ECCC questions with verified answers
1. A business owner makes 1000 devices a day. Each day he/she
contributes 8 hours to produce those devices. If hired, elsewhere
he/she could have earned $250 an hour. The item sells for $10 each.
Production does not stop during weekends. If the explicit costs total
$150,000 for 30 days, the economic profit for the month equals:
Ans✓✓✓ a. $90,000
1. A joint manufacturer can produce 10 knees for $25,000 and 12 knees
for $30,000. What is the difference between the average cost per knee
for 12 knees and the marginal cost of the 12th knee?
a. $100
b. $0
c. $250
d. $500 Ans✓✓✓ a. $0
1. A manager requires widgets in order to produce her final product.
Currently, they are made internally. She invests $200,000 in a new
process that will reduce cost per widget from $3.75 to $3.00. In two
years, she is approached by another company willing to produce
widgets for $2.75. In deciding whether to contract with the company
a. The decision should be based on the accounting profit of the
company.
b. She should compare the time it would take to pay off the new
process with the proposed cost savings of working with the new
company.
,c. She is at risk of committing the hidden cost fallacy.
a. The $200,000 should be considered as a sunk cost and is irrelevant to
the decision. Ans✓✓✓ a. The $200,000 should be considered as a sunk
cost and is irrelevant to the decision.
1. An FDA recall results in a reduction in the supply of knee
replacements in the United States of 16%. If the elasticity of demand
for knee replacements sold in the US is -0.4, the new equilibrium price
will be Ans✓✓✓ a. 40% higher.
1. Assume that RC Cola and Moon Pies are complements in
consumption; if the price of RC increases, we would expect to see:
Ans✓✓✓ a decrease in the demand for Moon Pies.
1. Consider a vendor-buyer relationship. Which of the following
conditions would lead to the buyer having more bargaining power?
a. Lots of substitutes for the vendor's product are available.
b. There are relatively few buyers and many vendors.
c. It costs little for buyers to switch vendors.
d. All of the above. Ans✓✓✓ d. All of the above.
1. Erin and TA decide to start a upscale fashion boutique that will earn
about $750K in profit. Erin currently earns $190K and TA earns $260K.
How will they split the profit of the boutique?
a. Erin gets $325K, TA gets $325K
,b. Erin gets $250K, TA gets $500K
c. Erin gets $340K, TA gets $410K
d. Erin gets $400K, TA gets $350K Ans✓✓✓ a. Erin gets $340K, TA gets
$410K
1. Following a dollar appreciation relative to the peso, which of the
following results is expected to occur?
a. Prices in the United States would rise, and prices in Mexico would
rise
b. Prices in the United States would rise, and prices in Mexico would fall
c. Prices in the United States would fall, and prices in Mexico would rise
d. Prices in the United States would fall, and prices in Mexico would fall
Ans✓✓✓ Prices in the United States would fall, and prices in Mexico
would rise
1. From the blog...Which is NOT a screen venture capitalists use to find
a newly-minted MBA entrepreneur committed to making money for her
investors rather than using capital to support her lifestyle?
a. During a chat about funding, deliberately change the subject, and see
how long it
takes the entrepreneur to get back to the topic.
b. Get edgy and unpleasant to see if the entrepreneur gets offended.
c. Make sure that the entrepreneur has a good exit strategy, to sell her
company after only a few years.
, d. Make sure the entrepreneur is not too confident. Ans✓✓✓ Make
sure that the entrepreneur has a good exit strategy, to sell her
company after only a few years.
1. If the market of a certain product experiences a decrease in supply
and an increase in demand, which of the following results is expected
to occur? Ans✓✓✓ Equilibrium price would rise, and the equilibrium
quantity could rise or fall.
1. In comparing a firm's accounting costs to its economic costs, the
economic costs Ans✓✓✓ a. are larger.
1. In repeated games, all of the below make it easier to get out of bad
situations except
a. Be nice, no first strikes
b. Respond immediately to rivals
c. Punish competitors as much as you can
d. Make sure your competitors can easily interpret your actions
Ans✓✓✓ a. Punish competitors as much as you can
1. In the short run, certain of the firm's costs are fixed. This implies that
a. if the firm were to expand output, average fixed costs would
increase.
b. in the decision to change production levels in the short run, these
costs are irrelevant.
