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Test Bank for Chapter 9 Long-Run Costs and Output Decisions {Elementary Microeconomic Theory (Econ 211) Verified Solutions
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Test Bank for Chapter 9 Long-Run Costs and Output Decisions {Elementary Microeconomic Theory (Econ 211) Verified Solutions

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  • November 17, 2024
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  • elementary microeconomic theory econ 211

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11/9/24, 10:08 AM Ch9 - Testbanks




Chapter9 Long-RunCostsandOutputDecisions

9.1 Short-RunConditionsandLong-RunDirections
1 MultipleChoice

1) Assumefirmsbreakeveninanindustry.Newfirms________attractedtotheindustry and
currentones________exitingit.
A) arenot;arenot B) arenot;are
C) are;arenot D) are;are
Answer: A
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Fact

2) Firmsthatareʺbreakingevenʺare
A) earningzeroeconomicprofits.
B) earninglessthananormalrateofreturn.
C) shuttingdownintheshortrun.
D) Alloftheabovearecorrect.
Answer: A
Diff:1
Topic: Short-RunConditionsandLong-RunDirections
Skill: Definition

3) Intheshortrun,firmsearningaprofitwillwantto________theirprofitswhilefirmssuffering
losseswillwantto________theirlosses.
A) maximize;maximize B) maximize;minimize
C) minimize;maximize D) minimize;minimize
Answer: B
Diff:1
Topic: Short-RunConditionsandLong-RunDirections
Skill: Fact

4) Intheshortrun,
A) allfirmsthatearnalosswillshutdown.
B) ifcurrentfirmsareearningaprofit,newfirmswillentertheindustry.
C) firmsacttominimizelossesormaximizeprofits.
D) Alloftheabovearecorrect.
Answer: C
Diff:1
Topic: Short-RunConditionsandLong-RunDirections
Skill: Conceptual




254




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RefertoScenario9.1toanswerthefollowingquestions.

SCENARIO9.1:Amyborrowed$20,000fromherparentstoopenabagelshop.Shepaysherparentsa5%
yearlyreturnonthemoneytheylenther.Herotheryearlyfixedcostsequal$9,000.Hervariablecostsequal
$30,000.Inherfirstyear,Amysold40,000dozenatapriceof$1.50perdozen.

5) RefertoScenario9.1.Amyʹstotalfixedcostsequal
A) $1,000. B) $9,000. C) $10,000. D) $21,000.
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

6) RefertoScenario9.1.Amyʹstotalcostsequal
A) $39,000. B) $40,000. C) $50,000. D) $59,000.
Answer: B
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

7) RefertoScenario9.1.Amyʹsprofitis
A) $0. B) $20,000. C) $30,000. D) $50,000.
Answer: B
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

RefertoScenario9.2belowtoanswerthefollowingquestions.

SCENARIO9.2:Tomborrowed$40,000fromhisparentstoopenadonutstand.Heagreestopayhis
parentsa5%yearlyreturnonthemoneytheylenthim.Hisotheryearlyfixedcostsequal$10,000.His
variablecostsequal$25,000.Hesold40,000dozendonutsduringtheyearatapriceof$2.00perdozen.

8) RefertoScenario9.2.Tomʹstotalfixedcostsequal
A) $1,000. B) $10,000. C) $12,000. D) $21,000.
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

9) RefertoScenario9.2.Tomʹstotalcostsequal
A) $37,000. B) $40,000. C) $50,000. D) $59,000.
Answer: A
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills



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10) RefertoScenario9.2.Tomʹstotalrevenuewas
A) $30,000. B) $40,000. C) $45,000. D) $80,000.
Answer: D
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

11) RefertoScenario9.2.Tomʹsprofitis
A) $0. B) $26,000. C) $30,000. D) $43,000.
Answer: D
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

RefertoScenario9.3toanswerthefollowingquestions.

SCENARIO9.3:Investorsputup$520,000toconstructabuildingandpurchaseallequipmentforanew
restaurant.Theinvestorsexpecttoearnaminimumreturnof10percentontheirinvestment.The
restaurantisopen52weeksperyearandserves900mealsperweek.Thefixedcostsarespreadoverthe52
weeks(i.e.proratedweekly).Includedinthefixedcostsisthe10%returntotheinvestorsand$1000per
weekinotherfixedcosts.Variablecostsinclude$1000inweeklywagesand$600perweekformaterials,
electricity,etc.Therestaurantcharges$5onaveragepermeal.

12) RefertoScenario9.3.Thenormalreturntotheinvestorsonaweeklybasisis
A) $600 B) $1,000 C) $3,600 D) $4,500
Answer: B
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

13) RefertoScenario9.3.Totalfixedcostsperweekare
A) $1,000 B) $2,000 C) $3,000 D) $4,500
Answer: B
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

14) RefertoScenario9.3.Totalvariablecostsperweekare
A) $600 B) $1,000 C) $1,600 D) $2,000
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills




256




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15) RefertoScenario9.3. Totalcostperweekis
A) $1,000 B) $1,600 C) $2,000 D) $3,600
Answer: D
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

16) RefertoScenario9.3. Totalrevenueperweekis
A) $3,000 B) $4,000 C) $4,500 D) $8,100
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

17) RefertoScenario9.3. Economicprofitperweekis
A) -$400 B) $0 C) $600 D) $900
Answer: D
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

18) RefertoScenario9.3. Therestaurantismaking________economicprofitsperweek.
A) positive B) zero C) negative D) breakeven
Answer: A
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

19) RefertoScenario9.3. Iftherestaurantweretoshutdown,lossesperweekwouldbe
A) $1,000 B) $1,600 C) $2,000 D) $3,600
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills

20) RefertoScenario9.3.Theoperatingprofitperweekoftherestaurantis
A) $0 B) $900 C) $2,900 D) $3,600
Answer: C
Diff:2
Topic: Short-RunConditionsandLong-RunDirections
Skill: Analytic
AACSB: AnalyticSkills




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