ECO 550 FINAL EXAM PART 1 WITH FOUR OTHER VERSIONS
olufunmilola
Question 1
George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
Answer
10,000 customers
20,000 customers
30,000 customers
40,000 customers
50,000 customers
Question 2
Evidence from empirical studies of long-run cost-output relationships lends support to the:
Answer
existence of a non-linear cubic total cost function
hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm
hypothesis that total costs increase quadratically over the ranges of output examined
hypothesis that total costs increase linearly over some considerable range of output examined
Question 3
In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called:
Answer
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
Question 4
In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer
one minus the variable cost ratio
contribution margin per unit
selling price per unit
standard deviation of unit sales
Question 5
A ____ total cost function implies that marginal costs ____ as output is increased.
Answer
linear; increase linearly
quadratic; are constant
cubic; increase linearly
linear; are constant
Question 6
In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
Answer
variable margin per unit
variable cost ratio
contribution margin per unit
target margin per unit
Question 7
Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining. The likely reason for the declining price for long distance service is:
Answer
Governmental pressure to lower the price
Reduced demand for long distance service
Entry into this industry pushes prices down
Lower price for a barrel of crude oil
Increased cost of providing long distance service
Question 8
Experience goods are products or services
Answer
that the customer already knows
whose performance is highly unusual
whose quality is undetectable when purchased
not likely to cause repeat purchases
Question 9
Under asymmetric information,
Answer
you never get what you pay for
you sometimes get cheated
you always get cheated
at best you get what you pay for
sellers make profits in excess of competitive returns
Question 10
Asset specificity is largest when
Answer
value in first best use is large
value in second best use is large
customers choose their supplier at random
very valuable assets are non-redeployable
customers are loyal to a particular seller
Question 11
Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will
Answer
deliver high quality products consistent with expectations
not attempt to establish any warranty enforcement mechanisms
offer several prices and qualities
produce only one quality
Question 12
In the long-run, firms in a monopolistically competitive industry will
Answer
earn substantial economic profits
tend to just cover costs, including normal profits
seek to increase the scale of operations
seek to reduce the scale of operations
Question 13
All of the following are mechanisms which reduce the adverse selection problem except ____.
Answer
warranties from established enterprises with non-redeployable assets
high interest rates
large collateral requirements
brand names and product-specific promotions and retail displays
higher prices in repeat customer transactions
Question 14
In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
Answer
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
Question 15
Of the following, which is not an economic rationale for public utility regulation?
Answer
production process exhibiting increasing returns to scale
constant cost industry
avoidance of duplication of facilities
protection of consumers from price discrimination
Question 16
____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility's plant over a larger number of units of output.
Answer
Peak load pricing
Inverted block pricing
Block pricing
First degree price discrimination
Question 17
In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates.
Answer
similar, similar
elastic, lower
elastic, higher
inelastic, lower
inelastic, higher
Question 18
Declining cost industries
Answer
have upward rising AC curves.
have upward rising demand curves.
have ∩-shaped total costs.
have diseconomies of scale.
have marginal cost curves below their average cost curve.
Question 19
When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
Answer
oligopoly
monopoly
pure competition
substitution
monopolistic competition
Question 20
In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm's ____ will not change.
Answer
price
output
marketing strategy
inventory
Question 21
“Conscious parallelism of action” among oligopolistic firms is an example of ____.
Answer
intense rivalry
a formal collusive agreement
informal, or tacit, cooperation
a cartel
Question 22
Some industries that have rigid prices. In those industries, we tend to
Answer
find that output is also rigid over the business cycle
find that output varies greatly over the business cycle
find the employment in these industries is quite stable over the business cycle
find that the rate of return is negative in boom times
Question 23
In a kinked demand market, whenever one firm decides to lower its price,
Answer
other firms will automatically follow.
none of the other firms will follow.
one half of the firms follow and one half of the firms don't follow the price cut.
other firms all decide to exit the industry
all of the other firms raise their prices
Question 24
Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?
Answer
The products are heterogeneous
The orders are small and frequent
The firms are all about the same size
Costs differ across the firms
Firms are geographically widely scattered
Question 25
If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical.
