Variable Costs
IE401-Econ401 MidTerm Managerial Economics
NAME:
Each of the 20 multiple choice questions is worth 3 points. Mark your answers on the ANSWER KEY on page 5. Also provide BRIEF answers to each of the 4 “essay type/logical” questions.
Multiple-Choice Questions
1. A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that
a. the firm has negative profit.
b. marginal cost equals $100.
c. marginal cost equals $150.
d. marginal cost equals marginal revenue. 2. A retailer has to pay $9 per hour to hire 13 workers. If the retailer only needs to hire twelve workers, a wage rate of $7 per hour is sufficient. What is the marginal cost of the 13th worker?
a. $117.
b. $9.
c. $33.
d. $84.
3. A computer manufacturer can produce 5 computers for $5,000 and 10 computers for $7,500. Based on this information, what is the marginal cost per computer of the 6th through 10th computers?
a. $500
b. $750
c. $1,000
d. $2,500
4. To maximize profits, you should produce at the point where
a. you maximize the amount by which marginal revenue exceeds marginal costs.
b. you minimize total costs.
c. you maximize total benefit.
d. marginal benefits and marginal costs are just equal.
5. A basketball company is considering purchasing a new machine that doubles capacity from 100 to 200 balls per day. The machine will occupy 1,000 square feet of unused space on the factory floor. Which costs are irrelevant in this decision to purchase a machine?
a. Rental expense associated with the 20,000 square foot factory.
b. Additional personnel required to operate the machine.
c. Additional electricity required to operate the machine.
d. Maintenance cost for routine cleaning of the
NAME:
Each of the 20 multiple choice questions is worth 3 points. Mark your answers on the ANSWER KEY on page 5. Also provide BRIEF answers to each of the 4 “essay type/logical” questions.
Multiple-Choice Questions
1. A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that
a. the firm has negative profit.
b. marginal cost equals $100.
c. marginal cost equals $150.
d. marginal cost equals marginal revenue. 2. A retailer has to pay $9 per hour to hire 13 workers. If the retailer only needs to hire twelve workers, a wage rate of $7 per hour is sufficient. What is the marginal cost of the 13th worker?
a. $117.
b. $9.
c. $33.
d. $84.
3. A computer manufacturer can produce 5 computers for $5,000 and 10 computers for $7,500. Based on this information, what is the marginal cost per computer of the 6th through 10th computers?
a. $500
b. $750
c. $1,000
d. $2,500
4. To maximize profits, you should produce at the point where
a. you maximize the amount by which marginal revenue exceeds marginal costs.
b. you minimize total costs.
c. you maximize total benefit.
d. marginal benefits and marginal costs are just equal.
5. A basketball company is considering purchasing a new machine that doubles capacity from 100 to 200 balls per day. The machine will occupy 1,000 square feet of unused space on the factory floor. Which costs are irrelevant in this decision to purchase a machine?
a. Rental expense associated with the 20,000 square foot factory.
b. Additional personnel required to operate the machine.
c. Additional electricity required to operate the machine.
d. Maintenance cost for routine cleaning of the