitors' products Buyers have NOT had time to adjust to the price change Question 18 4 / 4 pts In the long run, which of the following outcomes is most likely for a firm? Zero accounting profits but positive economic profits Zero accounting profits Positive accounting profits and positive economic profits Correct! Zero economic profits but positive accounting profits Question 19 0 / 4 pts Which of the following will NOT decrease the demand for jogging shoes? You Answered Surgeon General's report indicating jogging causes cancer A decrease in the price of substitutes Correct Answer An increase in the price of jogging shoes An increase in the price of complements Question 20 0 / 4 pts If demand for a product falls at the same time supply rises, which of the following might we expect? You Answered Correct Answer Equilibrium price and quantity sold would fall Equilibrium price would fall, and equilibrium quantity could either rise or fall Both the equilibrium price and the equilibrium quantity could rise or fall Equilibrium price would rise, and the equilibrium quantity could rise or fall Question 21 4 / 4 pts If you are trying to determine the value of a business, which of the following factors would be irrelevant? Interest rate (discount rate) Costs incurred by the business Revenues generated by the business How long the business is expected to survive Correct! None of the factors are irrelevant Question 22 0 / 4 pts If a firm's average cost is falling (economies of scale) with output, then Correct Answer Marginal cost is less than average cost Marginal cost is rising You Answered Marginal cost is greater than average cost Average cost is rising as a function of output Question 23 4 / 4 pts Produce as much as possible Correct! Shut down (produce nothing) Produce four units Produce six units Question 24 0 / 4 pts Dr. Octavio is an ophthalmologist who performs both cataract and LASIK surgeries. If a competitor starts offering LASIK surgery as well, causing a decrease in the price Dr. Octavio can charge for LASIK, this price decrease Increases the opportunity cost of performing cataract surgeries You Answered Increases the demand for LASIK surgery Correct Answer Reduces the opportunity cost of performing cataract surgeries Increases the demand for cataract surgeries, if cataract and LASIK surgeries are substitutes Question 25 0 / 4 pts In the short term, a firm in a very competitive market Can never earn positive economic profits Sets its price where marginal cost equals average total cost Correct Answer You Answered Must set its price at the competitive equilibrium price even if it is below their minimum average cost Maximizes its profits when it experiences economies of scale Quiz Score: 60 out of 100 ...
View Full Document

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture