Managerial Economics Christopher Thomas 13th Edition- Test Bank
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Sample Test
Chapter 3:MARGINAL ANALYSIS FOR OPTIMAL
DECISIONS
Multiple
Choice
3-1 A firm will maximize profit
by producing that level of output at which
1. the
additional revenue from the last unit sold exceeds the additional cost of the
last unit by the largest amount.
2. the
additional revenue from the last unit sold equals the additional cost of the
last unit.
3. total
revenue exceeds total cost by the largest amount.
4. total
revenue equals total cost.
5. both b and c
Answer: e
Difficulty: 02 Medium
Topic: Concepts and Terminology
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-02
3-2 The function a decision
maker seeks to maximize or minimize is the ________ function.
1. optimal
2. decision-making
3. objective
4. marginal
5. none
of the above
Answer: c
Difficulty: 01 Easy
Topic: Concepts and Terminology
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 03-01
3-3 Choice variables
1. determine
the value of the objective function
2. determine
the constraint
3. can
only take on integer values
4. cannot
be continuous
5. both c and d
Answer: a
Difficulty: 01 Easy
Topic: Concepts and Terminology
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 03-01
3-4 For an unconstrained
maximization problem
1. the
decision maker seeks to maximize net benefits.
2. the
decision maker seeks to maximize total benefits.
3. the
decision maker does not take cost into account because there is no constraint.
4. the
decision maker does not take the objective function into account because there
is no constraint.
5. none
of the above
Answer: a
Difficulty: 02 Medium
Topic: Concepts and Terminology
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-01
3-5 When marginal cost is
greater than marginal benefit at the current activity level, the decision maker
can increase net benefit by decreasing the activity because
1. total
benefit will rise by more than total cost will rise.
2. marginal
cost is rising faster than marginal benefit is falling.
3. net
benefit is upward sloping at this point.
4. total
cost will fall by more than total benefit will fall.
Answer: d
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-6 For a constrained
minimization problem, the decision maker
1. is
constrained by the specific amount of total benefits.
2. is
constrained by the choice set of values for the activities.
3. seeks
to minimize the cost of achieving a specific goal.
4. all
of the above
5. none
of the above
Answer: d
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-03
3-7 A continuous choice
variable
1. must
be continuously varied to attain the goal.
2. can take
on only special values between two end points.
3. is in
unconstrained but not constrained problems.
4. all
of the above
5. none
of the above
Answer: e
Difficulty: 01 Easy
Topic: Concepts and Terminology
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 03-01
3-8 An agency is having
problems with personal phone calls made during working hours. Each minute of a
personal call costs the agency $0.50 in wasted wages. The agency hires
operators to monitor calls in order to attain the optimal number of personal
calls (minimize total cost of personal calls).
|
Number of
Operators
|
Total minutes of personal calls (per
hour) |
|
0 |
600 |
|
1 |
480 |
|
2 |
410 |
|
3 |
370 |
|
4 |
350 |
Based on the above information, if operators receive $25 an
hour, how many operators should the agency hire?
1. 0
2. 1
3. 2
4. 3
5. 4
Answer: c
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-9 An agency is having
problems with personal phone calls made during working hours. Each minute of a
personal call costs the agency $0.50 in wasted wages. The agency hires
operators to monitor calls in order to attain the optimal number of personal
calls (minimize total cost of personal calls).
|
Number of
Operators
|
Total minutes of personal calls (per
hour) |
|
0 |
600 |
|
1 |
480 |
|
2 |
410 |
|
3 |
370 |
|
4 |
350 |
Based on the above information, if operators receive $25 an
hour, what is the minimum possible total cost of personal calls (per hour)?
1. $460
2. $255
3. $120
4. $ 85
5. none
of the above
Answer: b
Difficulty: 03 Hard
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-10 An agency is having problems with
personal phone calls made during working hours. Each minute of a personal call
costs the agency $0.50 in wasted wages. The agency hires operators to monitor
calls in order to attain the optimal number of personal calls (minimize total
cost of personal calls).
|
Number of
Operators
|
Total minutes of personal calls (per
hour) |
|
0 |
600 |
|
1 |
480 |
|
2 |
410 |
|
3 |
370 |
|
4 |
350 |
Based on the above information, what is the most the agency
would be willing to pay the first operator?
1. $480
2. $300
3. $240
4. $120
5. none
of the above
Answer: e
Difficulty: 03 Hard
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-11 Refer to the figure below, which shows
marginal benefits (MB)
and marginal cost (MC)
of activity A:
If the decision maker is choosing 200 units of activity A,
1. this
level maximizes net benefits.
2. the
activity could be reduced by one unit and net benefits will increase by $10.
3. the
activity could be increased by one unit and net benefits will increase by $10.
4. the
activity could be increased by one unit and net benefits will increase by $25.
5. the
activity could be reduced by one unit and net benefits will increase by $15.
Answer: c
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-12 Refer to the figure below, which shows
marginal benefits (MB)
and marginal cost (MC)
of activity A:
If the decision maker is choosing 400 units of activity A,
1. this
level maximizes net benefits.
2. the
activity could be reduced by one unit and net benefits will increase by $10.
3. the
activity could be reduced by one unit and net benefits will rise by $25.
4. the
activity could be increased by one unit and net benefits will increase by $15.
5. the
activity could be reduced by one unit and net benefits would decrease by $10.
Answer: b
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-13 Refer to the figure below, which shows
marginal benefits (MB)
and marginal cost (MC)
of activity A:
If the decision maker is choosing 300 units of activity A,
1. this
level maximizes net benefits.
