ECN 601 Exam 1| to help me study for the future.
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. A#er two
years, he realizes that if he outsourced the produc%on, 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 ques%on. 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 monopolis%cally compe%%ve firm will tend to have a more elas%c 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:
Con%nue opera%ng, 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 ques%on. How many units should the profit
maximizing firm produce?
3
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. A#er two
years, he realizes that if he outsourced the produc%on, 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 ques%on. 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 monopolis%cally compe%%ve firm will tend to have a more elas%c 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:
Con%nue opera%ng, 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 ques%on. How many units should the profit
maximizing firm produce?
3
