ECN 601 Exam 1 Questions with Verified
Correct Answers
A manager invests $20,000 in equipment that would help the company reduce it's per
unit costs from $15 to $12. He expects the equipment to be in use for the next seven
years. After two years, he realizes that if he outsourced the production, the unit cost
would be $7 instead. At this point what should the senior manager do?
Write off the equipment as sunk cost and allow for outsourcing since it is cheaper
A buyer values a house at $525,000 and a seller values the same house at $485,000. If
sales tax is 8% and is levied on the seller, then what would be the lowest price at which
the seller would be willing to sell?
$527,000
Which of the following describes a firm?
All of the above
Use the table provided to answer the following question. If hiring the fourth worker
increases total product by 50 units and the price of each unit is $15:
The firm should hire the fourth worker as MR>MC.
A monopolistically competitive firm will tend to have a more elastic demand curve than
a monopolist because:
Both B and C
A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are
$25, and the average fixed costs are $65. In the short run, the firm should:
Continue operating, as the firm is covering all the variable costs and some of the fixed costs.
, In an oligopoly, firms will tend to compete on the basis of price.
False
Use the table provided to answer the following question. How many units should the
profit maximizing firm produce?
3
A car dealership union negotiates a contract that dramatically increases the salaries of
all salesmen. If one of the salesmen is thinking of changing careers to be a hardware
salesman, his opportunity cost:
Of becoming a hardware salesman would increase
The difference between the minimum price the producer is willing to accept and the
price the producer actually receives for a product is referred to as:
Producer surplus
A company invested $400,000 in a technology that reduced the overall costs of
production by reducing their cost per unit from $2 to $1.85. Later, a manager has an
opportunity to outsource production to another company at a cost per unit of $1.75. If
you are the manager, you:
Both A and C
Jim saw a decrease in the quantity demanded for his firm's product from 8,000 to 6,000
units per week when he raised the price of the product from $200 to $250. What is Jim's
own price elasticity of demand?
1.00
Correct Answers
A manager invests $20,000 in equipment that would help the company reduce it's per
unit costs from $15 to $12. He expects the equipment to be in use for the next seven
years. After two years, he realizes that if he outsourced the production, the unit cost
would be $7 instead. At this point what should the senior manager do?
Write off the equipment as sunk cost and allow for outsourcing since it is cheaper
A buyer values a house at $525,000 and a seller values the same house at $485,000. If
sales tax is 8% and is levied on the seller, then what would be the lowest price at which
the seller would be willing to sell?
$527,000
Which of the following describes a firm?
All of the above
Use the table provided to answer the following question. If hiring the fourth worker
increases total product by 50 units and the price of each unit is $15:
The firm should hire the fourth worker as MR>MC.
A monopolistically competitive firm will tend to have a more elastic demand curve than
a monopolist because:
Both B and C
A firm sells 1,000 units per week. It charges $70 per unit, the average variable costs are
$25, and the average fixed costs are $65. In the short run, the firm should:
Continue operating, as the firm is covering all the variable costs and some of the fixed costs.
, In an oligopoly, firms will tend to compete on the basis of price.
False
Use the table provided to answer the following question. How many units should the
profit maximizing firm produce?
3
A car dealership union negotiates a contract that dramatically increases the salaries of
all salesmen. If one of the salesmen is thinking of changing careers to be a hardware
salesman, his opportunity cost:
Of becoming a hardware salesman would increase
The difference between the minimum price the producer is willing to accept and the
price the producer actually receives for a product is referred to as:
Producer surplus
A company invested $400,000 in a technology that reduced the overall costs of
production by reducing their cost per unit from $2 to $1.85. Later, a manager has an
opportunity to outsource production to another company at a cost per unit of $1.75. If
you are the manager, you:
Both A and C
Jim saw a decrease in the quantity demanded for his firm's product from 8,000 to 6,000
units per week when he raised the price of the product from $200 to $250. What is Jim's
own price elasticity of demand?
1.00
