1. As the quantity produced goes to infinity, the average variable cost curve will
(a) go to zero. (b) stay constant. (c) approach the average total cost curve. (d) None of the above answers are correct.
2. In our model of a competitive firm’s problem, the firm wants to
(a) maximize revenue by choosing quantity. (b) maximize profit by choosing quantity. (c) minimize cost by choosing quantity. (d) maximize profit by choosing market price.
3. Suppose you must pay a $40 fee for a license to sell stuffed animals. This fee is a
(a) variable cost. (b) fixed cost. (c) strategy. (d) supply function.
4. Which of the following are assumptions about a perfectly competitive market? Select all that apply.
(a) firms have no price-setting power (b) firms can’t vary the amount of capital they use (c) firms sell identical products (d) firms have constant economies of scale
5. Suppose a firm doubles its output and its costs more than double. We would say that this firm displays
(a) economies of scale (b) diseconomies of scale (c) constant economies of scale (d) increasing returns to scale
In: Economics
Using the following table of costs for a firm, what is the marginal cost of producing the 3rd unit?
Using the following table of costs, what is the firm's average total cost at 2 units of output?
| Q | Fixed Costs | Total Variable Costs |
| 1 | 200 | 50 |
| 2 | 200 | 100 |
| 3 | 200 | 175 |
| 4 | 200 | 275 |
In: Economics
The following table depicts the price and cost structure of a profit-maximizing firm:
Quantity | Price per Unit | Total Cost |
0 | 25 | 10 |
1 | 25 | 15 |
2 | 25 | 30 |
3 | 25 | 55 |
4 | 25 | 90 |
5 | 25 | 135 |
a.) What is the firm’s fixed cost?
b.) What is the variable cost of producing two units of output?
c.) What is the marginal cost of the second unit produced?
d.) What is the firm’s total revenue from selling two units of output?
e.) What is the marginal revenue from the second unit sold?
f.) What is the firm’s profit-maximizing level of output?
In: Economics
If a firm's marginal cost is 7q, where q is its output, and the price of output is $40. Assuming that this firm is producing output, the the firm's total variable cost will be equal or less than？
In: Economics
What is an agency cost or agency problem in the context of corporate management? Does the agency problem interfere with maximizing shareholder wealth? Why or Why not?
Explain the Free Cash Flow (FCF) approach to share valuation. What are the key steps involved in the FCF approach to share valuation?
In: Finance
A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. (Assume 250 working days per year)
◦D = _______________
◦S = _______________
◦H = _______________
◦Q* = ______________
◦Total cost = ____________
◦Expected number of orders per year =_______________
Expected time between orders =
In: Operations Management
Which of the following statements about the cost of capital is CORRECT ? Select one:
a. Both the cost of debt and equity financing will decrease when a nuclear plant company encounters a ban on nuclear power generation in certain states.
b. Both the cost of debt and equity financing will decrease when a firm increases its debt/asset ratio.
c. Both the cost of debt and equity financing will decrease when a firm expands into a risky new area.
d. Both the cost of debt and equity financing will increase when the Federal Reserve tightens credit.
e. The WACC of a firm will decrease when investors become more risk averse.
In: Finance
1. A firm produces 100 units of good A at a total cost of $1,500 and separately 200 units of good B at a cost of $2,000. By combining the production of A and B, it is possible to produce the same quantities of A and B respectively at a combined total cost of $2,238. Compute the economies of scope experienced by this firm.
Hint: Write your answer to two decimal places.
2. Suppose we are given a profit function Q = 12L.5K.5 . The price of labor is $6 per unit and the price of capital (K) is $15 per unit. The firm is interested in the optimal mix of inputs to minimize the cost of producing any level of output Q. In the optimal mix the ratio of labor to capital is ____ .
Hint: Write your answer to two decimal places. When discussing ratios the convention is "ratio of a to b" is
a/b"
3. A firm’s long-run average cost curve is estimated by the equation: LAC = 1,000 – 1.6Q + .005Q2 . What is the lowest price per unit sold that would prevent the firm from shutting down in the long run?
Hint: Write the answer to two decimal places.
In: Economics
A firm is producing 25,000 units of output at a total cost of $933,000. The firm's average variable cost is $32.5 per unit.
What is the firm's total fixed cost and average variable costs?
In: Economics
Zachary Manufacturing Company established the following standard price and cost data:
Sales price | $ | 8.90 | per unit |
Variable manufacturing cost | $ | 3.70 | per unit |
Fixed manufacturing cost | $ | 2,100 | total |
Fixed selling and administrative cost | $ | 1,000 | total |
Zachary planned to produce and sell 3,000 units. Actual production and sales amounted to 3,300 units.
Assume that the actual sales price is $8.70 per unit and that the actual variable cost is $3.95 per unit. The actual fixed manufacturing cost is $1,900, and the actual selling and administrative costs are $1,030.
Required
a.&b. Determine the flexible budget variances and classify the effect of each variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)
Flexible Budget Variances | ||
Sales | U | |
Variable manufacturing | U | |
Contribution margin | U | |
Fixed manufacturing | F | |
Fixed selling and administrative cost | U | |
Net income (loss) | U | |
In: Accounting