ECO 550 Final Exam Set 1

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ECO 550 Final Exam

Question 1:

The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change

in ____.

A). percentage; sales; percentage; EBIT

B). unit; sales; unit; EBIT

C). Percentage; EBIT; percentage; sales

D). unit; EBIT; unit; sales

Question 2:

In the linear breakeven model, the difference between selling price per unit and variable cost per

unit is referred to as:

Contribution margin per unit

Question 3

Break-even analysis usually assumes all of the following except:

A). In the short run, there is no distinction between variable and fixed costs.

B). revenue and cost curves are straight-lines throughout the analysis.

C). there appears to be perfect competition since the price is considered to remain the same

regardless of quantity.

D). the straight-line cost curve implies that marginal cost is constant.

E). both c and d

Question 4:

The short-run cost function is:

A). where all inputs to the production process are variable

B). Relevant to decisions in which one or more inputs to the production process are fixed

C). not relevant to optimal pricing and production output decisions

D). crucial in making optimal investment decisions in new production facilities

Question 5:

In the short-run for a purely competitive market, a manufacturer will stop production when:

A). the total revenue is less than total costs

B). The contribution to fixed costs is zero or less

C). the price is greater than AVC

D). operating at a loss

Question 6:

In the long-run, firms in a monopolistically competitive industry will

A). earn substantial economic profits

B). Tend to just cover costs, including normal profits

C). seek to increase the scale of operations

D). seek to reduce the scale of operations

Question 7:

A "search good" is:

A). One that depends on how the product behaves over time

B). A product whose quality is only found out over time by finding how durable it is

C). Like a peach that can be examined for flaws

D). Like a used car, since it is easy to determine its inherent quality

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ECO 550 Final Exam Question 1: The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____. A). percentage; sales; percentage; EBIT B). unit; sales; unit; EBIT C). Percentage; EBIT; percentage; sales D). unit; EBIT; unit; sales Question 2: In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as: Contribution margin per unit Question 3 Break-even analysis usually assumes all of the following except: A). In the short run, there is no distinction between variable and fixed costs. B). revenue and cost curves are straight-lines throughout the analysis. C). there appears to be perfect competition since the price is considered to remain the same regardless of quantity. D). the straight-line cost curve implies that marginal cost is constant. E). both c and d Question 4: The short-run cost function is: A). where all inputs to the production process are variable B). Relevant to decisions in which one or more inputs to the production process are fixed C). not relevant to optimal pricing and production output decisions D). crucial in making optimal investment decisions in new production facilities Question 5: In the short-run for a purely competitive market, a manufacturer will stop production when: A). the total revenue is less than total costs B). The contribution to fixed costs is zero or less C). the price is greater than AVC D). operating at a loss Question 6: In the ...
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