ms3033_2025T2_Q1_NA.pdf

Managerial Economics · Quiz 1 · May 2025

Questions and published explanations below are available without starting a test. Some questions may not have a published solution yet.

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

B1
A1
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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.

Question 286 MCQ · 1.0 marks

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

Leasing computer time
Gasoline
Money you pay grocers
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.

Question 287 MCQ · 1.0 marks

Your implicit cost will be

$300 car payment
$100 a month insurance cost
Your wage at campus dining hall $6 an hour
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.

Question 288 NAT · 1.0 marks

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: $\$100$.

Question 289 MCQ · 1.0 marks

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?______________

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.

Question 290 MCQ · 2.0 marks

[[IMAGE:ae164fd019ba4bb3_5_0]] Answer the given subquestions for this consumer.

Choose the correct alternative

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
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
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.

Question 291 MCQ · 2.0 marks

[[IMAGE:ae164fd019ba4bb3_5_0]] Answer the given subquestions for this consumer.

Choose the incorrect alternative

This consumer’s preferences exhibit a diminishing marginal utility of x
This consumer’s preferences exhibit a diminishing marginal utility of y
Both this consumer’s preferences exhibit a diminishing marginal utility of x & This consumer’s preferences exhibit a diminishing marginal utility of y
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.

Question 292 MCQ · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_6_1]] Based on the above data, answer the given subquestions.

[[IMAGE:ae164fd019ba4bb3_6_2]]

[[IMAGE:ae164fd019ba4bb3_6_3]]
[[IMAGE:ae164fd019ba4bb3_6_4]]
[[IMAGE:ae164fd019ba4bb3_6_5]]
[[IMAGE:ae164fd019ba4bb3_6_6]]

Published solution

**1. Given:** $Q=50\sqrt{LK}$, $w=20$, $r=5$. **2. Cost-minimizing rule:** $MRTS=\frac{MP_L}{MP_K}=\frac{w}{r}$. \[ MP_L=25\sqrt{K/L},\quad MP_K=25\sqrt{L/K}\;\Rightarrow\;MRTS=\frac{K}{L} \] **3. Solve:** \[ \frac{K}{L}=\frac{20}{5}=4 \] **4. Conclude:** $K/L=4$. Answer: A — 4. A: **Correct:** $K/L=w/r=20/5=4$. B: **Incorrect:** This is $L/K$, not $K/L$. C: **Incorrect:** $5$ is not $w/r$. D: **Incorrect:** $1/5$ is not equal to $w/r$.

Question 293 NAT · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_6_1]] 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: $L^*=10$.

Question 294 NAT · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_6_1]] 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? K$^{*}$= ______________

Published solution

**1. Use the ratio:** $K=4L$. **2. Find L:** $50\sqrt{L\cdot4L}=1000\Rightarrow100L=1000\Rightarrow L=10$. **3. Find K:** $K=4\times10=40$. Answer: $K^*=40$.

Question 295 NAT · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_8_7]] Based on the above data, answer the given subquestions.

What will be the average fixed cost if company produces 50 units ________________

Published solution

**1. Concept:** Fixed cost is the constant term: $FC=300$. $AFC=FC/q$. **2. Calculate:** \[ AFC=\frac{300}{50}=6 \] Answer: $6$.

Question 296 NAT · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_8_7]] Based on the above data, answer the given subquestions.

What is marginal cost of company at q=50? _____________

Published solution

**1. Concept:** $MC=\frac{dTC}{dq}$. **2. Differentiate:** $MC=50+2q$. **3. At $q=50$:** $MC=50+2(50)=150$. Answer: $150$.

Question 297 NAT · 1.0 marks

[[IMAGE:ae164fd019ba4bb3_8_7]] Based on the above data, answer the given subquestions.

What is average variable cost at q=50? _______________

Published solution

**1. Concept:** $VC=50q+q^2$, and $AVC=\frac{VC}{q}=50+q$. **2. At $q=50$:** $AVC=50+50=100$. Answer: $100$.