1)Marginal measurements provide a numerical value to the responsiveness of a fun
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Question
1)Marginal measurements provide a numerical value to the responsiveness of a function to changes in one of the variables in the function. (True/False)
2)The profit function only includes variable costs. (true/false)
3)Which of the following expenditures can be considered as a variable cost?
License fee
Shipping charge
Insurance premium
Rent paid to an apartment owner
4) Which of the following curves constantly declines as the number of units produced increases?
Average variable cost
Total cost
Average fixed cost
Marginal revenue
5) The details of the production process of a certain commodity and its market price is given below:
Price/unit (P) = $2
Quantity produced (Q) = 12,000
Variable cost/unit (V) = $0.50
Fixed cost (F) = $14,000
What is the breakeven amount of quantity produced?
9,333
7,000
6,333
8,667
6) The demand function for a good is given as: Q = 10 – 2P, where Q = quantity demanded and P = market price/unit of the good.
If Q = 6 in equilibrium, compute the revenue earned by the firm.
$10
$16
$12
$14
7) Marginal profit can be:
the amount of decrease in profit if the production declines by one unit.
the amount of increase in profit if the total cost increases by one unit.
the amount of increase in profit if the variable cost decreases by one unit.
the amount of decreases in profit if the revenue falls by one unit.
8) The cost of producing ice cream is $1.20 per unit. The market sale is targeted as 1,000 units per month. What will be the monthly profit if the revenue is $2,200 per month?
$1,500
$1,200
$1,300
$1,000
9) Which of the following is an exception to the law of demand?
All the beach resorts raised their tariffs in the peak season.
The sale of gold jewelry went up in spite of a sustained increase in its price.
Almost all the automobile companies lowered their price levels owing to lack of demand.
Major discounts were given in the retail garment stores just prior to Christmas.
10) The demand function for a good is given as: Q = 10 – 2P, where Q = quantity demanded and P = market price/unit of the good. The cost function is given as: C = 8 + 0.5 × Q, where C = total cost.
What is the profit function ()?
= 5Q2 – 4.5Q – 8
= – 0.5Q2 + 5Q – 8
= – 0.5Q2 + 4.5Q – 8
= 0.5Q2 – 5Q – 8
Explanation / Answer
1. Marginal measurements provide a numerical value to the responsiveness of a function to changes in one of the variables in the function. - True.
2. The profit function only includes variable costs. False.
3. Which of the following expenditures can be considered as a variable cost? Shipping charge. As it changes with time and also the quantity of product.
4. Which of the following curves constantly declines as the number of units produced increases? - Average fixed cost curve. The AFC starts from a height and goes on declining continuously as production increases.
5. The breakeven amount of quantity produced is 9,333. To calculate BREAKEVEN POINT OF QUANTITY PRODUCED we need to divide FIXED COST by PRICE - VARIABLE COST. 14000/(2-0.50)= 14000/1.5= 9333 (rounded off to two demical place.)
6. To get the revenue earned by the firm we first need to compute the price of a unit of good produced. We know, Q=10-2p, where Q=6, SO, 6=10-2p , 2p=10-6, p=2.
Now, if the price is $2 and equlibrium quantity is 6units then the revenue earned by the firm will be $12, ($2 x 6).
7. Marginal profit can be the amount of increase in profit if the total cost increases by one unit.
8. If the cost of productin is $1.20 per unit and the sales target is 1000 unit. The total production cost will be (1.20 x 1000) = $1200, where the total revenue earned is $2200 per month, so the profit will be $(2200-1200)= $1000.
9. The sale of gold jewelry went up in spite of a sustained increase in its price. Because as per the law of demand demand decreases with increasing price.
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