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Question 284 MCQ · 1.0 marks
A family of five. Husband is the bodyguard of a famous film star and Wife does the cooking in the
same star’s house. No children. The husband has studied till 12\(^{th}\) class in school and the wife is
just about literate but has no formal schooling. The husband takes care of managing the expenses
for the whole family
6406534314207.
B1
6406534314208.
A1
6406534314209.
A2
6406534314210.
C
6406534314211.
D
**Managerial Economics**
**Section Id :** 64065391707
**Section Number :** 14
**Section type :** Online
**Mandatory or Optional :** Mandatory
**Number of Questions :** 10
**Number of Questions to be attempted :** 10
**Section Marks :** 25
**Display Number Panel :** Yes
**Section Negative Marks :** 0
**Group All Questions :** No
**Enable Mark as Answered Mark for Review and**
No
**Clear Response :**
**Section Maximum Duration :** 0
**Section Minimum Duration :** 0
**Section Time In :** Minutes
**Maximum Instruction Time :** 0
A published solution is not available for this question yet.
Imagine that you have started a snack food delivery business on your college campus. Students
send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at
local grocery stores to fill these orders and then deliver the orders. To operate this business, you
pay $500 a month to lease computer time from a local Web-hosting company to use its server to
host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make
deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each
order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you
fill an order, you pay the grocer for the merchandise. You then collect a payment, including a
delivery fee, from the students to whom you sell. If you did not operate this business, you could
work at the campus dining hall, earning $6 an hour. Right now, you operate your business five
days a week, Monday through Friday. On weekends, your business is idle, and you work in the
campus dining hall.
Based on the above data, answer the given subquestions.
Your explicit costs include
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Leasing computer time
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Gasoline
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Money you pay grocers
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All of these
Published solution
**1. Concept:** Explicit costs are actual money payments to outsiders.
**2. Check:** Computer leasing ($500), gasoline ($0.50 per order) and money paid to grocers are all cash payments to others.
**3. Conclude:** All of these are explicit costs.
Answer: D — All of these.
A: **Incorrect:** It is explicit, but the other two are explicit too.
B: **Incorrect:** It is explicit, but the other two are explicit too.
C: **Incorrect:** It is explicit, but the other two are explicit too.
D: **Correct:** All three are cash payments to outsiders.
Imagine that you have started a snack food delivery business on your college campus. Students
send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at
local grocery stores to fill these orders and then deliver the orders. To operate this business, you
pay $500 a month to lease computer time from a local Web-hosting company to use its server to
host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make
deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each
order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you
fill an order, you pay the grocer for the merchandise. You then collect a payment, including a
delivery fee, from the students to whom you sell. If you did not operate this business, you could
work at the campus dining hall, earning $6 an hour. Right now, you operate your business five
days a week, Monday through Friday. On weekends, your business is idle, and you work in the
campus dining hall.
Based on the above data, answer the given subquestions.
Your implicit cost will be
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$300 car payment
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$100 a month insurance cost
6406534314220.
Your wage at campus dining hall $6 an hour
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All of these
Published solution
**1. Concept:** Implicit costs are opportunity costs of resources you own, with no cash payment.
**2. Check:** The car payment and insurance are cash payments (explicit). The $6 per hour you could earn at the dining hall is income you give up by using your own time.
**3. Conclude:** The implicit cost is your dining hall wage of $6 an hour.
Answer: C — Your wage at campus dining hall $6 an hour.
A: **Incorrect:** This is a cash payment, so it is explicit.
B: **Incorrect:** This is a cash payment, so it is explicit.
C: **Correct:** It is forgone income from your own time.
D: **Incorrect:** Only the dining hall wage is implicit.
Imagine that you have started a snack food delivery business on your college campus. Students
send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at
local grocery stores to fill these orders and then deliver the orders. To operate this business, you
pay $500 a month to lease computer time from a local Web-hosting company to use its server to
host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make
deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each
order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you
fill an order, you pay the grocer for the merchandise. You then collect a payment, including a
delivery fee, from the students to whom you sell. If you did not operate this business, you could
work at the campus dining hall, earning $6 an hour. Right now, you operate your business five
days a week, Monday through Friday. On weekends, your business is idle, and you work in the
campus dining hall.
Based on the above data, answer the given subquestions.
Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not
accept delivery. You paid $200 for these cases. You have a deal with your grocers that they will pay
you $0.5 for each dollar of returned merchandise. Just this week, you found a fraternity on campus
that will buy the five cartons for $125 (and will pick them up from your apartment, relieving you of
the need to deliver them to the frat house).
What is the opportunity cost of filling this order in $ (i.e., selling these cartons to the fraternity)?
