QUESTION 21

1. In the long run

   		A. all costs become fixed.
   		B. all costs become variable.
   		C. all costs become neither fixed nor variable.

2 points   

QUESTION 22

1. Which statement is false?

   		A. The MC always intersects the ATC at its minimum point.
   		B. The MC always intersects the AVC at its minimum point.
   		C. The MC always intersects the AFC at its minimum point.
   		D. None of these statements is false.

2 points   

QUESTION 23

1. The average fixed cost curve

   		A. is a vertical line.
   		B. is a horizontal line.
   		C. slopes downward to the right as output rises.
   		D. is U-shaped (it declines as output rises, reaches a minimum, and then rises).

2 points   

QUESTION 24

1. As output rises, average fixed cost

   		A. rises.
   		B. falls.
   		C. remains the same.

2 points   

QUESTION 25

1. When the average total cost is at its minimum, it is

   		A. greater than MC.
   		B. equal to MC.
   		C. smaller than MC.

2 points   

QUESTION 26

1. When MC is rising but still below AVC, then

   		A. AVC is declining.
   		B. AVC is constant.
   		C. AVC is rising.
   		D. There is not enough information to determine what AVC is doing.

2 points   

QUESTION 27

1. As a firm's output expands, the

   		A. ATC will reach a minimum before the AVC.
   		B. AVC will reach a minimum before the ATC.
   		C. ATC and AVC will reach minimums at the same output.

2 points   

QUESTION 28

1. Which statement is true?

   		A. Going out of business is a short run option.
   		B. Operating or shutting down are long run options.
   		C. Going out of business or not going out of business are long run options.

2 points   

QUESTION 29

1. If a firm cannot cover its variable costs, it will

   		A. operate in the short run and stay in business in the long run.
   		B. operate in the short run and go out of business in the long run.
   		C. shut down in the short run and stay in business in the long run.
   		D. shut down in the short run and go out of business in the long run.

2 points   

QUESTION 30

1. Average variable cost is equal to

   		A. average cost plus average fixed cost.
   		B. marginal cost plus average fixed cost.
   		C. marginal cost.
   		D. average total cost minus average fixed cost.

2 points   

QUESTION 31

1. The long-run average total cost curve:

   		A) displays declining unit costs so long as output is increasing.
   		B) indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.
   		C) has a shape which is the inverse of the law of diminishing returns.
   		D) can be derived by summing horizontally the average total cost curves of all firms in an industry.

2 points   

QUESTION 32

1. If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then:

   		A) it is encountering diseconomies of scale.
   		B) the law of diminishing returns is taking hold.
   		C) it is encountering economies of scale.
   		D) the firm's long-run ATC curve will be rising.

2 points   

QUESTION 33

1. If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then:

   		A) it is encountering diseconomies of scale.
   		B) it is encountering constant returns to scale.
   		C) it is encountering economies of scale.
   		D) the marginal products of all inputs are falling.

2 points   

QUESTION 34

1. The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that initially it was producing:

   		A) in the range of diseconomies of scale.
   		B) where AP is less than MP.
   		C) in the range of economies of scale.
   		D) at the point of minimum efficient scale.

2 points   

QUESTION 35

1. Diseconomies of scale means that:

   		A) a firm's long-run average total cost curve is declining.
   		B) a firm's long-run average total cost curve is rising.
   		C) the advantages of specialization are being more fully realized.
   		D) a given increase in inputs results in a more-than-proportionate increase in output.

2 points   

QUESTION 36

1. Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that:

   		A) the long-run average total cost curve is upsloping.
   		B) a 10 percent increase in all inputs will increase output by less than 10 percent.
   		C) a 10 percent increase in all inputs will increase output by more than 10 percent.
   		D) the firm is encountering problems of managerial bureaucracy because of its size.

2 points   

QUESTION 37

1. A cost that cannot be partly or fully recovered through any subsequent action is known as a:

   		A) variable cost.
   		B) fixed cost.
   		C) marginal cost.
   		D) sunk cost.

2 points   

QUESTION 38

1. Which of the following is an example of a sunk cost, as it relates to a firm?

   		A) an expenditure on raw materials used in the production process.
   		B) an expenditure on a nonrefundable, nontransferable airline ticket.
   		C) an expenditure to buy a delivery van.
   		D) an expenditure for a new factory.

2 points   

QUESTION 39

1. Which of the following sayings relates most closely to the idea of sunk costs:

   		A) Don't cry over spilt milk.
   		B) He who hesitates is lost.
   		C) A bird in the hand is worth two in the bush.
   		D) Show me the money.

