(Solution) If The Degree Of Operating Leverage (DOL) Is Equal To +2 Then Answer A. A One Percent Rise In Price Will Increase Profits By 2 Percent B. A One... | Snapessays.com


(Solution) If the degree of operating leverage (DOL) is equal to +2 then Answer a. a one percent rise in price will increase profits by 2 percent b. a one...


If the degree of operating leverage (DOL) is equal to +2 then

 

Answer

 

 

a. a one percent rise in price will increase profits by 2 percent

 

 

b. a one percent rise in sales will increase profits by 2 percent

 

 

c. a one percent rise in sales will increase operational costs by 2 percent

 

 

d. a one percent rise in price will increase sales by 2 percent

 

 

At an automobile assembly plant XYZ the progress ratio of 0.9 is used as a metric for learning. At the plant workers assembled 1,000 cars of model BW, and the average total cost is $25,000. What would be the expected cost per car for the 4,000th car?

 

Answer

 

 

a. 21,402

 

 

b. 20,250

 

 

c. 18,225

 

 

d. $22,500

 

 

If a firm doubles the amount of inputs used in production and as a result output has more than doubled, then the firm is experiencing

 

Answer

 

 

a. diminishing returns to scale

 

 

b. economies of scale

 

 

c. constant returns to scale

 

 

d. diseconomies of scale

 

 

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.

 

The total fixed cost function (TFC) is:

 

Answer

 

 

a. 200

 

 

b. 200/Q

 

 

c. 4Q - 10

 

 

d. 2Q – 10 + 200/Q

 

 

If a firm has increasing marginal cost then the firm’s

 

Answer

 

 

a. total fixed cost is decreasing

 

 

b. average total cost must be increasing

 

 

c. total cost must be increasing

 

 

d. average variable cost must be increasing

 

 

In the long run the desired plant size for a firm will be the one that has

 

Answer

 

 

a. largest capacity of producing output at lowest fixed cost

 

 

b. the lowest average fixed cost

 

 

c. minimum average total cost of producing the desired target level of output

 

 

d. the largest capacity of producing the maximum amount of output

 

 

A firm has the following cost function: TC = 2Q2 – 10Q + 200. What output level should the firm produce in order to minimize average total cost (ATC)?

 

Answer

 

 

a. 10

 

 

b. 25

 

 

c. 20

 

 

d. 8

 

 

Company XYZ produces a product Alpha that has a degree of operating leverage of +3.5. Suppose a new order is received, and, the rate of output is increased by 10 percent. The percentage effect that this increase in output will have on the profit made from producing and selling commodity Alpha will be

 

Answer

 

 

a. 35 percent

 

 

b. 3.5 percent

 

 

c. more than3.5 percent but less than 35 percent

 

 

d. less than 3.5 percent

 

 

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.

 

The average total cost function (ATC) will be

 

Answer

 

 

a. 200/Q

 

 

b. 2Q – 10 + 200/Q

 

 

c. 4Q - 10

 

 

d. 100

 

 

 

 

Normal economic profits

 

Answer

 

 

a. are affected by economic costs

 

 

b. are irrelevant to managers in the decision making process

 

 

c. occur when explicit costs are deducted from revenues

 

 

d. are not important in real investment decisions

 

 

Managers of a firm in which diseconomies of scale are taking place should

 

Answer

 

 

a. increase the amount of inputs used in the production process

 

 

b. reduce worker’s salaries in order to reduce cost

 

 

c. reduce the scale of production in order to cut back on average total cost

 

 

d. lower the prices of their products in the market to offset competition

 

 

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.

 

The average fixed cost (AFC) is

 

Answer

 

 

a. 4Q - 10

 

 

b. -10Q + 200

 

 

c. 2Q – 10 + 200/Q

 

 

d. 200/Q

 

 

 

Diseconomies of scale occur when a firm has

 

Answer

 

 

a. decreasing long-run prices

 

 

b. decreasing long-run average costs

 

 

c. increasing long-run average costs

 

 

d. constant returns to scale

 

 

 

 

 

 

 

At an automobile assembly plant XYZ the progress ratio of 0.9 is used as a metric for learning. At the plant workers assembled 1,000 cars of model BW, and the average total cost is $25,000. What is the learning rate or experience rate?

 

Answer

 

 

a. 10%

 

 

b. 9%

 

 

c. 8%

 

 

d. 1%

 

 

Which of the following costs are ignored when making managerial decisions?

 

Answer

 

 

a. relevant costs

 

 

b. incremental costs

 

 

c. marginal costs

 

 

d. sunk costs

 

 

At the level of output where marginal cost equals average variable cost

 

Answer

 

 

a. average total cost is minimum

 

 

b. average variable cost is increasing

 

 

c. average variable cost is decreasing

 

 

d. average total cost is decreasing

 

 

Which of the following costs does not depend upon output?

 

Answer

 

 

a. average total costs

 

 

b. marginal costs

 

 

c. fixed costs

 

 

d. variable costs

 

 

 

 

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.