_______________
Published solution
**1. Concept:** Opportunity cost is the value of the best alternative given up. The $200 already paid is a sunk cost.
**2. Alternative:** The grocers pay $0.50 per dollar of returned merchandise:
\[
0.5\times200=\$100
\]
**3. Conclude:** Selling to the fraternity means giving up the $100 refund.
Answer: \(\$100\).
Imagine that you have started a snack food delivery business on your college campus. Students
send you orders for snacks, such as potato chips and candy bars, via the Internet. You shop at
local grocery stores to fill these orders and then deliver the orders. To operate this business, you
pay $500 a month to lease computer time from a local Web-hosting company to use its server to
host and maintain your website. You also own a sports utility vehicle (SUV) that you use to make
deliveries. Your monthly car payment is $300, and you pay $100 a month in insurance costs. Each
order that you fill takes, on average, a half hour and consumes $0.50 worth of gasoline. When you
fill an order, you pay the grocer for the merchandise. You then collect a payment, including a
delivery fee, from the students to whom you sell. If you did not operate this business, you could
work at the campus dining hall, earning $6 an hour. Right now, you operate your business five
days a week, Monday through Friday. On weekends, your business is idle, and you work in the
campus dining hall.
Based on the above data, answer the given subquestions.
Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not
accept delivery. You paid $200 for these cases. You have a deal with your grocers that they will pay
you $0.5 for each dollar of returned merchandise. Just this week, you found a fraternity on campus
that will buy the five cartons for $125 (and will pick them up from your apartment, relieving you of
the need to deliver them to the frat house).
Should you sell the Fritos to the fraternity?______________
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Yes
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No
Published solution
**1. Compare:** The fraternity pays $125. The best alternative is returning the goods to the grocers for \(0.5\times200=\$100\). The $200 paid is sunk.
**2. Decide:** \(125>100\), so selling gives $25 more.
**3. Conclude:** Yes, sell the Fritos to the fraternity.
Answer: A — Yes.
A: **Correct:** The fraternity pays $125, more than the $100 refund.
B: **Incorrect:** Rejecting $125 for a $100 refund would lose $25.
This consumer believes that more is better for each good, x and y
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Marginal utility of the good x is independent of x and marginal utility of the
good y is independent of y
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Both this consumer believes that more is better for each good, x and y &
Marginal utility of the good x is independent of x and marginal utility of the good y is independent
of y
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None
Published solution
**1. Given:** \(U(x,y)=y\sqrt{x}\).
**2. Marginal utilities:**
\[
MU_x=\frac{y}{2\sqrt{x}}>0,\qquad MU_y=\sqrt{x}>0
\]
**3. Check the options:** Both are positive, so more of each good is better. But \(MU_x\) depends on \(x\) (and \(y\)), and \(MU_y\) depends on \(x\), so the second statement is false.
**4. Conclude:** Only the first statement is correct.
Answer: A — This consumer believes that more is better for each good, x and y.
A: **Correct:** Both marginal utilities are positive, so more is better.
B: **Incorrect:** \(MU_x\) depends on \(x\), so it is not independent of \(x\).
C: **Incorrect:** The second statement is false, so the combined option is false.
D: **Incorrect:** The first option is correct.
This consumer’s preferences exhibit a diminishing marginal utility of x
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This consumer’s preferences exhibit a diminishing marginal utility of y
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Both this consumer’s preferences exhibit a diminishing marginal utility of x &
This consumer’s preferences exhibit a diminishing marginal utility of y
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None
Published solution
**1. Concept:** Diminishing marginal utility means marginal utility falls as the good's quantity rises.
**2. Check x:** \(MU_x=\frac{y}{2\sqrt{x}}\) falls as \(x\) rises. So diminishing MU of \(x\) is **true**.
**3. Check y:** \(MU_y=\sqrt{x}\) does not change with \(y\); it is constant in \(y\). So diminishing MU of \(y\) is **false**.
**4. Conclude:** The question asks for the incorrect statement, which is the one about \(y\).
Answer: B — This consumer’s preferences exhibit a diminishing marginal utility of y.
A: **Incorrect:** This statement is true, so it is not the incorrect one.
B: **Correct:** This statement is false because \(MU_y=\sqrt{x}\) is constant in \(y\), so it is the incorrect one.
C: **Incorrect:** This is false since the statement about \(y\) is false.
D: **Incorrect:** One statement is incorrect, so 'None' is wrong.
Based on the above data, answer the given subquestions.
What is the cost-minimizing input combination if the firm wants to produce 1,000 units per year?
L\(^{*}\)= ___________________
Published solution
**1. Use the ratio:** From the cost-minimizing rule, \(K=4L\).
**2. Use the output target:**
\[
50\sqrt{L\cdot4L}=1000\;\Rightarrow\;100L=1000\;\Rightarrow\;L=10
\]
Answer: \(L^*=10\).
Based on the above data, answer the given subquestions.
Find the optimal input combination given that the firm wishes to produce 200 units of output.
L\(^{*}\)= _______________
Published solution
**1. Compare output per dollar:** \(\frac{MP_L}{w}=\frac{5}{5}=1\) and \(\frac{MP_K}{r}=\frac{2}{2}=1\). Both inputs give the same output per dollar.
**2. Choose a corner:** The firm can use only capital. For \(Q=200\): \(2K=200\Rightarrow K=100\) and \(L=0\).
**3. Check cost:** \(5(0)+2(100)=\$200\), the same as any other mix on the isoquant.
Answer: \(L^*=0\).
**Review note:** Because \(MP_L/w=MP_K/r=1\), every point on the isoquant has the same cost of $200, so the optimum is not unique. The supplied key picks the corner \(L=0\), \(K=100\), and this is a valid cost-minimizing choice.
Based on the above data, answer the given subquestions.
Find the optimal input combination given that the firm wishes to produce 200 units of output.
K\(^{*}\)= ________________
Published solution
**1. Compare output per dollar:** \(MP_L/w=MP_K/r=1\), so the inputs are equally cost-effective.
**2. Choose the corner with only capital:** \(2K=200\Rightarrow K=100\).
**3. Check cost:** \(2\times100=\$200\).
Answer: \(K^*=100\).
**Review note:** Because \(MP_L/w=MP_K/r=1\), every point on the isoquant has the same cost of $200, so the optimum is not unique. The supplied key picks the corner \(L=0\), \(K=100\), and this is a valid cost-minimizing choice.
The Cobb-Douglas production function F(K,L)=K\(^{p}\)L\(^{q}\)
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Never exhibits decreasing returns to scale
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Shows constant returns to scale if p+q=1
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Has constant marginal product of labour
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Has constant marginal product of capital
Published solution
**1. Concept:** For \(F=K^pL^q\), scaling both inputs by \(\lambda\) scales output by \(\lambda^{p+q}\).
**2. Apply:** If \(p+q=1\), output scales by \(\lambda\): constant returns to scale. If \(p+q<1\), returns decrease.
**3. Conclude:** The correct statement is constant returns to scale if \(p+q=1\).
Answer: B — Shows constant returns to scale if p+q=1.
A: **Incorrect:** With \(p+q<1\) there are decreasing returns to scale.
B: **Correct:** \(p+q=1\) gives constant returns to scale.
C: **Incorrect:** \(MP_L=qK^pL^{q-1}\) changes with \(L\) unless \(q=1\).
D: **Incorrect:** \(MP_K=pK^{p-1}L^q\) changes with \(K\) unless \(p=1\).
When average product is decreasing in labor, marginal product is greater than average product.
6406534314251.
TRUE
6406534314252.
FALSE
Published solution
**1. Concept:** If MP is above AP, AP rises. If MP is below AP, AP falls.
**2. Apply:** AP is decreasing, so MP < AP, not greater.
**3. Conclude:** The statement is false.
Answer: B — FALSE.
A: **Incorrect:** If AP is falling, MP is below AP.
B: **Correct:** The statement is reversed, so it is false.
When average product is increasing in labor, marginal product is less than average product.
6406534314253.
TRUE
6406534314254.
FALSE
Published solution
**1. Concept:** AP rises when MP > AP.
**2. Apply:** If AP is increasing, MP is greater than AP. The statement says less, which is the opposite.
**3. Conclude:** The statement is false.
Answer: B — FALSE.
A: **Incorrect:** If AP is rising, MP is above AP.
B: **Correct:** MP > AP when AP is increasing, so the statement is false.
When average product **AP**L is at a maximum, then marginal product is equal to average product
6406534314255.
TRUE
6406534314256.
FALSE
**Game Theory and Strategy**
**Section Id :** 64065391708
**Section Number :** 15
**Section type :** Online
**Mandatory or Optional :** Mandatory
Published solution
**1. Concept:** AP rises while MP > AP and falls while MP < AP.
**2. Apply:** At the maximum of AP, MP = AP. (Formally, \(\frac{d}{dL}\frac{q}{L}=\frac{MP-AP}{L}=0\).)
**3. Conclude:** The statement is true.
Answer: A — TRUE.
A: **Correct:** MP crosses AP at AP's maximum.
B: **Incorrect:** The statement is true.