2 points   

QUESTION 40

1. The real opportunity cost of producing product X is the amounts of products Y, Z, and so forth, that might have been produced if resources had not been used to produce X.

   True

   False

2 points   

QUESTION 41

1. The short run is a period of time during which all costs are fixed costs.

   True

   False

2 points   

QUESTION 42

1. Variable costs are costs that vary directly with output.

   True

   False

2 points   

QUESTION 43

1. The law of diminishing returns explains why the long-run average total cost curve is U-shaped.

   True

   False

2 points   

QUESTION 44

1. Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

   True

   False

2 points   

QUESTION 45

1. At zero units of output a firm's variable costs are zero.

   True

   False

2 points   

QUESTION 46

1. Average fixed costs diminish continuously as output increases.

   True

   False

2 points   

QUESTION 47

1. If the marginal-cost curve lies below the average-variable-cost curve, the average-variable-cost curve must be

   True

   False

2 points   

QUESTION 48

1. Economic profit is found by subtracting accounting costs from total revenue.

   True

   False

2 points   

QUESTION 49

1. A firm's economic profit is usually higher than its accounting profit.

   True

   False

2 points   

QUESTION 50

1. In economics, a firm earns a normal profit when its total revenue equals its total economic costs.

   True

   False

2 points   

QUESTION 51

1. The law of diminishing returns explains why short-run marginal cost curves are upward sloping.

   True

   False

2 points   

QUESTION 52

1. The law of diminishing returns explains diseconomies of scale. F

   True

   False

2 points   

QUESTION 53

1. Minimum efficient scale varies by industry.

   True

   False

2 points   

QUESTION 54

1. Accounting profits are typically:

   		A) greater than economic profits because the former do not take explicit costs into account.
   		B) equal to economic profits because accounting costs include all opportunity costs.
   		C) smaller than economic profits because the former do not take implicit costs into account.
   		D) greater than economic profits because the former do not take implicit costs into account.

2 points   

QUESTION 55

1. Economic profits are calculated by subtracting:

   		A) explicit costs from total revenue.
   		C) implicit costs from normal profits.
   		B) implicit costs from total revenue.
   		D) explicit and implicit costs from total revenue.

a) Refer to the table above. Several entries in the table are blank, but can be determined
using the information you know about costs. Determine the variable cost of producing
three units of output. Show your work.

     a) Variable Cost = $20

     b) Variable Cost = $5

     c) Variable Cost = $10

     d) Variable Cost = $15

b) Refer to the table above. Several entries in the table are blank, but can be determined
using the information you know about costs. Determine fixed cost. Show your work.

     a) Fixed Cost = $0

     b) Fixed Cost = $5

     c) Fixed Cost = $10

     d) Fixed Cost = $15

Tinkle-Tinkle Glass Company makes glass globe paper weights for desks. The company uses a job-order cost system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Fabrication Department is based on machine hours, and the rate in the Finishing Department is based on direct labor hours. At the beginning of the year, the company’s management made the following estimates for the year:

                                                                                                            Department

                                                                                                Fabrication       Finishing

Machine hours                                                                         84,000                       27,000

Direct labor hours                                                                    28,000                       44,000

Direct material cost                                                                 $415,000                     $214,000

Direct labor cost                                                                     $300,000                     $690,000

Fixed manufacturing overhead cost                                        $800,000           $280,000       

Variable manufacturing overhead per machine hour                   $2.25                              --

Variable manufacturing overhead per direct labor hour                               --                  $2.15

Job 25 (the Christmas holiday special) was started on September 1 and completed on September 30. The company’s cost records show the following information concerning the job:

                                                                                                            Department     

                                                                                                Fabrication       Finishing

Machine hours                                                                                  310                  75

Direct labor hours                                                                             110                133

Direct materials cost                                                                     $1,320        $1,050

Direct labor cost                                                                               $910           1,095

• Compute the predetermined overhead rate used during the year in the Fabrication Department. (Round to two decimal places.)  Be careful to use the proper cost driver.

• Compute the predetermined overhead rate used during the year in the Finishing Department. (Round to two decimal places.) Be careful to use the proper cost driver.

• Compute the total overhead cost applied to Job 25 (in dollars and cents).

• What would be the total cost recorded for Job 25? (Round to two decimal places.)

• If Job 25 contained 65 units, what would be the unit product cost? (Round to two decimal places.)

• If it contained 750 units, what would be the unit product cost? (Round to two decimal places.)

