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ECON 5050 Multiple choice HM Midterm Use as a guide only.

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Answers to MC Problem 1

Chapter 1: Managers, Profits, and Markets

Chapter 3: Marginal analysis for Optimal Decisions

 

the correct answers are marked red.

 

1 Economic theory is a valuable tool for business decision making because it

 

a. identifies for managers the essential information for making a decision.

b. assumes away the problem.

c. creates a realistic, complex model of the business firm.

d. provides an easy solution to complex business problems. 

 

2 Consider a firm that employs some resources that are owned by the firm. When accounting profit is zero, economic profit

 

1.       must also equal zero.

2.       is sure to be positive.

3.       must be negative and shareholder wealth is reduced.

4.       cannot be computed accurately, but the firm is breaking even nonetheless.

 

3 Suppose Marv, the owner-manager of Marv’s Hot Dogs, earned $72,000 in revenue last year. Marv’s explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $30,000 annually as mechanical engineer.

 

a. Marv's implicit cost of using owner-supplied resources is $36,000.

b. Marv's economic profit is $36,000.

c. Marv’" s implicit cost of using owner-supplied resources is $0.

d. Marv's economic profit is $6,000.

 

4 Owners of a firm want the managers to make business decisions that will

 


a. maximize the value of the firm.
b.   maximize expected profit in each period of operation.
c. maximize the market share of the firm.
d. both a and b are correct when revenue and cost conditions in one time period are independent of revenues and costs in future time periods. 

 

5 When a firm is a price-taking firm,

 


a. the price of the product it sells is determined by the intersection of the market demand and supply curves for the product.
b. raising the price of the product above the market-determined price will cause sales to fall nearly to zero.
c. many other firms produce a product that is identical to the output produced by the rest of the firms in the industry.
d. all of the above

 

6  Economic profit is the best measure of a firm’s performance because

 


a. normal profit is generally too difficult to measure.
b. economic profit fully accounts for all sources of revenue.
c. only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.
d. the opportunity cost of using ALL resources is subtracted from total revenue.

 

7  Which of the following is an example of an implicit cost for a firm?

 


a. the value of time worked by the owner for which the owner is paid a salary.
b. any wages and salaries paid to employed.
c. forgone rent on property owned by firm.
d. all of the above


 

8  St. Charles Hospital, located in an upper-income neighborhood of a large city, recently received a restored mansion as a gift from an appreciative patient. The board of directors decided to remodel the mansion and use it as recuperative quarters for patients willing to pay a premium for luxurious accommodations. The cost to the hospital of using the mansion includes

 

a. nothing because it was a gift.

b. how much the hospital pays for upkeep--taxes, insurance, utilities, maintenance, etc.

c. how much the hospital would receive if it rented or sold the mansion.

d. both b and c

 

9  Until recently you worked as an accountant, earning $30,000 annually. Then you inherited a piece of commercial real estate bringing in $12,000 in rent annually. You decided to leave your job and operate a video rental store in the office space you inherited.

 

At the end of the first year, your books showed total revenues of $60,000 and total costs of $30,000 for video purchases, utilities, taxes, and supplies. What is the total cost of operating the video store?

 

a. $60,000

b. $42,000

c. $30,000

d. none of the above

 

10  Which of the following is a common mistake managers make? 

 

a. Using marginal analysis to make output decisions.

b. Maximizing the value of the firm instead of maximizing the firm’s profits.

c. Treating implicit opportunity costs as part of the total costs of using resources.

d. Increasing the rate of production in order to reduce unit costs of production.

 

11 A group has chartered a bus to Atlanta. The driver costs $200, the bus costs $500, and parking in Atlanta will be $90. You have already paid $700 to reserve the bus and a driver. The driver’s fee is non-refundable, but the bus may be canceled a week in advance at a charge of $75. At $20 per ticket, at least how many people must buy tickets so that the trip need not be canceled?

 

1.       10

2.       14

3.       26

4.       40

 

12  A firm will maximize profit by producing that level of output at which

 

a. the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount.

b. the additional revenue from the last unit sold equals the additional cost of the last unit.

c. total revenue exceeds total cost by the smallest amount.

d. total revenue equals total cost.

