Test Bank Answers Chapter.10 Production And Cost Estimation - Foundations of Business Analysis 13th Edition | Test Bank with Answer Key by Christopher R. Thomas. DOCX document preview.
Chapter 10: PRODUCTION AND COST ESTIMATION
Multiple Choice
10-1 Which of the following specifications could NOT be employed for estimating a short run production function?
b. 
c. Q = AL3 + BL2
d. both a and b
e. all of the above
Difficulty: 02 Medium
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-01
10-2 Which of the following is an estimable form of a production function?
- Q = f(L, K)
- Q = f(L,
) 
- all of the above
Difficulty: 01 Easy
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 10-01
10-3 Which of the following represents a short-run cubic production function?
a.
b. 
c. 
d. 
Difficulty: 01 Easy
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 10-01
10-4 With a cubic production function of the form 
, in order for the average and marginal product functions to have their usual theoretical properties, it must be the case that
a. a < 0, b > 0
b. a > 0, b < 0
c. a < 0, b < 0
d. a > 0, b > 0
Difficulty: 02 Medium
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-01
10-5 When estimating a short-run production function of the form 
, it is necessary to specify in the computer routine that
a. A < 0.
b. B > 0.
c. the intercept term is forced to equal zero.
d. a and b
e. all of the above
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-02
10-6 When estimating a short-run average variable cost function,
a. the intercept must be forced to equal zero.
b. the cost data must be inflation-adjusted.
c. at least one input must have been constant during the period in which the data were collected.
d. both b and c
e. all of the above
Difficulty: 02 Medium
Topic: Short-Run Cost Estimation: Some Problems with Measuring Cost
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-03
10-7 An average variable cost function is estimated as
Which of the following cost functions is associated with this estimate?
a. SMC = 96 – 4Q + 0.1Q2
b. TVC = 96Q – 2Q2 + 0.05Q3
c. TVC = 96Q + 4Q2 + 0.15Q3
d. SMC = 96 – 4Q + 0.15Q2
e. both b and d
Difficulty: 03 Hard
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-04
10-8 A theoretical restriction on the short-run cubic cost equation, TVC = aQ + bQ + cQ2, is
a. a > 0, b > 0, c > 0
b. a > 0, b < 0, c > 0
c. a > 0, b > 0, c < 0
d. a > 0, b < 0, c < 0
Difficulty: 03 Hard
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-04
10-9 A short-run production function was estimated as
At what level of labor usage does the maximum average product occur?
a. 20
b. 30
c. 40
d. 50
e. 60
Difficulty: 03 Hard
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-02
10-10 A short-run production function was estimated as
What is average product when it is at its maximum level?
a. 3.20
b. 8.75
c. 6.92
d. 6.00
e. 9.40
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-11 A short-run production function was estimated as
What is total product when average product is at its maximum level?
a. 94
b. 86
c. 100
d. 128
e. 150
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-12 A short-run production function was estimated as
At 20 units of labor, what is average product?
a. 6.0
b. 1.9
c. 6.3
d. 4.0
e. 2.4
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-13 A short-run production function was estimated as
At 20 units of labor, what is marginal product?
a. 6.0
b. 1.9
c. 6.3
d. 4.0
e. 2.4
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-14 A short-run production function was estimated as
At 20 units of labor, what is total product?
a. 48
b. 96
c. 20
d. 62
e. 41
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-15 A short-run production function was estimated as
At 60 units of labor, what is average product?
a. 9.4
b. 8.6
c. 3.7
d. 2.4
e. 6.4
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-16 A short-run production function was estimated as
At 60 units of labor, what is marginal product?
a. 4.1
b. 1.2
c. 6.3
d. 2.4
e. −2.4
Difficulty: 03 Hard
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-01
10-17 An estimated short-run cost function
a. can be used to make price and output decisions.
b. holds the capital stock constant.
c. can be estimated using time-series data.
d. both a and c
e. all of the above
Difficulty: 01 Easy
Topic: Estimation of a Short-Run Cost Function
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 10-04
10-18 The opportunity cost of capital owned by the firm should reflect
a. acquisition cost.
b. the return foregone by using the capital rather than renting it to another firm.
c. wage rate differences.
d. both a and b
Difficulty: 01 Easy
Topic: Short-Run Cost Estimation: Some Problems with Measuring Cost
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 10-03
10-19 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
The estimated short-run marginal cost function (SMC) at Straker Industries is:
a. 
b. 
c. 
d. 
