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Quiz 5

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Question 1 (1 point)
The foregone value associated with the current rather than next-best use of a given asset is called:
  1. current cost.
  2. replacement cost.
  3. historical cost.
  4. opportunity cost.
Question 2 (1 point)
Sunk costs:
  1. typically involve multiple units of output.
  2. do not vary across decision alternatives.
  3. come into play when judging the costs of adding a new product line, advertising campaign, production shift, or organization structure.
  4. play a role in determining the optimal course of action.
Question 3 (1 point)
In the short run, the:
  1. firm has complete flexibility with respect to input use.
  2. availability of all inputs is fixed.
  3. operating period is longer than the planning period.
  4. availability of at least one input is fixed.
Question 4 (1 point)
The amount that must be paid for an item under prevailing market conditions is:
  1. historical cost.
  2. replacement cost.
  3. incremental cost.
  4. current cost.
Question 5 (1 point)
The acquisition cost of an asset is:
  1. a replacement cost.
  2. an implicit cost.
  3. an explicit cost.
  4. an opportunity cost.
Question 6 (1 point)
Incremental cost is the change in:
  1. total cost caused by a given managerial decision.
  2. noncash expenses caused by a given managerial decision.
  3. out-of-pocket costs caused by a given managerial decision.
  4. variable cost caused by a given managerial decision.
Question 7 (1 point)
Noncash expenses are:
  1. explicit costs.
  2. sunk costs.
  3. incremental costs.
  4. implicit costs.
Question 8 (1 point)
In the decision process, management should always consider:
  1. relevant costs.
  2. sunk costs.
  3. implicit costs only.
  4. historical costs.
Question 9 (1 point)
Marginal cost equals:
  1. average variable cost at its maximum point.
  2. the change in total fixed cost divided by the change in quantity.
  3. the change in total variable cost divided by the change in quantity.
  4. total cost divided by quantity.
Question 10 (1 point)
Incremental cost:
  1. always equals marginal cost.
  2. never involves multiple outs.
  3. is the added cost tied to a given managerial decision.
  4. is typically less than historical cost.
Question 11 (1 point)
If the productivity of variable factors is decreasing in the short-run:
  1. marginal cost must increase as output increases.
  2. average cost must decrease as output increases.
  3. average cost must increase as output increases.
  4. marginal cost must decrease as output increases.
Question 12 (1 point)
If the slope of a long-run total cost function decreases as output increases, the firm's underlying production function exhibits:
  1. constant returns to scale.
  2. decreasing returns to scale.
  3. decreasing returns to a factor input.
  4. increasing returns to scale.
Question 13 (1 point)
Average cost declines as output expands in a production process with:
  1. constant returns to scale.
  2. decreasing returns to scale.
  3. decreasing returns to a factor input.
  4. increasing returns to scale.
Question 14 (1 point)
If a total product curve exhibits increasing returns to a variable input, the cost elasticity is:
  1. equal to one.
  2. greater than one.
  3. unknown, without further information.
  4. less than one.
Question 15 (1 point)
Each point on a long-run average cost curve is the minimum:
  1. point on the short-run marginal cost curve.
  2. short-run average cost of production.
  3. long-run average cost of production.
  4. point on the short-run average cost curve.
Question 16 (1 point)
A firm's capacity is the output:
  1. maximum that can be produced in the long-run.
  2. level where short-run average costs are minimized.
  3. level where long-run average costs are minimized.
  4. maximum that can be produced in the short-run.
Question 17 (1 point)
The change in cost caused by a given managerial decision is:
  1. implicit cost.
  2. incremental cost.
  3. explicit cost.
  4. opportunity cost.
Question 18 (1 point)
Costs that do not vary across decision alternatives are:
  1. implicit.
  2. explicit.
  3. sunk.
  4. economic.
Question 19 (1 point)
The output level at which short-run average costs are minimized is:
  1. minimum efficient scale.
  2. where multi-plant economies of scale equal one.
  3. where multi-plant economies of scale exceed one.
  4. capacity.
Question 20 (1 point)
Opportunity cost is not:
  1. a real economic cost.
  2. an implicit cost.
  3. a variable cost.
  4. none of these.
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Quiz 5. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/managerial-economics/quiz5.htm. This work is licensed under a Creative Commons License Creative Commons License