 

13  When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because

 

a. total benefit will rise by more than total cost will rise.

b. marginal cost is rising faster than marginal benefit is falling.

c. net benefit is upward sloping at this point.

d. total cost will fall by more than total benefit will fall.

 

The questions 14 and 15 refer to the following:

 

An agency is having problems with personal phone calls made during working hours. Each minute of a personal call costs the agency $0.50 in wasted wages. The agency decides to hire operators to monitor calls in order to attain the optimal number of personal calls (minimize total cost of personal calls).

 

Number of Operators

Total minutes of personal calls (per hour)

0

600

1

480

2

410

3

370

4

350

 

14  If operators receive $25 an hour, how many operators should the agency hire?

 

a. 0

b. 1

c. 2

d. 3

e. 4

 

15 What is the most the agency would be willing to pay the first operator?

 

a. $300

b. $240

c. $120

d. none of the above

 

Answer questions 16 and 17 using the following marginal benefit and marginal cost functions for activity A:

MB = 100 − 5A

MC = 20 + 3A

 

16  The optimal level of A is

 

a. 40

b. 30

c. 20

d. 10

 

17  The fifth unit of activity A will

 

a. increase net benefits by 75.

b. reduce net benefits by 35.

c. increase net benefits by 40.

d. decrease net benefits by 40.

 

18 A firm is deciding whether or not to close down its plant and modernize by installing new technology. Which of the following should management ignore when making the decision?

 

a. How much the present plant cost

b. Cost of lost sales while the plant is closed

c. Added cost of the labor needed for the new plant

d. all of the above

 

The questions 19 and 20 refer to the following:

 

A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. 

 

19  If doctors make $40,000 a year, what do nurses make?

 

a. $25,000 a year

b. $20,000 a year

c. $15,000 a year

d. $10,000 a year

 

20 If doctors make $80,000 a year and nurses make $40,000 a year, then

 

a. the clinic could serve more patients by hiring more doctors and fewer nurses.

b. the clinic could serve more patients by hiring fewer doctors and more nurses.

c. the clinic is making the correct decision because doctors are more productive than nurses.

d. the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses.

 

21  Whenever the additional revenue from the last unit of output exceeds the additional cost of that unit, a profit-maximizing firm should

 

a. do nothing, the firm is making profits.

b. produce less in order to increase profits.

c. produce more in order to increase profits.

d. think about investing in another industry.

 

The questions 22 and 23 refer to the following:

 

A manager in charge of new product development can hire engineers and market researchers. The annual salary of an engineer is $30,000 and that of a market researcher is $20,000. The marginal contribution of engineers and market researchers are

Engineers (E)

Market Researchers (R)

Worker

Additional

New Products

Worker

Additional

New Products

1st

50

1st

30

2nd

30

2nd

25

3rd

15

3rd

20

4th

10

4th

15

5th

8

5th

10

 

22 If the manager has an annual budget of $120,000, how should this budget be allocated in order to maximize the number of new products developed?

 

a. Hire two engineers and one market researcher.

b. Hire two engineers and three market researchers.

c. Hire three engineers and two market researchers.

d. Hire three engineers and four market researchers.

 

23  If the manager currently has two engineers and one market researcher, what must be true?

 

a. He is making the correct decision because MPE = MPR.

b. He is not making the correct decision because  MPE/PE > MPR/PR.

c. Fewer new products will be developed if he hires fewer engineers and more market researchers.

d. More new products will be developed if he hires fewer engineers and more market researchers.

 

24  At age 40, Joe is considering quitting his job and going back for a college degree. He needs two more years full-time. Tuition is $10,000 per year. He earns $30,000 per year. A college degree would raise his annual income by $10,000 per year. He will retire at age 70. His benefit of a degree would be

a.  10,000/r.

b.   10,000 ×   .

c.  10,000 ×   .

d.  10,000 ×   .

