MBA 701 Midterm Prep Exam Questions and Answers Already Passed Latest Update

MBA 701 Midterm Prep Exam Questions and Answers Already Passed Latest Update Which of the following is an implicit cost to a firm that produces a good or service? a. Labor costs. b. Costs of operating production machinery. c. Foregone interest of using money that could have been kept in a bank. d. Costs of renting or buying land for a production site. - Answers c. Foregone interest of using money that could have been kept in a bank. Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business? [Economic Profit = Total revenue - Total costs (including explicit and implicit costs)]. a. $-55,000 b. $-5,000 c. $5,000 d. $20,000 - Answers c. $5,000 Incentive plans imply ____. a. if managers get highly paid, then they work hard. b. if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales and more profit, they receive a lot of pay. c. managers are not selfish. d. managers should be watched all the time. - Answers b. if managers put forth little effort, they receive little pay; if they put forth much effort and hence generate many sales and more profit, they receive a lot of pay. If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is ____. [For a stream of future values: PV = FV1/(1+i)1 + FV2/(1+i)2 + ... + FVn/(1+i)n]. a. $2,562 b. $3,200 c. $439 d. $3,000 - Answers $2,562 (use equation and add up the two years) If the annual interest rate is 0 percent, the present value of receiving $210 in the next year is ____. [PV = FV/(1+i)n]. a.$221 b.$200 c.$201 d.$210 - Answers d.$210 (zero interest rate means no value change) A farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second, and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savings will be realized at the end of each year. If the interest rate is 7 percent, what is the net present value of purchasing the tractor? [N(Q) = B(Q) - C(Q)]. a.-$3,467.46 b.-$2,498.35 c.$2,320.12 d.$6,501.65 - Answers b.-$2,498.35 (the reduced cost amounts go over each year of the equation, then total the amounts and subtract by the cost) If marginal costs of producing an additional unit for a firm exceed marginal benefits, then ____. a .the firm ends up with a net gain. b. the firm's average costs exceed average benefits. c. the firm should decrease its production level. d. the firm should not change its production level. - Answers b. the firm's average costs exceed average benefits. (?) In order to maximize net benefits, the managerial control variable should be used up to the point where ____. a. total costs equal total benefits. b. average costs equal marginal benefits. c. average benefits equal marginal costs. d. net marginal benefits equal zero. - Answers d. net marginal benefits equal zero. "Our marginal revenue is greater than our marginal cost at the current production level." This statement indicates that the firm ____. a. is maximizing profits b. should increase the quantity produced to increase profits c. should decrease the quantity produced to increase profits d. manager should retire - Answers b. should increase the quantity produced to increase profits Refer to the accompanying table above. What is the total benefit associated with producing four units of the control variable, Q (identify point A in the table)? [MB = DB/DQ] a.600 b.2,600 c.3,000 d.3,400 - Answers c.3,000 (Total benefits is previous total plus current row MB) Suppose the demand for good X is given by Qdx = 10 + axPx + ayPy + aMM. From the law