1.A manufacturer produces 1,000 basketballs each day, which it sells to customers for $30 each. All costs associated with production and sales total $10,000; however, if the manufacturer were to produce one additional basketball per day, total costs would increase to $10,100. From these amounts, we can tell that

a)the firm has negative profit.

b)marginal cost equals $100.

c)marginal cost equals $150.

d) marginal cost equals marginal revenue.

2.. A firm can hire 10 workers at a wage of $10 but has to pay a wage of $12 to get 11 workers.What is the marginal cost of the 11th worker?

a) $12

b) $32

c) $100

d) $132

3.To maximize profits, you should produce at the point where

a)you maximize the amount by which marginal revenue exceeds marginal costs.

b)you minimize total costs.

c)you maximize total benefit.

d)marginal benefits and marginal costs are just equal.

4.A basketball company is considering purchasing a new machine that doubles capacity from 100 to 200 balls per day. The machine will occupy 1,000 square feet of unused space on the factory floor. Which costs are irrelevant in this decision to purchase a machine?

a)Rental expense associated with the 20,000 square foot factory.

b)Additional personnel required to operate the machine.

c)Additional electricity required to operate the machine.

d)Maintenance cost for routine cleaning of the machine.

5.A sofa manufacturer can produce 10 sofas for $2,500 and 12 sofas for $2,760.What is the difference between the average cost per sofa for 12 sofas and the marginal cost of the 12th sofa?

a) $100

b) $130

c) $230

d) $260

6.Which of the following would be considered an extent decision?

a)A business is considering diversifying into a new line of business.

b) A business is considering shutting down operations.

c)A business is considering the sale of an underperforming line of business.

d)A business manager is trying to decide how many workers to hire for a new line of business.

7.Of the following types of costs, which is most likely a fixed cost for a shoe manufacturer?

a)Inventory costs.

b)Cost of the leather used to produce shoes.

c)Electricity costs to run manufacturing equipment.

d)An NBA player's lump-sum royalty payment to endorse the shoe.

8.A spirits manufacturer is considering two potential production investments:

Option A costs an initial $2 billion and will involve variable costs (labor and material) of $5 per bottle of spirits.Option B costs an initial $4 billion and will involve variable costs (labor and material) of $3 per bottle of spirits.Assuming an annual capital charge equal to 10 percent of the initial costs, what is the average fixed cost at production level of 20,000,000 bottles per year for the Option B facility?

a)$3.

b)$20.

c)$23.

d)$10.

9.You are hiring for a job that requires employees to work collaboratively on work that requires a high degree of mental and creative energy (there is a great deal of uncertainty regarding if the job can even be completed).The job does not require much physical effort.Which of the following do you believe would be most effective compensation package?

a)A salary that pays slightly more than what the going rate is.

b)A low salary, but a bonus based on the completion of certain creative tasks.

c)No salary, but just a bonus system for each job completed.

d)A salary below the current going rate

10. A few years ago, a Professor earning $40,000 decided to quit her job and open her own painting company.She took $50,000 out of her investment account earning 10% per year.She hired one employee.Suppose she generated $300,000 in sales.Total material and salary cost was $190,000.Calculate the accounting profit and economic profit for the professor of opening the business.

a)110,000; 65,000

b)85,000; 125,000

c)110,000; 20,000

d)125,000; 65,000

e)None of the above.