Which Of The Following Will Increase The Break Even Quantity

Question: Which of the following will increase the break-even quantity?

1. A decrease in overall fixed costs

2. b. A decrease in the marginal costs

3. c. A decrease in the price level

4. d. An increase in price level

5. Answer: c. A decrease in the price level

6. An increase in the break-even quantity implies that it takes you longer (need to produce and sell

7. more units) before you can break even. In that case, an increase in FC, an increase in MC, or a

8. reduction in price will cause the break-even quantity to increase.

9. Question:

10. Answer: b. the more value individuals place on current dollars

11. c. less investments will take place

12. Question:

13. Answer:

14. Question:

15. Answer: a. 5

16. $500 + $50 x Q = $250 + $100 x Q

17. Q = 5 units. If you expect to sell more than 5 units use the high-FC/Low-MC technology, if less than 5,

18. use the low-FC/high-MC technology

19. Question: What is the net present value of a project that requires a $100 investment today and returns $50 at the

20. end of the first year and $80 at the end of the second year? Assume a discount rate of 10%.

21. a. $10.52

22. b. $11.57

23. c. $18.18

24. d. $30.00

25. Answer: b. $11.57

26. -$100 + $50/1.1 + $80/1.1^2 = $11.57

27. Question: You expect to sell 500 cell phones a month, which have a marginal cost of $50. If your fixed costs are

28. $5,000 per month, what is the break-even price?

29. a. $10

30. b. $50

31. c. $60

32. d. $100

33. Answer: c. $60

34. At this point, all your costs are avoidable. Thus,

35. [$5,000 + $50 x 500]/500 = $60

36. Question:

37. Answer: d. 17,500

38. FC / (P - MC) = $350,000 / ($100 - $80) = 17,500

39. Question: Which of the following is NOT true if a firm shuts down and produces zero output in the short run?

40. a. Variable costs will be zero.

41. b. Losses will be incurred.

42. c. Fixed costs will be greater than zero.

43. d. Fixed costs will be less than zero.

44. Answer: d. Fixed costs will be less than zero.

45. Question: What are some of the solutions for a hold-up problem?

46. a. Mergers

47. b. Contracts

48. c. Exchange of ‘hostages’

49. d. All the above

50. Answer: d. All the above

51. Question: Which of the following is classified as a sunk cost?

52. a. Cost of the next best alternative

53. b. Additional cost of producing an additional unit

54. c. Research costs to determine the implementation of a technology

55. d. Total cost of producing a product

56. Answer: c. Research costs to determine the implementation of a technology