Practice Test: Managerial Economic 
Test #2
Practice Test #2: Answer Key
Exam number 2 will take place on Monday, April 8th, 2013. This, the second of two practice exams, will be the subject of class on Wednesday. It will not be graded, but will serve only as practice material accurately representing the content and format of the exam.
1.) Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business’s costs.
a.
Tyler says his costs are $25,900, and Greg says his costs are $66,500.
b.
Tyler says his costs are $25,000, and Greg says his costs are $65,000.
c.
Tyler says his costs are $66,500, and Greg says his costs are $66,500.
d.
Tyler says his costs are $75,000, and Greg says his costs are $41,500.
2.) Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the total cost of production when the firm hires 7 workers?
a.
$66
b.
$76
c.
$906
d.
$946
3.) Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
a.
$50
b.
$90
c.
$120
d.
$150
4.) At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal
Practice Test #2: Answer Key
Exam number 2 will take place on Monday, April 8th, 2013. This, the second of two practice exams, will be the subject of class on Wednesday. It will not be graded, but will serve only as practice material accurately representing the content and format of the exam.
1.) Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business’s costs.
a.
Tyler says his costs are $25,900, and Greg says his costs are $66,500.
b.
Tyler says his costs are $25,000, and Greg says his costs are $65,000.
c.
Tyler says his costs are $66,500, and Greg says his costs are $66,500.
d.
Tyler says his costs are $75,000, and Greg says his costs are $41,500.
2.) Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the total cost of production when the firm hires 7 workers?
a.
$66
b.
$76
c.
$906
d.
$946
3.) Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired?
a.
$50
b.
$90
c.
$120
d.
$150
4.) At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal