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Exam 8: Cost Theory and Estimation

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Question 51

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International outsourcing can potentially expose a firm to increased risks of delay in production and quality issues.

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Question 52

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Sunk costs are not relevant to managerial decisions.

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Question 53

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What percent of corporations currently have expertise in logistics?

The firm increased production from 200,000 to 400,000 units and the total costs increased from $5,000,000 to $7,000,000. What is the marginal cost associated with this increase in production?

If TC=50+10Q-12Q^²+Q^³, find total variable cost, average variable cost and marginal cost functions. At what level of output is the average variable cost the lowest? At what level of output is the marginal cost the lowest?

If the long-run average cost curve slopes upward over some range of output, then the firm is experiencing increasing returns to scale over that range of output.

Your firm has estimated the total variable cost and total fixed cost functions to be TVC=-10Q+2Q^²,TFC=200. If your firm is selling the product for $300, what is the break-even output? At what output does the firm maximize its profits?

The long-run average cost curve is at a minimum at a level of output where

Breakeven analysis identifies the

Oceanview Construction, Inc., has the following short-run total cost schedule: $\begin{array} { l r r r r r r r r r r r } Q & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \\T C & 75 & 85 & 91 & 94 & 95 & 98 & 104 & 114 & 129 & 151 & 181\end{array}$ (i)What is the firm's average fixed cost when Q = 5? (ii)What is the firm's average variable cost when Q = 4? (iii)What is the firm's average total cost when Q = 10? (iv) What is the firm's marginal cost when Q = 8? (v) At what level of output does the firm begin to experience diminishing returns?

A manager of a firm was given the following table. Compute the average fixed costs (AFC), average variable costs (AVC), average total costs (ATC) and marginal costs (MC) for indicated levels of output. $\begin{array} { | l | l | l | l | l | l | l | } \hline \text { Output } & \begin{array} { l } \text { Total } \\\text { Variable } \\\text { Cost }\end{array} & \begin{array} { l } \text { Total } \\\text { Cost }\end{array} & \text { AFC } & \text { AVC } & \text { ATC } & \text { MC } \\\hline 0 & 0 & 30 & & & & \\\hline 1 & 20 & 50 & & & & \\\hline 2 & 30 & 60 & & & & \\\hline 3 & 48 & 78 & & & & \\\hline\end{array}$

Use the following to answer questions below: -Refer to the short-run per-unit cost curves graph. Which of the four curves represents average total cost?

A manager of a firm was given the following table. Compute the average fixed costs (AFC), average variable costs (AVC), average total costs (ATC) and marginal costs (MC) for indicated levels of output. $\begin{array} { | l | l | l | l | l | l | l | } \hline \text { Output } & \begin{array} { l } \text { Total } \\\text { Variable } \\\text { Cost }\end{array} & \begin{array} { l } \text { Total } \\\text { Cost }\end{array} & \text { AFC } & \text { AVC } & \text { ATC } & \text { MC } \\\hline 0 & 0 & 20 & & & & \\\hline 1 & 40 & 60 & & & & \\\hline 2 & 60 & 80 & & & & \\\hline 3 & 90 & 110 & & & & \\\hline\end{array}$

If the firm's average total costs are $200 per unit and average fixed costs are $70 per unit, what are the average variable costs?

If the output levels at which short-run marginal and average cost curves reach a minimum are listed in order from smallest to greatest, then the order would be:

If the firm's total costs are $2,200,000 and total variable costs are $1,300,000, what are the total fixed costs?

The centralized management of all functions involved in a firm's relationships with suppliers and customers is called

Firms that produce more than one type of product cannot benefit from economies of scope.

The survival technique

Use the following to answer questions below: -Refer to the graph of the short-run total cost and total variable cost curves. At what level of output is marginal cost increasing?