25.  At age 40, Joe is considering quitting his job and going back for a college degree. He needs two more years full-time. Tuition is $10,000 per year. He earns $30,000 per year. A college degree would raise his annual income by $10,000 per year. He will retire at age 70. His cost of going back to college is

a.  40,000 ×   .

b.  30,000 ×   .

c.  10,000 ×   .

d.  20,000 ×   .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Answers to MC Problem 2

Chapter 2: Demand, Supply, and Market Equilibrium

 

 

1 Which of the following would shift the demand curve for gasoline in the current period to the right?

 

1.       a decrease in the price of gasoline

2.       an increase in consumer income, assuming gasoline is a normal good

3.       an increase in the price of cars, a complement for gasoline

4.       a decrease in the expected future price of gasoline

 

2 Suppose that a decrease in the price of good X results in fewer units of good Y being sold. This implies that X and Y are

 

1.       complementary goods.

2.       normal goods.

3.       inferior goods.

4.       substitute goods.

 

3 Which of the following would lead to a DECREASE in the demand for tennis balls? 

 

a. An increase in the price of tennis balls

b. A decrease in the price of tennis rackets

c. An increase in the cost of producing tennis balls

d. A decrease in average household income when tennis balls are a normal good

e. None of the above

 

4 When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in

 

a. the demand for this wine.

b. the supply of this wine.

c. the quantity of this wine demanded.

d. the quantity of this wine supplied.

 

Use the following general linear demand relation to answer questions 5 through 8:

 

Qd = 680 – 9P + 0.006M – 4PR

 

where M is income and PR is the price of a related good, R.

 

5 From this relation it is apparent that the good is: 

 

a. an inferior good 

b. a substitute for good R

c. a normal good

d. a complement for good R

e. both c and d

 

6 If M = $15,000 and PR = $20, the demand function is

 

a. P = 690 – 9Qd.

b. Qd = 690 – 9P.

c. Qd = 680 – 9P.

d. P = 680 – 9Qd.

e. Qd = 800 – 19P.

 

7 If M = $15,000 and  PR = $20 and the supply function is Qs = 30 + 3P, equilibrium price and quantity are, respectively, 

 

1.       P = $55 and Q = 195.

2.       P = $6 and Q = 38.

3.       P = $12 and Q = 200.

4.       P = $50 and Q = 170.

5.       P = $40 and Q = 250.

 

8 If M = $15,000 and PR = $20 and the supply function is Qs = 30 + 3P, then, when the price of the good is $60, 

 

1.       there is a shortage of 60 units of the good.

2.       there is equilibrium in the market.

3.       there is a surplus of 60 units of the good.

4.       the quantities demanded and supplied are indeterminate.

 

9 Suppose that the market for salad dressing is in equilibrium. Then the price of lettuce rises. What will happen?

 

1.       The price of salad dressing will rise.

2.       The supply of salad dressing will decrease.

3.       The demand for salad dressing will decrease.

4.       The quantity demanded of salad dressing will increase.

 

10 Suppose that the market for engagement rings is in equilibrium. Then political unrest in South Africa shuts down the diamond mines there. South Africa is the world's primary supplier of diamonds. What will happen?

 

1.       The equilibrium quantity of engagement rings will decrease.

2.       The equilibrium price of engagement rings will decrease.

3.       The demand for engagement rings will decrease.

4.       The supply of engagement rings will increase.

 

11 In which of the following cases will the effect on equilibrium output be indeterminate (i.e., depend on the magnitudes of the shifts in supply and demand)? 

 

 a. Demand increases and supply increases

 b. Demand decreases and supply decreases

 c. Demand decreases and supply increases

 d. Demand remains constant and supply increases

 

12 We observe that the equilibrium price of coffee falls and the equilibrium quantity falls. Which of the following best fits the observed data? 

 

1.       an increase in demand with supply constant.

2.       an increase in demand coupled with a decrease in supply.

3.       an increase in demand coupled with an increase in supply

4.       a decrease in demand with supply constant.

 

Use the following demand and supply functions to answer the next two questions.

