When there are diseconomies of scope between two products

Question

1 Other things held constant, consumer surplus increases as:

• The price of a good decreases.
• The price of a good increases.
• The supply curve shifts to the left.
• None of the above.

2. When there are diseconomies of scope between two products that are separately produced by two firms, merging into a single firm can:

• accomplish an increase in sales.
• accomplish a reduction in costs.
• lead to an increase in cost.
• lead to a reduction in sales.

3. For a cost function C = 100 + 5Q + 2Q2, the average variable cost of producing 10 units of output is:

• 10.
• 25.
• 35.
• None of the answers are correct.

4. Other things held constant, producer surplus decreases as:

• The price of a good decreases.
• The price of a good increases.
• The demand curve shifts upward.
• None of the above.

5. Managerial economics:

• helps managers with day-to-day decisions.
• helps managers with long-term decisions.
• is valuable to the manager of a not-for-profit organization.
• All of the above statements are correct.

6. The change in benefits that arises from a one-unit change in quantity is the:

• marginal net benefits.
• marginal benefits.
• total net benefits.
• variable benefits.

7. Economic profits are:

• the same as accounting profits.
• accounting profits minus implicit costs.
• the same as total revenue.
• total profits of the economy as a whole.

8. A curve that defines the minimum average cost of producing different levels of output (allowing for optimal selection of all variables of production) is:

• long-run average cost curve.
• long-run variable cost curve.
• short-run average variable cost curve.
• short-run variable cost curve.

9. Other things held constant, consumer surplus decreases as:

• The price of a good decreases.
• The price of a good increases.
• The supply curve shifts to the right.
• None of the above.

10 Suppose the cost function is C(Q) = 100 + Q - 2Q2 + 2Q3. What are the fixed costs?

• $4
• $2
• $100
• 1 - 4Q + 6Q2

11. Given the linear production function Q = 2K + 10L, if Q = 2,000 and L = 100, how much capital is utilized?

• 500 units
• 800 units
• 600 units
• 1,000 units

12. Graphically, an increase in advertising will cause the demand curve to:

• become steeper.
• shift rightward.
• become flatter.
• shift leftward.

13. Consider a market characterized by the following inverse demand and supply functions: PX = 30 - 3QX and PX = 10 + 2QX. Compute the surplus consumers receive when a $24 per unit price floor is imposed on the market.

• $0.
• $12.
• $24.
• $6.

14. When the government imposes a price ceiling above the market price, the result will be that:

• surpluses occur.
• shortages become a problem.
• supply and demand will shift up to the new equilibrium.
• a price floor set above the equilibrium price will have no effect on the market equilibrium

15. Consumer-producer rivalry happens because:

• consumers want to negotiate low prices, while producers want to negotiate high prices.
• consumers want to negotiate high prices, while producers want to negotiate low prices.
• consumers' high valuation and producers' low production cost of a good.
• producers' high production cost and consumers' low valuation of a good.

16. $20 today is worth _____ than $20 in the future, because:

• more; the foregone interest that could be earned if you had the money today.
• less; the foregone interest that could be earned if you had the money later.
• more; of inflation concerns.
• less; of inflation concerns.

17 The demand for good X has been estimated to be ln Qxd = 100 - 3 ln PX + 7 ln PY + 5 ln M. The income elasticity of good X is:

• -3.0.
• 7.0.
• 5.0.
• -5.0.

18. You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly -0.5. Due to the economic recession, you expect incomes to increase by 10 percent next year. How should you adjust your purchase of peanut butter?

• Buy 5 percent more peanut butter.
• Buy 5 percent less peanut butter.
• Buy 10 percent more peanut butter.
• Buy 10 percent less peanut butter.

19. Suppose the production function is given by Q = 10K + 8L. What is the average product of capital when 2 units of capital and 10 units of labor are employed?

• 10
• 8
• 50
• 18

20. Consider a market characterized by the following demand and supply conditions: PX = 30 - 4QX and PX = 6 + 4QX. The equilibrium price and quantity are, respectively,

• $3 and 9 units.
• $9 and 3 units.
• $3 and 18 units.
• $18 and 3 units.

21The lower the interest rate, the lower the:

• present value.
• net present value.
• Both present value and net present value are correct.
• Neither present value nor net present value is correct.

22. What is the present value of $200 received in two years if the interest rate is 12.5 percent?

• $175
• $158.05
• $177.78
• $225

23. At what level of output does marginal cost equal marginal revenue?

• 10
• 20
• 30
• 40

24 What is the average product of labor, given that the level of labor equals 5, total output equals 500, and the marginal product of labor equals 25?

• 100
• 125
• 20
• 2,500

25. Competitive market equilibrium is determined by:

• Only the most influential buyers and sellers.
• Only the demand curve.
• Only the supply curve.
• The intersection of the demand and supply curves.

26. If Starbucks's marketing department estimates the income elasticity of demand for its coffee to be 2.55, how will the prospect of an economic bust (expected to decrease consumers' incomes by 3 percent over the next year) impact the quantity of coffee Starbucks expects to sell?

It will change by ___________percent.

27. The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company's value under several possible growth scenarios and the assumption that the company's many divisions will remain a single entity forever. The manager is concerned that, despite the fact that the firm's competitors are comparatively small, collectively their annual revenue growth has exceeded 50 percent over each of the last five years. She has requested that the value projections be based on the firm's current profits of $3 billion (which have yet to be paid out to stockholders) and the average interest rate over the past 20 years (9 percent) in each of the following profit growth scenarios:

a. Profits grow at an annual rate of 11 percent. (This one is tricky.)

The firm's value is zero
This growth rate is not possible
The firm will have to shut down at this growth rate
The firm's value is infinite

b. Profits grow at an annual rate of 4 percent.

c. Profits grow at an annual rate of 0 percent.

d. Profits decline at an annual rate of 3 percent.

28. A firm produces output according to a production function:

Q = F(K,L) = min {4K,8L}.

a. How much output is produced when K = 2 and L = 3?

b. If the wage rate is $60 per hour and the rental rate on capital is $20 per hour, what is the cost-minimizing input mix for producing 8 units of output?

c. How does your answer to part b change if the wage rate decreases to $20 per hour but the rental rate on capital remains at $20 per hour?

It does not change.
Capital and labor increase.
Capital decreases and labor increases.
Capital increases and labor decreases.

29. What is the value of a preferred stock that pays a perpetual dividend of $220 at the end of each year when the interest rate is 3 percent?

30. The supply curve for product X is given by QXS = -320 + 10PX .

a. Find the inverse supply curve.

b. How much surplus do producers receive when Qx = 460? When Qx = 1,040?