 

The average variable cost function (AVC) is:

 

Answer

 

 

a. 200/Q

 

 

b. 2Q – 10 +200/Q

 

 

c. 2Q - 10

 

 

d. 2Q+ 200/Q

 

 

The breakeven point of a firm occurs at the level of output where

 

Answer

 

 

a. marginal cost equals average variable cost

 

 

b. marginal revenue equals marginal cost

 

 

c. total revenue equals total cost

 

 

d. price equals marginal cost

 

 

If the fixed cost of producing a product is $1,500 and the price is $10 with an average variable cost of $5, the breakeven output level is

 

Answer

 

 

a. $100

 

 

b. $200

 

 

c. $150

 

 

d. $300

 

 

 

If a firm has implicit costs that are greater than zero but its economic profits is exactly zero

 

Answer

 

 

a. the firm will shut down some of its production facilities due to inefficiency

 

 

b. accounting profits are negative

 

 

c. inputs in the production process are used inefficiently

 

 

d. accounting profits are greater than zero

 

 

Managers, in the decision making process, will always take into account

 

Answer

 

 

a. relevant costs

 

 

b. average fixed cost

 

 

c. sunk costs

 

 

d. historical costs

 

 

 

The percentage change in profits that occurs from a one percent change in sales is known as

 

Answer

 

 

a. output elasticity

 

 

b. degree of operating leverage

 

 

c. cost elasticity

 

 

d. sales elasticity

 

 

Which of the following alternatives represent economic costs?

 

Answer

 

 

a. the sum of implicit and explicit costs

 

 

b. sunk costs

 

 

c. implicit costs

 

 

d. explicit costs

 

 

The firm reaches breakeven point when

 

Answer

 

 

a. price equals average variable cost

 

 

b. price equals marginal cost

 

 

c. Price equals average total cost

 

 

d. the contribution margin per unit is zero

 

 

Managers in determining the rate of output which maximizes profits must consider

 

Answer

 

 

a. variable costs

 

 

b. fixed costs

 

 

c. sunk costs

 

 

d. fixed and variable costs

 

 

 

Company XYZ produces cellular phones brand GREENBERRY, at an annual rate of 500,000 units. Its total fixed costs are $6 million per year, and at is current rate of output, its total variable costs for the year will be 80 million. The price of the GREENBERRY is $450. What is the degree of operating leverage for the GREENBERRY?

 

Answer

 

 

a. 2.8

 

 

b. 2

 

 

c. 1.04

 

 

d. 1.5

 

 

Average total costs is minimum when

 

Answer

 

 

a. marginal cost is declining

 

 

b. marginal costs is greater than average total costs

 

 

c. average total cost is greater than marginal cost

 

 

d. average cost equals marginal cost

 

 

Suppose that a company has the following total cost function: TC = 2Q2 – 10Q + 200.

 

The marginal cost function (MC) is:

 

Answer

 

 

a. 200/Q

 

 

b. 2Q – 10 + 200/Q

 

 

c. – 10Q + 200.

 

 

d. 4Q - 10

 

 

The minimum efficient scale of output occurs when:

 

Answer

 

 

a. short-run average total cost is minimum

 

 

b. long-run marginal cost is minimum

 

 

c. short-run total cost is minimum

 

 

d. long-run average total cost is minimumIf the degree of operating leverage (DOL) is equal to +2 then

 

Answer

 

a. a one percent rise in price will increase profits by 2 percent

 

b. a one percent rise in sales will increase profits by 2 percent

 

c. a one percent rise in sales will increase operational costs by 2 percent

 

d. a one percent rise in price will increase sales by 2 percent

 

At an automobile assembly plant XYZ the progress ratio of 0.9 is used as a metric for learning. At the plant workers

 

assembled 1,000 cars of model BW, and the average total cost is $25,000. What would be the expected cost per car

 

for the 4,000th car?

 

Answer

 

a. 21,402

 

b. 20,250

 

c. 18,225

 

d. $22,500

 

If a firm doubles the amount of inputs used in production and as a result output has more than doubled, then the firm

 

is experiencing

 

Answer

 

a. diminishing returns to scale

 

b. economies of scale

 

c. constant returns to scale

 

d. diseconomies of scale

 

Suppose that a company has the following total cost function: TC = 2Q

 

2

 

– 10Q + 200.

 

The total fixed cost function (TFC) is:

 

Answer

 

a. 200

 

b. 200/Q

 

c. 4Q - 10

 

d. 2Q – 10 +

 

200/Q

 

If a firm has increasing marginal cost then the firm’s

 

Answer

 

a. total fixed cost is decreasing

 

b. average total cost must be increasing

 

c. total cost must be increasing

 

d. average variable cost must be increasing

 

In the long run the desired plant size for a firm will be the one that has

 

Answer

 

a. largest capacity of producing output at lowest fixed cost

 

b. the lowest average fixed cost

 

c. minimum average total cost of producing the desired target level of output

 

d. the largest capacity of producing the maximum amount of output

 

A firm has the following cost function: TC = 2Q

 

2

 

– 10Q + 200. What output level should the firm produce in order

 

to minimize average total cost (ATC)?

 

Answer

 

a. 10

 

b. 25

 


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