ECO 550 Final Exam (Part 1 And 2) - Updated 2014
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o550 final exam part 1
Question 1
A ____ total cost function implies that marginal costs ____ as output is increased.
Answer
linear; increase linearly
quadratic; are constant
cubic; increase linearly
linear; are constant
Question 2
Which of the following is not an assumption of the linear breakeven model:
Answer
constant selling price per unit
decreasing variable cost per unit
fixed costs are independent of the output level
a single product (or a constant mix of products) is being produced and sold
Question 3
Break-even analysis usually assumes all of the following except:
Answer
in the short run, there is no distinction between variable and fixed costs.
revenue and cost curves are straight-lines throughout the analysis.
there appears to be perfect competition since the price is considered to remain the same regardless of quantity.
the straight-line cost curve implies that marginal cost is constant.
Question 4
George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000. If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.
Answer
10,000 customers
20,000 customers
30,000 customers
40,000 customers
50,000 customers
Question 5
The degree of operating leverage is equal to the ____ change in ____ divided by the ____ change in ____.
Answer
percentage; sales; percentage; EBIT
unit; sales; unit; EBIT
percentage; EBIT; percentage; sales
unit; EBIT; unit; sales...