1. A business owner makes 1000 devices a day. Each day he/she
contributes 8 hours to produce those devices. If hired, elsewhere
he/she could have earned $250 an hour. The item sells for $10 each.
Production does not stop during weekends. If the explicit costs total
$150,000 for 30 days, the economic profit for the month equals:
Ans✓✓✓ a. $90,000
1. A joint manufacturer can produce 10 knees for $25,000 and 12 knees
for $30,000. What is the difference between the average cost per knee
for 12 knees and the marginal cost of the 12th knee?
a. $100
b. $0
c. $250
d. $500 Ans✓✓✓ a. $0
1. A manager requires widgets in order to produce her final product.
Currently, they are made internally. She invests $200,000 in a new
process that will reduce cost per widget from $3.75 to $3.00. In two
years, she is approached by another company willing to produce
widgets for $2.75. In deciding whether to contract with the company
a. The decision should be based on the accounting profit of the
company.
b. She should compare the time it would take to pay off the new
process with the proposed cost savings of working with the new
company.
,c. She is at risk of committing the hidden cost fallacy.
a. The $200,000 should be considered as a sunk cost and is irrelevant to
the decision. Ans✓✓✓ a. The $200,000 should be considered as a sunk
cost and is irrelevant to the decision.
1. An FDA recall results in a reduction in the supply of knee
replacements in the United States of 16%. If the elasticity of demand
for knee replacements sold in the US is -0.4, the new equilibrium price
will be Ans✓✓✓ a. 40% higher.
1. Assume that RC Cola and Moon Pies are complements in
consumption; if the price of RC increases, we would expect to see:
Ans✓✓✓ a decrease in the demand for Moon Pies.
1. Consider a vendor-buyer relationship. Which of the following
conditions would lead to the buyer having more bargaining power?
a. Lots of substitutes for the vendor's product are available.
b. There are relatively few buyers and many vendors.
c. It costs little for buyers to switch vendors.
d. All of the above. Ans✓✓✓ d. All of the above.
1. Erin and TA decide to start a upscale fashion boutique that will earn
about $750K in profit. Erin currently earns $190K and TA earns $260K.
How will they split the profit of the boutique?
a. Erin gets $325K, TA gets $325K
,b. Erin gets $250K, TA gets $500K
c. Erin gets $340K, TA gets $410K
d. Erin gets $400K, TA gets $350K Ans✓✓✓ a. Erin gets $340K, TA gets
$410K
1. Following a dollar appreciation relative to the peso, which of the
following results is expected to occur?
a. Prices in the United States would rise, and prices in Mexico would
rise
b. Prices in the United States would rise, and prices in Mexico would fall
c. Prices in the United States would fall, and prices in Mexico would rise
d. Prices in the United States would fall, and prices in Mexico would fall
Ans✓✓✓ Prices in the United States would fall, and prices in Mexico
would rise
1. From the blog...Which is NOT a screen venture capitalists use to find
a newly-minted MBA entrepreneur committed to making money for her
investors rather than using capital to support her lifestyle?
a. During a chat about funding, deliberately change the subject, and see
how long it
takes the entrepreneur to get back to the topic.
b. Get edgy and unpleasant to see if the entrepreneur gets offended.
c. Make sure that the entrepreneur has a good exit strategy, to sell her
company after only a few years.
, d. Make sure the entrepreneur is not too confident. Ans✓✓✓ Make
sure that the entrepreneur has a good exit strategy, to sell her
company after only a few years.
1. If the market of a certain product experiences a decrease in supply
and an increase in demand, which of the following results is expected
to occur? Ans✓✓✓ Equilibrium price would rise, and the equilibrium
quantity could rise or fall.
1. In comparing a firm's accounting costs to its economic costs, the
economic costs Ans✓✓✓ a. are larger.
1. In repeated games, all of the below make it easier to get out of bad
situations except
a. Be nice, no first strikes
b. Respond immediately to rivals
c. Punish competitors as much as you can
d. Make sure your competitors can easily interpret your actions
Ans✓✓✓ a. Punish competitors as much as you can
1. In the short run, certain of the firm's costs are fixed. This implies that
a. if the firm were to expand output, average fixed costs would
increase.
b. in the decision to change production levels in the short run, these
costs are irrelevant.