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-20 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
At what level of output is average variable cost (AVC) at its minimum point for Straker Industries?
a. 0.14
b. 4.7
c. 7
d. 14
e. 28
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-21 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
At Straker Industries, average variable cost (AVC) reaches its minimum value at $________.
a. $24.50
b. $33.60
c. $72.80
d. $121.80
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-22 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 20 units of output, what is estimated average variable cost (AVC)?
a. $19.40
b. $67.40
c. $171.40
d. $179.40
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-23 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 20 units of output, what is estimated total variable cost (TVC)?
a. $1,348
b. $1,498
c. $2,348
d. $4,428
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-24 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 20 units of output, what is estimated total cost (TC)?
a. $1,348
b. $1,498
c. $2,348
d. $4,428
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-25 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 20 units of output, what is estimated average total cost (ATC)?
a. $19.40
b. $67.40
c. $117.40
d. $1,348
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-26 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 20 units of output, what is estimated short-run marginal cost (SMC)?
a. $171.40
b. $463.20
c. $1,348
d. $2,348
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-27 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 12 units of output, what is estimated average variable cost (AVC)?
a. $28.04
b. $32.40
c. $33.33
d. $38.60
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-28 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 12 units of output, what is estimated total variable cost (TVC)?
a. $171.40
b. $463.20
c. $1,348
d. $2,348
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-29 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 12 units of output, what is estimated total cost (TC)?
a. $1,000
b. $1,463
c. $2,348
d. $4,428
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-30 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 12 units of output, what is estimated average total cost (ATC)?
a. $121.93
b. $171.40
c. $463.20
d. $1,348
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-31 Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
DEPENDENT VARIABLE: | AVC | R−SQUARE | F−RATIO | P−VALUE ON F | |
OBSERVATIONS: | 35 | 0.8713 | 108.3 | 0.0001 | |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T−RATIO | P−VALUE | |
INTERCEPT | 43.40 | 13.80 | 3.14 | 0.0036 | |
Q | −2.80 | 0.90 | −3.11 | 0.0039 | |
Q2 | 0.20 | 0.05 | 4.00 | 0.0004 | |
If Straker Industries produces 12 units of output, what is estimated short-run marginal cost (SMC)?
a. $28.04
b. $32.40
c. $33.33
d. $62.60
Difficulty: Marginal cost
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-32 For the short-run cost function AVC = a + bQ + cQ2,
a. the AVC curve is 
-shaped when a < 0, b > 0, and c < 0.
b. the AVC curve is 
-shaped when a > 0, b < 0, and c > 0.
c. the corresponding SMC function is 
.
d. both a and c
e. all of the above
Difficulty: 03 Hard
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 10-04
10-33 A cubic specification for a short-run production function is appropriate when the scatter diagram indicates
a. an S-shaped total product curve.
b. marginal product of labor falls throughout the range of labor usage.
c. total product is decreasing throughout the range of labor usage.
d. an S-shaped marginal product of labor curve.
e. a 
-shaped marginal product of labor curve (MP first falls and then rises as labor usage increases.
