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ECO 550 Assignment 2 Operations Decision






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ECO 550 Assignment 3
Managerial Economics and Globalization
ECO 550: Managerial Economics and Globalization
Assignment 3
Instructor: Dr. A. A. Boakye Due By: 08/08/2011
Candidate’s Name-Andre Stevenson
INSTRUCTIONS: Answer ALL the questions in PART I and PART II
Part 1 (40 points)
1. The WXY Corporation has fixed costs of $50. Its total variable costs
(TVC) vary with output as shown in the following table.
Refer to the table. The average total cost of 4 units of output is
A. $27.50
B. $40.00
C. $52.50
D. $210.00
2. to scale as it increases its output over any reasonable range. If it
increases all its inputs by 10%, its Suppose a particular firm exhibits
constant returns
A. total cost will increase by less than 10%
B. average total cost will increase by 10%
C. output will increase by 10%
D. long run average cost curve will shift to the right by 10%
3. The distinguishing feature of the short run is that:
A. at least one input is fixed

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B. output is fixed
C. input prices are variable
D. technology is variable
4. If marginal product is positive but falling
A. marginal cost must also be falling
B. average product must be falling
C. total product is increasing at a decreasing rate
D. total product is falling
5. Which one of the following short-run cost curves would not be affected
by an increase in the wage paid to a firm's labor?
A. Average variable cost
B. Average fixed cost
C. Average total cost
D. Marginal cost
6. To the economist, total cost includes:
A. explicit and implicit costs, including a normal profit.
B. neither implicit nor explicit costs.
C. implicit, but not explicit, costs.
D. explicit, but not implicit, costs.
7. The long run is characterized by:
A. the relevance of the law of diminishing returns.
B. at least one fixed input.
C. insufficient time for firms to enter or leave the industry.
D. the ability of the firm to change its plant size or all the factor inputs.

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8. The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource,
marginal product will decline beyond some point.
B. because of economies and diseconomies of scale a competitive firm's
long-run average total cost curve will be U-shaped.
C. the demand for goods produced by purely competitive industries is
D. beyond some point the extra utility derived from additional units of a
product will yield the consumer smaller and smaller extra amounts of
9. If a firm decides to produce no output in the short run, its costs will
A. its marginal costs.
B. its fixed plus its variable costs.
C. its fixed costs.
D. zero
10. A natural monopoly exists when:
A. unit costs are minimized by having one firm produce an industry's
entire output.
B. several formerly competing producers merge to become the only firm
in an industry.
C. short-run average total cost curves are tangent to long-run average
total cost curves.
D. minimum efficient scale is attained at a small level of output.
Part 2 (110 points)
Quest1ion 1: Some games of strategy are cooperative. One example is
deciding which side of the road to drive on. It doesn’t matter which side it
is as long as everyone chooses the same side. Otherwise, everyone
may get hurt.

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