The marginal cost curve crosses the *

1 point

a. average total cost curve at the maximum of the average total cost curve.

b. average variable cost curve at the minimum of the average variable cost curve.

c. total cost curve at the minimum of the total cost curve.

d. average fixed cost curve at the minimum of the average fixed cost curve.

The average variable cost curve and average total cost curve tend to converge as output rises because *

1 point

a. the marginal cost curve intersects the average total cost curve at its minimum.

b. the average fixed costs are constant as output rises.

c. the difference between them (average fixed cost) declines.

d. output is rising more rapidly than inputs are being increased.

Monopoly and pure competition *

1 point

a. are alike in that entry is easy in both.

b. are alike in that entry is blocked in both.

c. differ in terms of the number of firms in the industry.

d. differ in that monopoly is associated with a standardized product and perfect competition associated with differentiated products.

With respect to entry and exit, monopolistic competition is *

1 point

a.characterized by free entry and blocked exit.

b. like pure competition in that entry and exit are free.

c. characterized by easy (though not free) entry and exit.

d. like pure monopoly in that entry is blocked.

An oligopoly is characterized by *

1 point

a. free entry and blocked exit.

b. few number of firms and blocked entry.

c. firms that sell homogeneous product but differentiated.

d. firms selling identical products but differentiated.

Suppose that the market for computers is dominated by a single firm, like IBM, that is able to exert influence over prices and output. This situation violates the perfect competition assumption of *

1 point

a. many buyers and sellers.

b. identical or homogeneous goods.

c. ease of entry and exit.

d. no differentiation.

• Identify four methods of assigning a cost to ending inventory and cost of goods sold and briefly explain the difference in the methods.
  
• It’s common in the electronics industry for unit costs of raw materials inventories to decline over time. In this environment, explain the difference between LIFO and FIFO, in terms of the effect on income and financial position. Assume that inventory quantities remain the same for the period.
  
• Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situation would it not provide a better match?

Use the ideas of opportunity cost, marginal analysis, and sunk cost to give advice to the following people:

a. When Ursula goes to an all-you-can-eat buffet, she eats so much that she is sick for two days. But she says it’s OK, because it didn’t cost her anything extra. Your advice?

b. Victor is thinking about starting a small business selling baseball caps in the shopping mall. He tells you that if he makes a financial investment of $10,000 and works full-time for a year, he can earn $20,000 per year. Since the gain of $20,000 exceeds the $10,000 he invests, this seems like a good idea to him. Your advice?

c. Xavier works at a U.S. post office in a large city, which is located in a lovely old building in a prime downtown location. He says that it’s a great deal, because the building was bought and paid for many years ago and so it now has zero cost. Your comment?

d. Yolanda works for a company that spends $20,000 on surveys to decide whether to launch a new product. Then it decides that it needs to launch the product to earn back the money it spent on the surveys. Your advice?

e. Zachariah decides that his favorite food is grapes; therefore, he decides that he will eat nothing but grapes from now on. Your advice?

What is a cost accounting system? Why is a cost accounting system important for a business? A business without a cost accounting system cannot effectively manage its operations. Give an example of how a company you are familiar with costs its products or services.

1. Diagram the “cost template” for the firm and explain precisely how and why the marginal cost curve relates to the average cost curves at any output level.

Please show me your thought process. Please explain it as if you are telling it to someone who has no clue about economics.

Question 2

Explain why it is important for a cost accountant to identify properly the cost drivers for the purpose of cost estimation.[8 marks]

A firm cost of debt = 6%, cost of Preferred stock = 5%, and required common stock return = 12%. if the capital structure = 30% debt, 5% preferred, and 65% common stock, calculate the WACC: