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University of California, Los Angeles ECON 103 Implicit Cost Exan Question 1 An example of implicit costs is the: Select one: A. bad-debt liabilities arising out of excessive sales on credit B. ... wages paid to the owners' children C. opportunity cost of owner-supplied capital and labor that is not recognized by accountants D. prices paid for purchased inputs E. the alternative uses for money that could be borrowed Question 2 Short-run marginal cost eventually increases with increasing output because: Select one: A. eventually marginal returns will diminish B. not all variable inputs increase at the same rate C. diseconomies of scale usually set in immediately D. of diseconomies of scope E. eventually diseconomies of scale set in Question 3 The long-run average cost curve slopes downward if there are: Select one: A. some factors without diminishing marginal returns B. economies of scope in the management of multiplant operations C. economies of scale D. diseconomies of scope in the management of multiplant operations E. no factors without diminishing marginal returns Question 4 Framjam Sports Equipment produces basketballs at its factory in Kentucky and soccer balls at its factory in Illinois. At its current annual rate of production, the cost of producing basketballs is $80,000 and the cost of producing soccer balls is $45,000. If the firm consolidates production at a single location, the annual cost of production will be $100,000. What is the degree of economies of scope in this case? Select one: A. 5 B. 4 C. 0.75 D. 0.25 E. none of the above Question 5 Ramblin' Randy's Dude Ranch's daily total cost of accommodating overnight guests is given by TC = 100 + 5Q. On the basis of this information, the average fixed cost, when there are 25 overnight guests, is: Select one: A. $4 B. $5 C. $6 D. $7 E. $9 Question 6 Hedge Fun is a landscaping firm that specializes in topiary. It contracts with the owners of 125 local homes and provides its service at an annual fee of $1,300. Its average variable cost is $800, and its annual fixed cost is $28,000. What is the break-even level of output? Select one: A. 125 B. 87 C. 63 D. 56 E. none of the above Question 7 In the model of perfect competition, firms produce a: Select one: A. standardized product with considerable control over price B. differentiated product with considerable control over price NO C. standardized product with no control over price D. differentiated product with no control over price NO E. standardized or differentiated product with some control over price NO Question 8 In the model of perfect competition, firms maximize profits by producing where: Select one: A. the difference between marginal revenue and marginal cost is maximized B. marginal revenue equals price C. the difference between price and marginal cost is maximized D. price equals marginal cost E. the difference between price and marginal revenue is maximized Question 9 If the perfectly competitive market demand for gym shoes is given by QD = 100 - P and the market supply is given by QS 10 + 2P, then the equilibrium price and quantity will be: Select one: A. P = 50 and Q = 50 B. P = 40 and Q = 90 C. P = 40 and Q = 60 D. P = 30 and Q = 70 E. P = 25 and Q = 75 Question 10 If a representative firm with total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,400 - 40P and QS = - 400 + 20P, its short-run profit-maximizing level of output is: Select one: A. 0 units B. 1 unit C. 2 units D. 4 units E. 6 units Question 11 At the profit-maximizing level of output for the monopolist: Select one: A. total revenue is equal to total cost B. total costs are minimized C. total revenue is maximized D. marginal revenue is equal to marginal cost E. average revenue is equal to average cost Question 12 The Frank Failing Company has an average variable cost of $8, average fixed cost of $16, marginal cost of $12, and elasticity of demand -3. Frank should: Select one: A. shut down B. charge $8 C. charge $16 D. charge $18 E. charge $36 Question 13 Harriet Quarterly wants a 25 percent return on the $100 of assets she has in her company. Her average variable costs are $50 per unit, and she has no fixed costs. If she sells 10 units, what price should she charge? Select one: A. $52.50 B. $62.50 C. $75.00 D. $87.50 E. $125.00 Question 14 If elasticity of demand is -2, marginal cost is $4, and average cost is $6, a profit-maximizing markup price is: Select one: A. $4 B. $6 C. $8 D. $10 E. $12 Question 15 If a firm in a monopolistically competitive industry is profit maximizing, it should choose its level of advertising such that the marginal revenue of an additional dollar of advertising: Select one: A. is equal to the elasticity of its demand curve minus 1 B. is exactly $1 C. increases revenues by $1 D. is equal to 1 plus the elasticity of its demand curve E. is equal to the elasticity of its demand curve [Show More]

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