Answer
average total cost
average profit
marginal profit
marginal cost
marginal revenue
Question 1
The short-run cost function is:
Answer
where all inputs to the production process are variable
relevant to decisions in which one or more inputs to the production process are fixed
not relevant to optimal pricing and production output decisions
crucial in making optimal investment decisions in new production facilities
Question 2
Which of the following is not an assumption of the linear breakeven model:
Answer
constant selling price per unit
decreasing variable cost per unit
fixed costs are independent of the output level
a single product (or a constant mix of products) is being produced and sold
Question 3
George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
Answer
10,000 customers
20,000 customers
30,000 customers
40,000 customers
50,000 customers
Question 4
The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
Answer
percentage; sales; percentage; EBIT
unit; sales; unit; EBIT
percentage; EBIT; percentage; sales
unit; EBIT; unit; sales
Question 5
In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called:
Answer
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
Question 6
In the linear breakeven model, the breakeven sales volume (in dollars) can be found by multiplying the breakeven sales volume (in units) by:
Answer
one minus the variable cost ratio
contribution margin per unit
selling price per unit
standard deviation of unit sales
Question 7
A firm in pure competition would shut down when:
Answer
price is less than average total cost
price is less than average fixed cost
price is less than marginal cost
price is less than average variable cost
Question 8
Under asymmetric information,
Answer
you never get what you pay for
you sometimes get cheated
you always get cheated
at best you get what you pay for
sellers make profits in excess of competitive returns
Question 9
An "experience good" is one that:
Answer
Only an expert can use
Has undetectable quality when purchased
Can be readily experienced simply by touching or tasting
Improves with age, like a fine wine
Question 10
A "search good" is:
Answer
One that depends on how the product behaves over time
A product whose quality is only found out over time by finding how durable it is
Like a peach that can be examined for flaws
Like a used car, since it is easy to determine its inherent quality
Question 11
All of the following are mechanisms which reduce the adverse selection problem except ____.
Answer
warranties from established enterprises with non-redeployable assets
high interest rates
large collateral requirements
brand names and product-specific promotions and retail displays
higher prices in repeat customer transactions
Question 12
Asset specificity is largest when
Answer
value in first best use is large
value in second best use is large
customers choose their supplier at random
very valuable assets are non-redeployable
customers are loyal to a particular seller
Question 13
In the purely competitive case, marginal revenue (MR) is equal to:
Answer
cost
profit
price
total revenue
Question 14
In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates.
Answer
similar, similar
elastic, lower
elastic, higher
inelastic, lower
inelastic, higher
Question 15
Declining cost industries
Answer
have upward rising AC curves.
have upward rising demand curves.
have ∩-shaped total costs.
have diseconomies of scale.
have marginal cost curves below their average cost curve.
Question 16
The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer
pure competition
monopolistic competition
oligopoly
pure monopoly
Question 17
Of the following, which is not an economic rationale for public utility regulation?
Answer
production process exhibiting increasing returns to scale
constant cost industry
avoidance of duplication of facilities
protection of consumers from price discrimination
Question 18
In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
Answer
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
Question 19
When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.
Answer
oligopoly
monopoly
pure competition
substitution
monopolistic competition
Question 20
The existence of a kinked demand curve under oligopoly conditions may result in
Answer
volatile prices
competitive pricing.
prices above the monopoly price.
an increase in the coefficient of variation of prices.
price rigidity
Question 21
A(n) ____ is characterized by a relatively small number of firms producing a product.
Answer
monopoly
syndicate
cooperative
oligopoly
Question 22
Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?
Answer
The products are heterogeneous
The orders are small and frequent
The firms are all about the same size
Costs differ across the firms
Firms are geographically widely scattered
Question 23
Even ideal cartels tend to be unstable because
Answer
firms typically prefer competition to collusion as competition, because it leads to more profits.
collusion leads to lowest possible overall profits in the industry.
oligopolistic managers are extremely risk loving.
firms can benefit by secretly selling more than they promised the other firms
Question 24
Which of the following is an example of an oligopolistic market structure?
Answer
public utilities
air transport industry
liquor retailers
wheat farmers
Question 25
A cartel is a situation where firms in the industry
Answer
have an agreement to restrict output.
agree to produce identical products.
obey the rules of dominant firm price leadership.
experience the pain of a kinked demand curve.
have a barometric price leader
THIRD VERSION
Question 1
Theoretically, in a long-run cost function:
Answer
all inputs are fixed
all inputs are considered variable
some inputs are always fixed
capital and labor are always combined in fixed proportions
4 points
Question 2
In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent. The size that is becoming more predominant is presumed to be least cost. This is called:
Answer
regression to the mean analysis.
breakeven analysis.
survivorship analysis.
engineering cost analysis.
a Willie Sutton analysis.