 

 Demand: Qd = 900 – 60P

 Supply: Qs = - 200 + 50P

 

13 Equilibrium price and output are

 

a. P = $7 and Q = 480.

b. P = $10 and Q = 300.

c. P = $20 and Q = 150.

d. P = $100 and Q = 5,300.

e. none of the above

 

14 If the price is currently $11, there is a

 

 a. surplus of 110 units.

 b. shortage of 240 units.

 c. surplus of 350 units.

 d. shortage of 700 units.

 e. none of the above

 

15 With a given supply curve, a decrease in demand leads to

 

a. a decrease in equilibrium price and an increase in equilibrium quantity.

b. an increase in equilibrium price and a decrease in equilibrium quantity.

c. a decrease in equilibrium price and a decrease in equilibrium quantity.

d. no change in price and a decrease in equilibrium quantity.

e. none of the above

 

16 Suppose that more people want Orange Bowl tickets than the number of tickets available. Which of the following statements is correct?

 

a. There is a shortage of Orange Bowl tickets at the box office price.

b. The box office price is higher than the equilibrium price for Orange Bowl tickets.

c. If the box office price were raised, the excess demand for Orange Bowl tickets would decrease.

d. both a and c

 

17 If a demand curve goes through the point P = $6 and Qd = 400, then

 

 a. $6 is the highest price consumers will pay for 400 units.

 b. $6 is the lowest price consumers can be charged to induce them to buy 400 units.

 c. 400 units are the most consumers will buy if price is $6.

 d. consumers will buy more than 400 if price is $6.

 e. both a and c

 

18 If a supply curve goes through the point P = $10 and Qs = 320, then

 

a. $10 is the highest price that will induce firms to supply 320 units.

b. $10 is the lowest price that will induce firms to supply 320 units.

c. at a price higher than $10 there will be a surplus.

d. at a price lower than $10 there will be a shortage.

e. both c and d

 

19 The change in price that results from a leftward shift of the supply curve will be greater if

 

 a. the demand curve is relatively steep than if the demand curve is relatively flat.

 b. the demand curve is relatively flat than if the demand curve is relatively steep.

 c. the demand curve is horizontal than if the demand curve is vertical.

 d. the demand curve is horizontal than if the demand curve is downward sloping.

 

20 Yesterday's newspaper reported the results of a study indicating that people who eat more bananas are more attractive to the opposite sex. What do you expect to happen to the market price and quantity of bananas? 

 

a. price will decrease, quantity will decrease

b. price will decrease, quantity will increase

c. price will increase, quantity will decrease

d. price will increase, quantity will increase

 

21 If the market price of eggs rises at the same time as the market quantity of eggs purchased decreases, this could have been caused by

 

a. an increase in demand with no change in supply.

b. a decrease in supply with no change in demand.

c. an increase in supply and an increase in demand.

d. an increase in supply and a decrease in demand.

 

22 Assuming neither supply or demand curves is horizontal, in which of the following cases must price always fall?

 

a. Demand increases and supply increases.

b. Demand decreases and supply decreases.

c. Supply increases and demand remains constant.

d. Demand decreases and supply increases.

e. Both c and d

 

23 Because bagels and cream cheese are often eaten together, they are complements.  Suppose we observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. Which of the following explanations is consistent with these changes in the bagels and cream cheese markets? 

 

1.       Price of milk increased.

2.       Price of milk decreased.

3.       Price of flour increased.

4.       Price of flour decreased.

 

Use the following figure to answer questions 24 and 25:

 

24 Let demand remain constant at D; an increase in wages causes firms to be willing and able to sell 150 fewer units at each price than they were before the wage increase. 

 

 a. The new equilibrium price and quantity will be P = $6 and Q = 150.

 b. The new equilibrium price and quantity will be P = $6 and Q = 400.

 c. The new equilibrium price and quantity will be P = $7 and Q = 250.

 d. The new equilibrium price and quantity will be P = $8 and Q = 300.

 

25 Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously. 

 

 a. The new equilibrium price and quantity will be P = $6 and Q = 150.

 b. The new equilibrium price and quantity will be P = $5 and Q = 150.

 c. The new equilibrium price and quantity will be P = $7 and Q = 250.

 d. The new equilibrium price and quantity will be P = $5 and Q = 200.

 

 

·         Answers to MC Problem 3

Chapter 6: Elasticity and Demand

 

1 Which of the following is likely to have the most price inelastic demand?

 

 a. mint-flavored toothpaste

 b. toothpaste

 c. Colgate mint-flavored toothpaste

 d. a generic mint-flavored toothpaste

 

2 For a good that is a luxury, demand

 

a. tends to be inelastic.

b. tends to be elastic.

c. has unit elasticity.

d. cannot be represented by a demand curve in the usual way.