• At the end of the year, the records of Tinkle-Tinkle Glass revealed the following actual cost and

operating data for all jobs during the year:

                                                                                                            Department

                                                                                                Fabrication       Finishing

Machines hours                                                                                      85,900              30,000

Direct labor hours                                                                       32,500              29,000

Direct materials cost                                                                $425,000         $163,000

Manufacturing overhead cost                                                  $713,000         $288,000        

What was the amount of actual overhead in each department at the end of the year? Was it underapplied or overapplied? (You should have a total of four answers for this question.)

High Desert Potteryworks makes a variety of pottery products that it sells to retailers, such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Moulding Department is based on machine-hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the company’s management made the following estimates:

Job 205 was started on August 1 and completed on August 10. The company’s cost records show the following information concerning the job:

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department. Compute the rate used in the Painting Department. (Round "Cost per machine-hour" answer to 2 decimal places.)

2. Compute the total overhead cost applied to Job 205. (Do not round intermediate calculations. Enter your answer rounded to the nearest whole dollar.)

Total overhead cost=

3-a. What would be the total cost recorded for Job 205? (Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollar.)

3-b. If the job contained 70 units, what would be the cost per unit? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Cost per unit=

4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

What was the amount of under- or overapplied overhead in each department at the end of the year? (Do not round intermediate calculations.)

molding department:

Painting department:

The direct materials​ (rubber pads) are added at the end of the plating process. Conversion costs are incurred evenly throughout the process. Work in process of the Plating Department on March 1 consisted of 1,200 racks. The $35,350 beginning balance of Work in Processlong dash—Plating includes $21,600 of​ transferred-in cost and $13,750 of conversion cost. During​ March, 2,400 racks were transferred in from the Shaping Department. The Plating Department transferred 2,100 racks to finished goods inventory in March and 1,500 were still in process on March 31. This ending inventory was​ 50% of the way through the plating process.

Requirement 2. Prepare the March production cost report for the Plating Department.

Before we can start the production cost report we must first compute the Plating​ Department's equivalent units. ​(For entries with a zero​ balance, make sure to enter​ "0" in the appropriate​ cell.)

Now we will begin the production cost report by completing the first half of the report. Compute the cost per equivalent unit. ​(For entries with a zero​ balance, make sure to enter​ "0" in the appropriate​ column.)

Complete the March production cost report by assigning the costs to units completed and transferred out and to ending inventory. ​(Enter quantities​ first, then the cost per equivalent unit amounts in the same order as calculated in the preceding step. For entries with a zero​ balance, make sure to enter​ "0" in the appropriate​ cell(s). Round your answers to the nearest whole​ dollar.)

Complete the March production cost report by assigning the costs to units completed and transferred out and to ending inventory. ​(Enter quantities​ first, then the cost per equivalent unit amounts in the same order as calculated in the preceding step. For entries with a zero​ balance, make sure to enter​ "0" in the appropriate​ cell(s). Round your answers to the nearest whole​ dollar.)

Requirement 3. Journalize all transactions affecting the Plating Department during​ March, including the entries that have already been posted.

Record the journal entry for the cost of the units transferred in from the Shaping Department. ​(Record debits​ first, then credits. Explanations are not​ required.)

Record the direct​ materials, direct​ labour, and manufacturing overhead assigned to the Plating Department.

Prepare the journal entry to record the cost of units completed and transferred out.

THE BUSINESS SITUATION

                When Shelley Jones became president-elect of the Circular Club of Auburn, Kansas,

she was asked to suggest a new fundraising activity for the club. After a considerable

amount of research, Shelley proposed that the Circular Club sponsor a professional

rodeo. In her presentation to the club, Shelley said that she wanted a

fundraiser that would (1) continue to get better each year, (2) give back to the community,

and (3) provide the club a presence in the community. Shelley’s goal was to

have an activity that would become an “annual community event” and that would

break even the first year and raise $5,000 the following year. In addition, based on

the experience of other communities, Shelley believed that a rodeo could grow in

popularity so that the club would eventually earn an average of $20,000 annually.

                A rodeo committee was formed. Shelley contacted the world’s oldest and

largest rodeo-sanctioning agency to apply to sponsor a professional rodeo. The

sanctioning agency requires a rodeo to consist of the following five events:

Bareback Riding, Bronco Riding, Steer Wrestling, Bull Riding, and Calf Roping.

Because there were a number of team ropers in the area and because they

wanted to include females in the competition, members of the rodeo committee

added Team Roping and Women’s Barrels. Prize money of $3,000 would be paid

to winners in each of the seven events.