Difficulty: 01 Easy
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 10-01
10-34 When estimating a cubic short-run production function 
using linear regression analysis, you must
a. transform the equation into linear form by defining L3 and L2 as L3 and L2, respectively.
b. suppress the intercept term (regress through the origin).
c. convert the right-hand-side variables to logarithms.
d. both a and b
e. both b and c
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-02
10-35 The empirical specification 
can be used to estimate
a. a short-run cubic production function.
b. short-run cubic cost function.
c. a 
-shaped TVC curve.
d. both b and c
e. none of the above
Difficulty: 01 Easy
Topic: Estimation of a Short-Run Cost Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-04
10-36 The empirical specification 
can be used to estimate
a. a short-run cubic production function.
b. short-run cubic cost function.
c. a family of U-shaped product curves.
d. both a and c
e. none of the above
Difficulty: 01 Easy
Topic: Specification of the Short-Run Production Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-01
10-37 A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital. The product curve(s) in the short-run are
a. TP = –12.96 L3 + 1,728L2.
- AP = –12.96 L3 + 1,728L2.
c. MP = –38.88 L2 + 3,456L.
d. both a and b
e. both a and c
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-02
10-38 A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital. At _______ units of labor, marginal product of labor begins to diminish.
a. 32.21
b. 44.44
c. 66.67
d. 76.66
e. 82.27
Difficulty: 03 Hard
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-02
10-39 A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital. At ________ units of labor, average product of labor begins to diminish.
a. 32.21
b. 44.44
c. 66.67
d. 76.66
e. 82.27
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-02
10-40 A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital. Marginal product when 10 units of labor are employed is
a. 12,248
b. 13,142
c. 14,287
d. 15,984
e. 30,672
Difficulty: 02 Medium
Topic: Specification of the Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-01
10-41 A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital. Average product when 10 units of labor are employed is
a. 12,248
b. 13,142
c. 14,287
d. 15,984
e. 30,672
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Production Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-02
10-42 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. At what level of output does average variable cost (AVC) reach its minimum value for Greene Enterprises?
a. 800
b. 3,144
c. 3,800
d. 4,333
e. 51,672
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-43 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. At Greene Enterprises, average variable cost (AVC) reaches its minimum value at $________.
a. $28.00
b. $31.67
c. $39.64
d. $43.33
e. $82.00
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-44 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. What is total variable cost (TVC) at Greene Enterprises when average variable cost (AVC) is at its minimum?
a. $48,000
b. $101,101
c. $137,222
d. $190,476
e. $437,212
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-45 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene Enterprises produces 6,000 units, average variable cost (AVC) is $_________.
a. $40
b. $49.62
c. $55
d. $60
e. $72.46
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-46 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. If Greene Enterprises produces 6,000 units of output, what is estimated short-run marginal cost (SMC)?
a. $45.60
b. $62.40
c. $83
d. $92
e. $100
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-47 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. If Greene Enterprises produces 6,000 units of output, what is estimated average total cost (ATC)?
a. $40
b. $75.25
c. $80
d. $90
e. $168.42
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-48 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene’s output is 6,000 units, average variable cost (AVC) is
- rising
- falling
- greater than short-run marginal cost
- less than short-run marginal cost
- both a and d
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-49 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene’s output is 2,000 units, what is average variable cost (AVC)?
a. $20
b. $48
c. $62
d. $72
e. $85
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-50 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene’s output is 2,000 units, average variable cost (AVC) is
a. rising
b. falling
c. greater than short-run marginal cost
d. less than short-run marginal cost
e. both b and c
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-51 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene’s output is 2,000 units, what is short-run marginal cost (SMC)?
a. $20
b. $42
c. $72
d. $90
e. $100
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-52 The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene’s output is 2,000 units, what is total cost (TC)?
a. $144,000
b. $396,000
c. $444,000
d. $642,000
e. $846,000
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 10-04
10-53 A short-run marginal cost function is estimated as
. Which of the following cost functions is associated with this estimated SMC equation?
a. TVC = 96Q – 2Q2 + 0.05Q3
b. SMC = 96 – 4Q + 0.1Q2
c. TVC = 96Q + 4Q2 + 0.15Q3
d. AVC = 96 – 2Q + 0.05Q2
e. a and d
Difficulty: 02 Medium
Topic: Estimation of a Short-Run Cost Function
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 10-04
Document Information
Connected Book
Foundations of Business Analysis 13th Edition | Test Bank with Answer Key
By Christopher R. Thomas
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