Managerial Economics, 5th Edition Test Bank

Test Bank for Managerial Economics, 5th Edition, Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor,

Table of Contents SHOW LESS
Part I: PROBLEM SOLVING AND DECISION MAKING.
1. Introduction: What This Book Is About.
2. The One Lessor of Business.
3. Benefits, Costs, and Decisions.
4. Extent (How Much) Decisions.
5. Investment Decisions: Look Ahead and Reason Back.
Part II: PRICING, COST, AND PROFITS.
6. Simple Pricing.
7. Economies of Scale and Scope.
8. Understanding Markets and Industry Changes.
9. Market Structure and Long-Run Equilibrium.
10. Strategy: The Quest to Keep Profit from Eroding.
11. Foreign Exchange, Trade, and Bubbles.
Part III: PRICING FOR GREATER PROFIT.
12. More Realistic and Complex Pricing.
13. Direct Price Discrimination.
14. Indirect Price Discrimination.
Part IV: STRATEGIC DECISION MAKING.
15. Strategic Games.
16. Bargaining.
Part V: UNCERTAINTY.
17. Making Decisions with Uncertainty.
18. Auctions.
19. The Problem of Adverse Selection.
20. The Problem of Moral Hazard.
Part VI: ORGANIZATIONAL DESIGN.
21. Getting Employees to Work in the Firm’s Best Interest.
22. Getting Divisions to Work in the Firm’s Best Interest.
23. Managing Vertical Relationships.
Part VII: WRAPPING UP.
24. You Be the Consultant.

1. Variable costs are
a. costs that vary with output
b. not important in decision making
c. costs that do not vary with output
d. equal to total costs
ANSWER: a
TOPICS: Section 1: Background: Variable, fixed and Total Costs
2. A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent
$250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal
a. $125Million
b. $45Million
c. $1Million
d. $170Million
ANSWER: d
TOPICS: Section 1: Background: Variable, fixed and Total Costs
3. A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent
$250,000/month. If the firm produces 1,000,000 units a month, the total fixed costs equal
a. $250,000
b. $50,000
c. $20,500
d. $30,000
ANSWER: a
TOPICS: Section 1: Background: Variable, fixed and Total Costs
4. A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and rent
$250,000/month. If the firm produces 1,000,000 units a month, the total costs equal
a. $125,250,000
b. $170,250,000
c. $125,050,000
d. $170,050,000
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
5. Firm X is producing 1000 units, selling them at $15 each. Variable costs are $3 per unit and the firm is
making an accounting profit of $3000. What is the firm’s fixed costs?
a. $9,000
b. $10,000
c. $11,000
d. $12,000
ANSWER: a
TOPICS: Section 1: Background: Variable, fixed and Total Costs
6. Firm X is producing 1000 units, selling them at $15 each. Variable costs are $3 per unit and the firm is
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making an accounting profit of $3000. What is the firm’s total variable costs?
a. $1000
b. $3000
c. $5,000
d. $7,000
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
7. Firm X is producing 1000 units, selling them at $15 each. Variable costs are $3 per unit and the firm is
making an accounting profit of $3000. What is the firm’s total costs?
a. $10,000
b. $11,000
c. $12,000
d. $13,000
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
8. Fixed costs are
a. costs that vary with output
b. always equal to marginal costs
c. costs that do not vary with output
d. equal to total costs
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
9. In the short-run:
a. All inputs are variable
b. Some inputs are fixed and some inputs are variable
c. There are no fixed inputs
d. The firm is not restricted in how much it can produce
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
10. A business incurs the following costs per unit: Labor $5/unit; Materials $3/unit and rent $5000/month. If
the firm produces 1000 units a month, the total variable costs equals
a. $5,000
b. $8,000
c. $13,000
d. $10,000
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
11. A business incurs the following costs per unit: Labor $5/unit; Materials $3/unit and rent $5000/month. If
the firm produces 1000 units a month, the total fixed costs equals
a. $5,000
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b. $8,000
c. $13,000
d. $3,000
ANSWER: a
TOPICS: Section 1: Background: Variable, fixed and Total Costs
12. A business incurs the following costs per unit: Labor $5/unit; Materials $3/unit and rent $5000/month. If
the firm produces 1000 units a month, the total costs equals
a. $5,000
b. $8,000
c. $13,000
d. $3,000
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
13. A company currently sells 10,000 units at $9/unit and makes $20,000 accounting profit. Variable costs
currently stand at $6 per unit. What are the company’s fixed costs?
a. $5,000
b. $10,000
c. $15,000
d. The company has no fixed costs
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
14. In the long-run, all costs are
a. Fixed costs
b. Variable costs
c. Sunk Costs
d. Marginal Costs
ANSWER: b
TOPICS: Section 1: Background: Variable, fixed and Total Costs
15. For a restaurant, all the following are examples of variable costs, except
a. Labor costs
b. Cost of raw materials
c. Rents on dining space
d. None- all of them are variable costs
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
16. For a restaurant, all the following are fixed costs, except
a. Space rental
b. Advertising
c. Raw material cost
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d. All of the above-they are all variable costs
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
17. For a trucking company, all of the following are examples of fixed costs, except
a. Tax accountant fees
b. Package designing fees
c. Insurance
d. Gasoline costs
ANSWER: d
TOPICS: Section 1: Background: Variable, fixed and Total Costs
18. For a moving company, all of the following are examples of variable costs, except
a. Gasoline costs
b. Truck rents
c. Marketing costs
d. None of the above
ANSWER: c
TOPICS: Section 1: Background: Variable, fixed and Total Costs
19. Total costs equal
a. Fixed costs
b. Variable costs
c. Sunk costs
d. Fixed costs plus variable costs
ANSWER: d
TOPICS: Section 1: Background: Variable, fixed and Total Costs
20. Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she
could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the
explicit costs total $150,000 per month, what is her accounting profit?
a. $300,000
b. $60,000
c. $450,000
d. $240,000
ANSWER: a
TOPICS: Section 2: Background: Accounting Versus Economic Profit