                Members of the rodeo committee contracted with RJ Cattle Company, a livestock

contractor on the rodeo circuit, to provide bucking stock, fencing, and

chutes. Realizing that costs associated with the rodeo were tremendous and that

ticket sales would probably not be sufficient to cover the costs, the rodeo committee

sent letters to local businesses soliciting contributions in exchange for

various sponsorships. Exhibiting Sponsors would contribute $1,000 to exhibit

their products or services, while Major Sponsors would contribute $600. Chute

Sponsors would contribute $500 to have the name of their business on one of the

six bucking chutes. For a contribution of $100, individuals would be included in

a Friends of Rodeo list found in the rodeo programs. At each performance the

rodeo announcer would repeatedly mention the names of the businesses and individuals

at each level of sponsorship. In addition, large signs and banners with

the names of the businesses of the Exhibiting Sponsors, Major Sponsors, and

Chute Sponsors were to be displayed prominently in the arena.

CaseA local youth group was contacted to provide concessions to the public and

divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo

Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set

at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger

was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather,

one ticket would admit an individual to one performance of his or her choice—

Friday, Saturday, or Sunday. The rodeo committee was able to secure a location

through the county supervisors board at a nominal cost to the Circular Club. The

arrangement allowed the use of the county fair grounds and arena for a oneweek

period. Several months prior to the rodeo, members of the rodeo committee

had been assured that bleachers at the arena would hold 2,500 patrons. On

Saturday night, paid attendance was 1,663, but all seats were filled due to poor

gate controls. Attendance was 898 Friday and 769 on Sunday.

                The following revenue and expense figures relate to the first year of the rodeo.

Receipts

Contributions from sponsors $22,000

Receipts from ticket sales 28,971

Share of concession profits 1,513

Sale of programs 600

Total receipts $53,084

Expenses

Livestock contractor 26,000

Prize money 21,000

Contestant hospitality 3,341*

Sponsor signs for arena 1,900

Insurance 1,800

Ticket printing 1,050

Sanctioning fees 925

Entertainment 859

Judging fees 750

Port-a-potties 716

Rent 600

Hay for horses 538

Programs 500

Western hats to first 500 children 450

Hotel rooms for stock contractor 325

Utilities 300

Sand for arena 251

Miscellaneous fixed costs 105

Total expenses 61,410

Net loss $(8,326)

*The club contracted with a local caterer to provide a tent and food for the contestants. The

cost of the food was contingent on the number of contestants each evening. Information concerning

the number of contestants and the costs incurred are as follows:

Contestants Total Cost

Friday 68 $ 998

Saturday 96 1,243

Sunday 83 1,100

$3,341

On Wednesday after the rodeo, members of the rodeo committee met to

Discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the

Circular Club, commented that the club did not lose money. Rather, Jonathan

said, “The club made an investment in the rodeo.”

Answer Questions Below

1. Do yo think it was necessary for shelly joes to stipulate that she (1) wanted a fundraiser that world continue to get better each year (2) give back to the community and (3) provide the club a presence in the community? Why or why not?

2. What did Johnathan Edmunds mean when he said the club had made an invstment in the rodeo?

5. Determine the fixed and variable cost components of the catering costs using the high low method?

Assume the economy has a GDP of $11,500 billion. The unemployment rate is at 7.3% and has been slowly rising for the last 6 months. Inflation was at 2.3% one year ago but has since dropped to near 0%. The MPC in the economy is .80 and the Natural Rate of Unemployment is 4.5%. The target rate for inflation is 2%.

1. Why would it be better for government to solve the problem using government purchases (part c above) rather than taxes (part d above) to solve the problem?
2. Assuming that government does decide to use the tax policy, what could happen to cause the policy to be ineffective?

Trace metals found in wells affect the taste of drinking water, and high concentrations can pose a health risk. Researchers measured the concentration of zinc (in milligrams/liter) near the top and the bottom of 7 randomly selected wells in a large region. The data are provided in the following table. Construct and interpret a 90% confidence interval for the true mean difference (Bottom – Top) in the zinc concentrations of the wells in this region.

A. The electric potential at a position located a distance of 19.2 mm from a positive point charge of 7.80×10^-9C and 13.0 mm from a second point charge is 1.14 kV. Calculate the value of the second charge.

B. The potential difference between two parallel conducting plates in vacuum is 590 V. An alpha particle with mass of 6.50×10^-27 kg and charge of 3.20×10^-19 C is released from rest near the positive plate. What is the kinetic energy of the alpha particle when it reaches the other plate? The distance between the plates is 45.0 cm.