4 points
Question 3
George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
Answer
10,000 customers
20,000 customers
30,000 customers
40,000 customers
50,000 customers
4 points
Question 4
In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:
Answer
variable margin per unit
variable cost ratio
contribution margin per unit
target margin per unit
4 points
Question 5
A ____ total cost function implies that marginal costs ____ as output is increased.
Answer
linear; increase linearly
quadratic; are constant
cubic; increase linearly
linear; are constant
4 points
Question 6
Break-even analysis usually assumes all of the following except:
Answer
in the short run, there is no distinction between variable and fixed costs.
revenue and cost curves are straight-lines throughout the analysis.
there appears to be perfect competition since the price is considered to remain the same regardless of quantity.
the straight-line cost curve implies that marginal cost is constant.
4 points
Question 7
In the short-run for a purely competitive market, a manufacturer will stop production when:
Answer
the total revenue is less than total costs
the contribution to fixed costs is zero or less
the price is greater than AVC
operating at a loss
4 points
Question 8
The price for used cars is well below the price of new cars of the same general quality. This is an example of:
Answer
The Degree of Operating Leverage
A Lemon's Market
Redeployment Assets
Cyclical Competition
The Unemployment Rate
4 points
Question 9
In the purely competitive case, marginal revenue (MR) is equal to:
Answer
cost
profit
price
total revenue
4 points
Question 10
A "search good" is:
Answer
One that depends on how the product behaves over time
A product whose quality is only found out over time by finding how durable it is
Like a peach that can be examined for flaws
Like a used car, since it is easy to determine its inherent quality
4 points
Question 11
The problems of asymmetric information exchange arise ultimately because
Answer
one party to the exchange possesses different information than another
one party has more information than another
one party knows nothing
one party cannot independently verify the information of another
information is scarce
4 points
Question 12
Experience goods are products or services
Answer
that the customer already knows
whose performance is highly unusual
whose quality is undetectable when purchased
not likely to cause repeat purchases
4 points
Question 13
If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.
Answer
more; decrease; down
more; decrease; up
more; increase; down
more; increase; up
4 points
Question 14
Regulatory agencies engage in all of the following activities except _______.
Answer
controlling entry into the regulated industries
overseeing the quality of service provided by the firms
setting federal and state income tax rates on regulated firms
setting prices that consumers will pay
4 points
Question 15
In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then:
Answer
price would equal average cost.
price would exceed average cost.
price would be below average cost.
price would be at the profit maximizing level for natural monopoly
4 points
Question 16
In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates.
Answer
similar, similar
elastic, lower
elastic, higher
inelastic, lower
inelastic, higher
4 points
Question 17
Declining cost industries
Answer
have upward rising AC curves.
have upward rising demand curves.
have ∩-shaped total costs.
have diseconomies of scale.
have marginal cost curves below their average cost curve.
4 points
Question 18
Of the following, which is not an economic rationale for public utility regulation?
Answer
production process exhibiting increasing returns to scale
constant cost industry
avoidance of duplication of facilities
protection of consumers from price discrimination
4 points
Question 19
The demand curve facing the firm in ____ is the same as the industry demand curve.
Answer
pure competition
monopolistic competition
oligopoly
pure monopoly
4 points
Question 20
If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical.
Answer
average total cost
average profit
marginal profit
marginal cost
marginal revenue
4 points
Question 21
Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful?
Answer
The products are heterogeneous
The orders are small and frequent
The firms are all about the same size
Costs differ across the firms
Firms are geographically widely scattered
4 points
Question 22
Which of the following is an example of an oligopolistic market structure?
Answer
public utilities
air transport industry
liquor retailers
wheat farmers
4 points
Question 23
The existence of a kinked demand curve under oligopoly conditions may result in
Answer
volatile prices
competitive pricing.
prices above the monopoly price.
an increase in the coefficient of variation of prices.
price rigidity
4 points
Question 24
In a kinked demand market, whenever one firm decides to lower its price,
Answer
other firms will automatically follow.
none of the other firms will follow.
one half of the firms follow and one half of the firms don't follow the price cut.
other firms all decide to exit the industry
all of the other firms raise their prices.
4 points
Question 25
Even ideal cartels tend to be unstable because
Answer
firms typically prefer competition to collusion as competition, because it leads to more profits.
collusion leads to lowest possible overall profits in the industry.
oligopolistic managers are extremely risk loving.
firms can benefit by secretly selling more than they promised the other firms
- 9 years ago
Purchase the answer to view it
- final_exam_part_1_all_version_answer.docx