 

3 There are very few, if any, good substitutes for motor oil. Therefore,

 

a. the demand for motor oil would tend to be inelastic.

b. the demand for motor oil would tend to be elastic.

c. the demand for motor oil would tend to respond strongly to changes in prices of other goods.

d. the supply of motor oil would tend to respond strongly to changes in people’s tastes for large cars relative to their tastes for small cars.

 

4 Which of the following statements is correct?

 

a. The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.

b. The demand for grandfather clocks is more elastic than the demand for clocks in general.

c. The demand for cardboard is more elastic over a long period of time than over a short period of time.

d. All of the above are correct.

 

5 If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

 

a. a 0.2 percent increase in the price of the good

b. a 3.2 percent increase in the price of the good

c. a 4.8 percent increase in the price of the good

d. a 5 percent increase in the price of the good

 

6 For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

 

a. There are no close substitutes for this good.

b. The good is a luxury.

c. The market for the good is broadly defined.

d. The relevant time horizon is short.

 

7 As we move downward and to the right along a linear, downward-sloping demand curve,

 

a. slope and elasticity both remain constant.

b. slope changes but elasticity remains constant.

c. slope and elasticity both change.

d. slope remains constant but elasticity changes.

 

8 Which of the following will NOT affect the elasticity of demand for a product? 

 

a. the number of substitutes

b. how long consumers have to adapt to price changes

c. the cost of producing the product

d. the percentage of the consumer’s budget spent on the product

e. all of the above will affect the elasticity of demand for a product

 

9 The cross-price elasticity of demand between goods X and Y

 

1.       measures the responsiveness of the quantity of X demanded to changes in the price of Y.

2.       is the percentage change in the price of Y divided by the percentage change in the quantity of X demanded.

3.       is greater than zero if X and Y are substitutes.

4.       both a and c

5.       all of the above

 

10 Marginal revenue

 

a. is the change in total revenue when output increases by one unit.

b. is always greater than zero.

c. measures the slope of the total revenue curve.

d. both a and c

e. all of the above

 

11 When the price of corn dogs is $0.50, 10,000 corn dogs are demanded. When the price of corn dogs is $1.20, 5,000 are demanded. What is the interval (or arc) price elasticity of demand for corn dogs? 

 

a. −0.40

b. −0.81

c. −1.20

d. −1.40

 

12 If the price elasticity of DVD recorders is −0.3 and price increases 20%, what happens to the quantity of DVD recorders demanded? 

 

1.       quantity decreases by 26%

2.       quantity decreases by 6%

3.       quantity increases by 15%

4.       quantity increases by 21%

 

13 The demand for heart surgery is price inelastic. So it follows that

 

1.       the percentage change in price is less than the resulting percentage change in quantity demanded.

2.       if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.

3.       changes in price do not affect the number of operations demanded.

4.       both a and b

5.       all of the above

 

14 If the price elasticity of demand for Harley-Davidson motorcycles is −1.2 and quantity demanded increases by 24%, price must have

 

a. decreased by 20%.

b. increased by 20%.

c. decreased by 28.8%.

d. decreased by 0.05%.

 

15 Which of the following would tend to DECREASE the elasticity of demand for good X

 

a. The cost of producing X decreases.

b. Several firms which used to produce substitutes for X go out of business.

c. Consumers begin spending a smaller percentage of their income on X.

d. both b and c

e. all of the above

 

16 E1 is demand elasticity for Minutemaid orange juice, E2 is demand elasticity for all orange juice, and E3 is demand elasticity for all fruit drinks. Then

 

a. |E1| > |E2| > |E3|

b. |E2| > |E3| > |E1|

c. |E3| > |E1| > |E2|

d. |E3| > |E2| > |E1|

 

17 The demand for good X will be more elastic than the demand for good Y when

 

a. good X has fewer substitutes than good Y.

b. good X accounts for a larger percentage of a typical consumer's budget than good Y.

c. consumers have more time to adjust to a change in the price of good X than they have time to adjust to a change in the price of good Y.

d. both b and c

e. all of the above

 

18 The fact that the cross-price elasticity of natural gas with respect to the price of fuel oil is 0.4 implies that

 

a. natural gas and fuel oil are substitutes.

b. natural gas is a normal good.

c. the quantity of natural gas demanded will decrease by 1.6% when the price of fuel oil decreases by 4%.

d. both a and c

 

19 Total revenue increased for a firm operating in the elastic range of its demand curve. Which of the following statements is correct? 

