管理经济学第七版英文教辅 chapter 7.docx

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1、Managerial Economics, 7e (Keat)Chapter 7 The Theory and Estimation of Cost (Appendices 7A, 7B, and 7C)Multiple-Choice Questions1) To an economist, total costs includeA) explicit, but not implicit costs.B) implicit, but not explicit costs.C) explicit and implicit costs.D) neither explicit nor implici

2、t costs.Answer: CDiff: 12) Economists consider which of the following costs to be irrelevant to a short-run business decision?A) opportunity costB) out-of-pocket costC) historical costD) replacement costAnswer: CDiff: 13) Which of the following is a relevant cost?A) replacement costB) sunk costC) hi

3、storical costD) fixed costE) All of the above are relevant.Answer: ADiff: 14) Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?A) accounting cost vs. direct costB) historical cost vs. replacement costC) sunk cost vs. fixed costD) variable cost

4、vs. incremental costAnswer: BDiff: 146) Diseconomies of scale can be caused byA) the law of diminishing returns.B) bureaucratic inefficiencies.C) increasing advertising and promotional costs.D) All of the aboveAnswer: BDiff: 147) Which of the following is the best example of economies of scope?A) Co

5、ca-Cola expands its global operations to sub-Sahara Africa.B) Alcohol for car fuel is produced from corn.C) A decides to rent out its Web site to independent e-commerce companies.D) A company reduces its cost by getting bigger discounts for bulk purchases.Answer: CDiff: 248) Short-run cost functions

6、 are estimated usingA) time-series regression analysis.B) cross-sectional regression analysis.C) nominal cost data.D) present value cost data.Answer: ADiff: 149) In estimating short-run cost functions, one must adjust forA) price level changes.B) accounting procedure changes.C) product heterogeneity

7、.D) All of the aboveAnswer: DDiff: 150) Long-run cost functions are estimated usingA) time-series regression analysis.B) cross-sectional regression analysis.C) cost accounting data.D) None of the aboveAnswer: BDiff: 1Analytical Questions1) You have opened your own word-processing service. You bought

8、 a personal computer, and paid $5,000 for it. However, due to the cost changes in the computer industry, the current price of an equivalent machine is $2,500. You could sell any used machine for $1,000. If you were not word processing, you could earn $20,000 per year at an alternative job. Assume th

9、at the interest rate is 10%. You can also hire an assistant who can do everything that you can do for $20,000 per year (you would still continue to do word processing).One person using one computer can produce 11,000 typed pages per year, and the price per page for your service is $2.You are conside

10、ring three options: (1) expand your business by hiring an assistant; (2) leave your business the way it is; (3) shut down. Based on the costs and revenues above, which should you do? Explain and show any relevant calculations.Answer:Option 1:Revenue = $22,000Opportunity cost of your time = 20,000Opp

11、ortunity cost of interest on salvage value of existing computer = 100Economic profit = $1,900Option 2:You still earn $1,900 as above.Revenue from additional worker = 22,000Wages = 20,000Opportunity cost of interest on purchase of new computer = 250Depreciation = 1,500Economic profit from additional

12、worker = $250Total economic profit = $2,150Option 3:Revenue = 0No costs, since opportunity costs no longer apply, and fixed costs are sunk.Economic profit = 0(Could possibly view the $ 1,000 you get from selling the used computer as revenue, but makes no difference to final solution of problem.)Opti

13、on 2, expand your business, is the best option.2) Freds Widget Company has purchased $500,000 in equipment, which can be sold for a salvage value of $300,000 at any time. The best interest rate on alternative investments is 5%. What is the cost of using this machinery for one year? How would your an

14、swer be different if the machinery had not yet been purchased?Answer: Short-run cost = $15,000Cost if the machinery was not purchased = $200,000 + $25,000 二 $225,000Explanation: The short-run cost is just the forgone interest. The short-run depreciation is sunk, and the salvage value doesnt change.

