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University of the Cumberlands MBA 531 Assignment One Chapters 1The One Lesson of Business & Benefits, Costs, and Decisions MULTIPLE CHOICE 1)One lesson of business: a

Economics

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University of the Cumberlands

MBA 531

Assignment One

Chapters 1The One Lesson of Business & Benefits, Costs, and Decisions

MULTIPLE CHOICE

1)One lesson of business:

a.            is tracing the consequences of a policy.

b.            promoting a policy change to eradicate inefficiencies.

c.             moving assets from lower to higher value uses, thereby creating wealth.

d.            None of the above

2.            An individual’s value for a good or service is the

a.            The amount of money he or she used to pay for a good

b.            The amount of money he or she is willing to pay for it

c.             The amount of money he or she has to spend on goods

d.            None of the above

3.            The difference between Capitalism and Socialism is that

a.            Capitalism is concerned more about how to slice up the “pie”

b.            Socialism is concerned with making the “pie” as large as possible

c.             Capitalism is concerned with making the “pie” as large as possible

d.            Both A and B

4.            A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at

$24,000, the transaction will generate:

a.            No surplus

b.            $4,000 worth of seller surplus and unknown amount of buyer surplus c. $6,000 worth of buyer surplus and $4,000 of seller surplus

d. $6,000 worth of buyer surplus and unknown amount of seller surplus

5.            A consumer values a car at $30,000 and a producer values the same car at $20,000. The transaction will not take place if a tax is imposed

a.            equal to the seller surplus

b.            smaller than the total surplus

c.             larger than the total surplus

d.            smaller than the buyer surplus

6.            A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at

$24,000, what level of sales tax will result in unconsummated transaction?

a.            0%

b. 25%

c. 20%

d. 40%

7.            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 buyer, then, what would be the highest price that the buyer would be willing to pay?

a. $525,000

b. $523,800

c. $485,000

 

8.            The difference between the maximum price the consumer is willing to pay and the price the consumer actually pays for a product is referred to as:

a.            market surplus.

b.            market shortage. c. consumer surplus.

d. producer surplus.

9.            Price ceilings are primarily intended to help

a.            No one

b.            Consumers

c.             Producers

d.            Government

10.          Government can intervene in the market through

a.            Price floors

b.            Price ceilings

c.             Taxes

d.            All the above

11.          Variable costs are

a.            costs that vary with output

b.            not important in decision making

c.             costs that do not vary with output

d.            equal to total costs

12.          A business incurs the following costs per unit: Labor $125/unit; Materials $45/unit and

rent $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal

a.            $125Million

b.            $45Million

c.             $1Million

d.            $170Million

13.          Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her accounting profit?

a. $300,000 b. $60,000

c. $450,000

d. $240,000

14.          A business owner makes 1000 items a day. Each day she spends 8 hours producing those items. If hired, elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her economic profit?

a. $300,000

b. $60,000

c. $450,000

 

15.          Which of the following statements is true?

a.            Economic profits ignore implicit costs.

b.            Economic profits include implicit costs.

c.             Accounting profits include all of the opportunity costs.

d.            Economists consider sunk costs in their decision making.

16.          Jim is planning on attending a football game. He spent $40 on the ticket. He will have to take the day off losing 8 hours of work. His hourly wage is $10. He estimates it will cost him around $20 for gas and parking at the game. Jim’s total economic cost of attending the game equals

a. $80

b. $40

c. $60

d. $140

 

17.          You and two partners start a company. However, your partners play no role in running the company. You spend all your time managing the business. The time that you could have spent working for someone else and earning wages instead of running the business is your:

a.            explicit cost.

b.            marginal cost.

c.             sunk cost.

d.            opportunity cost.

 

18.          After graduating from college, Jim had two choices. He can either move to Florida, from Philadelphia, where he can work as an analyst and earn $60,000 or he can stay in Philadelphia and work in a car dealership earning $59,000. His opportunity cost of moving to Florida includes

a.            The benefits he could have received from playing soccer

b. $59,000

c. both a and b

d. none of the above

19.          A manager invests $400,000 in a technology that should reduce the overall costs of production. The company managed to reduce their cost per unit from $2 to $1.85. After the investment has been made, the

$400,000 investment is

a.            Considered sunk costs, not relevant in further decision making

b.            Considered sunk costs, but still relevant in further decision making

c.             Considered a loss

d.            Considered a profit

20.          The fixed-cost fallacy occurs when

a.            A firm considers sunk costs in making decisions

b.            A firm ignores relevant costs

c.             A firm considers overhead or depreciation costs in making decisions

d.            Both a and c

 

SHORT ESSAYS

 

1.            Taco Casa is considering installing touch screen terminals for patrons to place their food orders. A terminal can typically accommodate the placement of 15 orders each hour while a human can process 20 orders each hour. If employee costs are $7.50/hour in wages and $4.50/hour in taxes, benefits and insurance, what is the per order opportunity cost of a touch screen?

 

2.            BMC is considering upgrading the sound systems in their theaters so that patrons can get the full experience from surround sound movies. They discovered that upgrade costs at locations with 12 screens were $170,000 but were $110,000 at locations with six screens. What are the fixed costs of upgrading at a location?

 

 

3.            A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at $24,000, the transaction will generate:

a.            No surplus

b.            $4,000 worth of seller surplus and unknown amount of buyer surplus c. $6,000 worth of buyer surplus and $4,000 of seller surplus

d. $6,000 worth of buyer surplus and unknown amount of seller surplus

 

 

4.            A consumer values a car at $30,000 and a producer values the same car at $20,000. If the transaction is completed at $24,000, what level of sales tax will result in unconsummated transaction?

a. 0%

b. 25%

c. 20%

d. 40%

 

 

5.            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 buyer, then, what would be the highest price that the buyer would be willing to pay?

a. $525,000

b. $523,800

c. $485,000 d. $486,111

 

6. Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her accounting profit?

a. $300,000 b. $60,000

c. $450,000

d. $240,000

 

 

7.            A business owner makes 1000 items a day. Each day she spends 8 hours producing those items. If hired, elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her economic profit?

a. $300,000

b. $60,000

c. $450,000 d. $240,000