 

a. The firm must have raised price.

b. The firm must have lowered price.

c. Quantity demanded must have increased.

d. both a and c

e. both b and c

 

20 When demand is elastic, 

 

a. marginal revenue is negative.

b. the percentage change in price exceeds the percentage change in quantity.

c. an increase in price causes total revenue to rise.

d. both b and c

e. none of the above

 

21 When marginal revenue is zero, 

 

a. P < MR.

b. P = MR.

c. a small increase in price causes no change in total revenue.

d. a small decrease in price causes no change in total revenue.

e. both c and d

 

22 Jerry drives up to a gas station. Before looking at the price, he places an order and says, “I’d like $10 of gas.”< span> What is Jerry’s price elasticity of demand (in absolute value)? 

 

1.       0

2.       0.5

3.       1

4.       Infinity (i.e., perfectly elastic)

 

 

23 If the demand curve for comic books is expressed as P = 10,000/Q, then demand has a unitary elasticity

 

a. only when p = 10,000. 

b. only when p = 100. 

c. always.

d. never. 

 

24 If an increase in income results in a rightward parallel shift of the demand curve, then at any given price, the price elasticity of demand will have

 

a. increased in absolute terms. 

b. decreased in absolute terms.

c. remained unchanged. 

d. increased, decreased or stayed the same. It cannot be determined. 

 

25 The market demand for wheat is Q = 100 – 2P + 1Pb, where Q is the quantity demanded of wheat, P is the price of wheat, and Pb is the price of barley. The cross price elasticity of demand for wheat with respect to barley

 

a. is negative. 

b. suggests that wheat and barley are complements. 

c. equals 1. 

d. cannot be calculated from just the information provided.

 

·        

Answers to MC Problem 4

Chapter 8: Production and Cost in the Short Run

Chapter 9: Production and Cost in the Long Run

The correct answers are marked red.

1 A short-run production function assumes that

 

 a. the level of output is fixed.

 b. at least one input is a fixed input.

 c. all inputs are fixed inputs.

 d. both a and b

 e. both b and c

 

The next 2 questions refer to the following:

 

Amount of total output produced from various combinations of labor and capital.

 

 

 

Units of Capital

 

 

1

2

3

 

Units

of

Labor

1

2

3

4

5

6

 80

180

270

340

390

410

100

220

330

420

490

530

120

260

390

500

590

650

 

2 If capital is fixed at two units, what is the marginal product of the fourth unit of labor?

 

a. 60

b. 80

c. 100

d. 420

e. none

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[Solved] ECON 5050 Multiple choice HM Midterm Use as a guide only.

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Answers to MC Problem 1 Chapter 1: Managers, Profits, and Markets Chapter 3: Marginal analysis for Optimal Decisions the correct answers are marked red. 1 Economic theory is a valuable tool for business decision making because it a. identifies for managers the essential information for making a decision. b. assumes away the problem. c. creates a realistic, complex model of the business firm. d. provides an easy solution to complex business problems. 2 Consider a firm that employs some resources that are owned by the firm. When accounting profit is zero, economic profit 1. must also equal zero. 2. is sure to be positive. 3. must be negative and shareholder wealth is reduced. 4. cannot be computed accurately, but the firm is breaking even nonetheless. 3 Suppose Marv, the owner-manager of Marv’s Hot Dogs, earned $72,000 in revenue last year. Marv’s explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $30,000 annually as mechanical engineer. a. Marv's imp...
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ECON 5050 Multiple choice HM Midterm Use as a guide only.

Answers to MC Problem 1 Chapter 1: Managers, Profits, and Markets Chapter 3: Marginal analysis for Optimal Decisions the correct answers are marked red. 1 Economic theory is a valuable tool for business decision making be...

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