15、The long-run cost (if the machine has not been purchased) is the depreciation cost plus the foregone interest on the whole $500,000.3) The following table shows the relationship between output and number of workers in the short run. If the wage is $50/day, find marginal cost of production.Number of

16、WorkersOutput001502110330044505590666577008725974010735Answer:Numberof WorkersOutputMPlMC (=w/MPl)00_150501.002110600.9133001900.2644501500.3355901400.366665750.677700351.438725252.009740153.3310735-5一一4) Consider a firm that has just built a plant, which cost $1,000. Each worker costs $5.00 per hou

17、r. Based on this information, fill in the table below.Number of Worker HoursOutputMarginal ProductFixed CostVariable CostTotalCostMarginal CostAverage Variable CostAverage Total Cost005040010090015013002001600250180030019003501950Answer:Number of Worker HoursOutputMarginal ProductFixed CostVariable

18、CostTotal CostMarginal CostAverage Variable CostAverage Total Cost001,00001,0005020041,0002501,2501.251.256.25100700101,0005001,5000.500.71432.14291501400141,0007501,7500.35710.5357L25200165051,00010002,00010.60611.2121250180031,00012502,2501.66670.69441.25300190021,00015002,5002.500.78951.315835019

19、751.51,00017502,7503.33330.88611.39245) How would each of the following affect the firms marginal, average, and average variable cost curves?a. An increase in wagesb. A decrease in material costsc. The government imposes a fixed amount of tax.d. The rent that the firm pays on the building that it le

20、ases decreases.Answer:a. Wages are a variable cost, so MC, AVC, and ATC increase.b. Materials are a variable cost, so MC, AVC, and ATC decrease.c. A fixed or lump-sum tax increases ATC but not MC or AVC.d. Rent is generally viewed as a fixed cost, so ATC decreases, but MC and AVC are unchanged.6) A

21、firm experiences increasing returns to scale; that is, doubling all its inputs more than doubles its output. What can be inferred about the firms short-run costs?Answer: Returns to scale is a long-run phenomenon because all inputs must be changed. Thus we can infer little about the firms short-run c

22、osts from this information, other than the firm is likely to experience diminishing marginal returns in the short run due to the fact that it will have a fixed factor of production (and thus short-run marginal costs will rise with output).7) Carefully explain if the following statements are true, fa

23、lse, or uncertain.a. If average cost is increasing, marginal cost must be increasing.b. If there are diminishing returns, the marginal cost curve must be positively sloped.c. Marginal costs decrease as output increases because the firm can spread fixed costs over more units.Answer:d. True. If averag

24、e cost is increasing, marginal cost must be above average cost, so marginal cost must be increasing.e. True. If there are diminishing returns, each worker produces less than the one before him. Thus each unit must be getting more expensive (because you pay workers the same amount but they produce le

25、ss).f. False. Marginal costs have nothing to do with fixed costs. The statement would be correct if it was about average costs.8) Carefully explain the difference between diseconomies of scale and diminishing returns. Answer: Diseconomies of scale means that, in the long run, average costs are risin

26、g, usually due to coordination problems or decreasing returns to scale. Diminishing returns means that, in the short run, marginal product is falling (or marginal cost is rising) because each additional worker is producing less than the one before him, due to the fact that capital (or some other fac

27、tor of production) is fixed. There is no connection between these things.9) For each of the following cost functions, find MC, AC, and AVC.a. TC = 20,000+ 10 Qb. TC= 18,000+ Q + 0.2Q2Answer:c. MC= 10AC = (20,000/Q) + 10AVC = 10d. MC = 1 + 0.4QAC = (18,000/Q)+ 1 + 0.2QAVC = 1 + 0.2Q10) For each of th

28、e following cost functions, if possible, find minimum AC and minimum AVC.a. TC = 20,000 + 10 Qb. TC= 18,000+ Q + 0.2Q2Answer:a. Set MC 二 AC.10 二(20,000/Q) + 10In this case, AC is decreasing everywhere, and thus there is no minimum average cost (although it will approach $10). Set MC = AVC.10= 10MC 二

29、 AVC = 10 for all values of Q in this instance.b. Set MC = AC.1 + 0.4Q = (18,000/Q) + 1 + 0.2QQ = 300, and at that point, AC = $121.Set MC = AVC.1 + 0.4Q = 1 + 0.2QQ = 0, and at that point, AVC = $1.11) Given the total cost function TC = 100 + 40Q - 15Q2 + 5Q3, calculate thea. average fixed cost fun

30、ction (AFC)b. average variable cost function (AVC)c. marginal cost function (MC) Answer:a. AFC = 100/Qb. AVC = 40- 15Q + 5Q2c. MC = 40-30Q+ 15Q2 12) Given the production function Q = 21X + 9X2 - x3, where Q = Output, and X = Inputa. At what value of X does Stage II of the production function begin?b

31、. At what value of X does Stage III of the production function begin?c. At what value of X does diminishing returns set in?Answer:a. Stage II begins when AP is at a maximum, or X = 4.5b. Stage III begins where MP = 0, or X = 7 -1 has no meaningc. diminishing returns set in when MP at a maximum, or d

