# ECO 550 Final Exam

Aug 6th, 2016
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Question 1 1. In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as: Answer a. variable margin per unit b. variable cost ratio c. contribution margin per unit d. target margin per unit Question 2 Evidence from empirical studies of long-run cost-output relationships lends support to the: Answer a. existence of a non-linear cubic total cost function b. hypothesis that marginal costs first decrease, then gradually increase over the normal operating range of the firm c. hypothesis that total costs increase quadratically over the ranges of output examined d. hypothesis that total costs increase linearly over some considerable range of output examined Question 3 George Webb Restaurant collects on the average \$5 per customer at its breakfast & lunch diner. Its variable cost per customer averages \$3, and its annual fixed cost is \$40,000. If George Webb wants to make a profit of \$20,000 per year at the diner, it wi

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ECO 550 Final ExamQuestion 11. In the linear breakeven model, the difference between selling price per unit and variable costper unit is referred to as:Answera. variable margin per unitb. variable cost ratioc. contribution margin per unitd. target margin per unitQuestion 2Evidence from empirical studies of long-run cost-output relationships lends support to the:Answera. existence of a non-linear cubic total cost functionb. hypothesis that marginal costs first decrease, then gradually increase over the normaloperating range ofthe firmc. hypothesis that total costs increase quadratically over the ranges of output examinedd. hypothesis that total costs increase linearly over some considerable range of output examinedQuestion 3George Webb Restaurant collects on the average \$5 per customer at its breakfast & lunch diner.Its variable cost per customer averages \$3, and its annual fixed cost is \$40,000. If George Webbwants to make a profit of \$20,000 per year at the diner, it will have to serve__________customers per year.Answera. 10,000 customersb. 20,000 customersc. 30,000 customersd. 40,000 customerse. 50,000 customersQuestion 4Which of the following is not an assumption of the linear breakeven model:Answera. constant selling price per unitb. decreasing variable cost per unitc. fixed costs are independent of the output leveld. a single product (or a constant mix of products) is being produced and sold4 pointsQuestion 5A ____ total cost funct

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