One of your classmates asserts that advertising, marketing research, and brand
management are redundant expenditures because a firm can obtain the same
information by simply looking at what customers are already buying. Which of the
following is not a response you might offer her?
A) Conducting market research is a good way for firms to keep abreast of changing
consumer tastes and preferences.
B) Advertising and brand management allow a firm to create an entry barrier which will
insulate the firm from competition and from undertaking further product innovations.
C) Marketing research could allow a firm to identify new market opportunities and at
least, in the short run, a firm can make a profit supplying products to this market
segment.
D) If a firm successfully manages its brand, customers become less price sensitive as
they perceive fewer substitutes for the firm’s brand.
Tax laws affect
A) economic efficiency but not equity.
B) equity but not economic efficiency.
C) consumption and production, not efficiency and equity.
D) both efficiency and equity.
Vipsana’s Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to
make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed
cost of $120 per day. Calculate Vipsana’s average fixed cost per day when she produces
50 gyros using two workers?
A) $2.00
B) $2.40
C) $4.40
D) $6.80
Under the Patient Protection and Affordable Care Act (ACA), individuals who do not
have health insurance will be subject to a fine.
Perfectly competitive firms produce up to the point where the price of the good equals
the marginal cost of producing the last unit. This condition is referred to as
A) productive efficiency.
B) constant returns to scale.
C) allocative efficiency.
D) perfectly competitive efficiency.
Which of the following explains why a firm would be interested in the knowing the
price elasticity of demand for a good it sells?
A) The price elasticity of demand can be used to determine the impact of changes in
income on quantity sold.
B) Knowing the price elasticity of demand allows the firm to determine how the cost of
producing additional units of the good will change.
C) Knowing the price elasticity of demand allows the firm to calculate how changes in
the price of the good will affect the firm’s total profit.
D) The price elasticity of demand allows the firm to calculate how changes in the price
of the good will affect the firm’s total revenue.
The ability to exercise control over one’s own resources within the confines of the law
refers to
A) the free market.
B) one’s property rights.
C) entrepreneurship.
D) having an absolute advantage.
Table 11-9
Clock It To Me manufactures clock radios. The table above shows estimates of fixed
cost per period and average variable cost for three possible plant sizes. a. You are
employed as the company’s cost accountant and have been asked to prepare cost
estimates for various output levels for each of the three possible plant sizes. Record
your calculations in the table below.
Average Cost of Production
b. For each of the three output levels, which plant size will generate the lowest average
total cost of production?
c. Suppose the firm currently sells 8,000 clock radios per period (using the optimal
plant size for this output level). Now, however, it has just secured a long-term contract
to supply 20,000 clock radios per period. In the short run, what is the average total cost
of producing 20,000 clock radios? Provide a numerical value based on your answer in
part a.
d. What happens to average total cost of production in the long run? Provide a
numerical value based on your answer in part a.
The price of a financial asset should be equal to
A) the face value of the asset.
B) the present value of the sum of the coupon payments and the interest rate.
C) the face value of the asset divided by the interest rate.
D) the present value of payments to be received from owning that asset.
Table 1-2
Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether
she should extend her hours of operation. Thuy Anh figures that her sales revenue will
depend on the number of hours the flower shop is open as shown in the table above.
She would have to hire a worker for those hours at a wage rate of $16 per hour. What is
Thuy Anh’s marginal cost if she decides to stay open for three hours instead of two
hours?
A) $0
B) $16
C) $25
D) $32
E) $45