32、MP/dQ = 0, or X = 35) Which of the following distinctions does not help to explain the difference between relevant and irrelevant cost?A) historical vs. replacement costB) sunk vs. incremental costC) variable vs. fixed costD) out-of-pocket vs. opportunity costE) All help to explain the difference.An

33、swer: DDiff: 26) Costs of production that change with the rate of output areA) sunk costs.B) opportunity costs.C) fixed costs.D) variable costs.Answer: DDiff: 17) Changes in the short-run total costs result from changes in onlyA) variable costs.B) fixed costs.C) zero.D) total fixed costs.Answer: ADi

34、ff: 18) Economic profit equals accounting profit minusA) explicit costs.B) implicit costs.C) fixed costs.D) variable costs.Answer: BDiff: 19) Which of the following is most likely a fixed cost?A) expenditures for raw materialsB) wages for unskilled laborC) fuel costD) property taxesAnswer: DDiff: 11

35、0) Average fixed costA) does not change as total output increases or decreases.B) varies directly with total output.C) falls continuously as total output expands.D) rises as the output is expanded.Answer: CDiff: 111) Average fixed cost isA) AC minus A VC.B) TC divided by Q.C) A VC minus MC.D) TC min

36、us TVC.Answer: ADiff: 112) Which of the following cost relationships is not true?A) AFC = AC - MCB) TVC = TC - TFCC) The change in TVC/the change in Q = MCD) The change in TC/ the change in Q = MCAnswer: ADiff: 213) When a firm increased its output by one unit, its AFC decreased. This is an indicati

37、on that A) the law of diminishing returns has taken effect.B) MC AFC.C) A VC AFC.D) the firm is spreading out its total fixed cost.Answer: DDiff: 314) The distinction between sunk and incremental costs is most helpful in answering which question?A) How many more people should be added to the product

38、ion process?B) What is the correct price to charge?C) Should we begin to build a new factory?D) Should we continue developing a new software application that we began last year?Answer: DDiff: 215) Which of the following relationships is correct?A) When marginal product starts to decrease, marginal c

39、ost starts to decrease.B) When marginal cost starts to increase, average cost starts to increase.C) When marginal cost starts to increase, average variable cost starts to increase.D) When marginal product starts to decrease, marginal cost starts to increase.Answer: DDiff: 216) The relationship betwe

40、en MC and AC can best be described asA) when AC increases, MC starts to increase.B) when MC increases, AC starts to increase.C) when MC decreases, AC decreases.D) when MC exceeds AC, AC increases.Answer: DDiff: 217) The law of diminishing returns begins first to affect a firms short-run cost structu

41、re when A) average variable cost begins to increase.B) marginal cost begins to increase.C) average cost begins to increase.D) average fixed cost begins to decrease.Answer: BDiff: 218) When a firm increased its output by one unit, its AC rose from $45 to $50, This implies that its MC isA) $5.B) betwe

42、en $45 and $50.C) greater than $50.D) Cannot be determined from the above informationAnswer: CDiff: 319) When a firms MC curve shifts to the right, it implies thatA) new firms are entering the market.B) labor productivity is decreasing.C) labor productivity is increasing.D) the firms overhead costs

43、are decreasing.Answer: CDiff: 320) MC increases becauseA) MC naturally increases as the firm nears capacity.B) labor is paid overtime wages when volume increases.C) in the short run, MC always increases.D) the law of diminishing returns takes effect.Answer: DDiff: 321) The marginal cost will interse

44、ct the average variable cost curveA) when the average variable cost curve is rising.B) where average variable cost curve equals price.C) at the minimum point of the average variable cost curve.D) The two will never intersect.Answer: CDiff: 222) Which of the following cost functions will exhibit both

45、 decreasing and increasing marginal costs?A) a cubic cost functionB) a quadratic cost functionC) a linear cost functionD) All of the aboveAnswer: ADiff: 223) Which of the following statements best represents a difference between short-run and long-run cost?A) Less than one year is considered the sho

46、rt run; more than one year the long run.B) There are no fixed costs in the long run.C) In the short-run labor must always be considered the variable input and capital the fixed input.D) All of the above are true.Answer: BDiff: 124) When a firm increased its output by one unit, its AC decreased. This implies thatA) MC AC.B) MC = AC.C) MC AFC.D) the law of diminishing returns has not y