2. if
the activity is increased by one unit, net benefits will increase by $20.
3. if
the activity is decreased by one unit, net benefits will decrease by $20.
4. both b and c
5. all
of the above
Answer: a
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-14 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an engineer
is $40,000 while a market researcher receives $20,000. The marginal contribution
of engineers and market researchers are:
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
240 |
1st |
80 |
|
2nd |
200 |
2nd |
70 |
|
3rd |
160 |
3rd |
60 |
|
4th |
100 |
4th |
50 |
|
5th |
40 |
5th |
40 |
Based on the above information, how should a manager with an
annual budget of $140,000, allocate this budget in order to maximize the number
of new products developed?
1. Hire
one engineer and five market researchers
2. Hire
two engineers and three market researchers
3. Hire
three engineers and one market researcher
4. Hire
four engineers and four market researchers
Answer: c
Difficulty: 03 Hard
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Analyze
Learning Objective: 03-03
3-15 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an
engineer is $40,000 while a market researcher receives $20,000. The marginal contribution
of engineers and market researchers are:
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
240 |
1st |
80 |
|
2nd |
200 |
2nd |
70 |
|
3rd |
160 |
3rd |
60 |
|
4th |
100 |
4th |
50 |
|
5th |
40 |
5th |
40 |
Based on the above information, if the manager has an annual
budget of $140,000 and currently is hiring two engineers and three market
researchers, then
1. the
last dollar spent on an engineer yielded more new products than the last dollar
spent on a market researcher.
2. the
last dollar spent on a market researcher yielded more new products than the
last dollar spent on an engineer.
3. he is
making the correct decision because engineers make more than market
researchers.
4. he is
making the correct decision because the last market researcher hired was more
productive than the last engineer hired.
Answer: a
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-16 A manager in charge of new product development
can hire engineers and market researchers.The annual salary of an engineer is
$40,000 while a market researcher receives $20,000. The marginal contribution
of engineers and market researchers are:
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
240 |
1st |
80 |
|
2nd |
200 |
2nd |
70 |
|
3rd |
160 |
3rd |
60 |
|
4th |
100 |
4th |
50 |
|
5th |
40 |
5th |
40 |
Based on the above information, how should a manager with an
annual budget of $240,000, allocate this budget in order to maximize the number
of new products developed?
1. Hire
three engineers and four market researchers.
2. Hire
three engineers and five market researchers.
3. Hire
five engineers and two market researchers.
4. Hire
four engineers and four market researchers.
Answer: d
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-17 The decision rule for constrained
optimization is to select the level for each activity at which
1. marginal
benefit equals marginal cost for each activity.
2. total
benefit equals total cost for each activity.
3. marginal
benefit per dollar of marginal cost is equal across all activities.
4. total
benefit per dollar of total cost is equal across all activities.
Answer: c
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-03
3-18 A student taking economics, statistics,
and finance has decided to spend 9 hours per week studying. The objective is to
maximize the average grade, which means maximizing the total grade in the three
courses. The table shows the student’s estimate of the relation between time
spent studying each course and the grade for each course.
|
|
Grade In |
||
|
Hours of Study |
Economics |
Statistics |
Finance |
|
0 |
50 |
42 |
56 |
|
1 |
62 |
54 |
68 |
|
2 |
71 |
64 |
76 |
|
3 |
79 |
72 |
82 |
|
4 |
85 |
80 |
87 |
|
5 |
88 |
84 |
90 |
|
6 |
90 |
87 |
93 |
|
7 |
92 |
89 |
95 |
Based on the above information, how should the student allocate
her time?
1. 3
hours economics, 4 hours statistics, 2 hours finance
2. 3
hours economics, 3 hours statistics, 3 hours finance
3. 4
hours economics, 3 hours statistics, 2 hours finance
4. 3
hours economics, 2 hours statistics, 4 hours finance
Answer: a
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-19 A student taking economics, statistics,
and finance has decided to spend 9 hours per week studying. The objective is to
maximize the average grade, which means maximizing the total grade in the three
courses. The table shows the student’s estimate of the relation between time
spent studying each course and the grade for each course.
|
|
Grade In |
||
|
Hours of Study |
Economics |
Statistics |
Finance |
|
0 |
50 |
42 |
56 |
|
1 |
62 |
54 |
68 |
|
2 |
71 |
64 |
76 |
|
3 |
79 |
72 |
82 |
|
4 |
85 |
80 |
87 |
|
5 |
88 |
84 |
90 |
|
6 |
90 |
87 |
93 |
|
7 |
92 |
89 |
95 |
Based on the above information, what is the maximum AVERAGE
grade the student can earn if she studies 9 hours per week?
1. 80
2. 3
3. 82
4. 3
Answer: d
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB:Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-20 Use the following marginal benefit and
marginal cost functions for activity A:
MB = 100 – 5A
MC = 20 + 3A
The optimal level of A is
1. 40
2. 30
3. 20
4. 10
5. 0
Answer: d
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-21 Use the following marginal benefit and
marginal cost functions for activity A:
MB = 100 – 5A
MC = 20 + 3A
The fifth unit of activity A will
75.
increase net benefits by 75.
76.
reduce net benefits by 35.
77.
increase net benefits by 40.
78.
decrease net benefits by 40.
79.
reduce net benefits by 75.
Answer: c
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-22 In order to minimize the net cost of
pollution reduction, the level of pollution reduction (the amount of a
pollutant not released into the environment) should be the level at which
1. the
marginal benefit of reducing pollution exceeds the marginal cost of reducing
pollution by the greatest possible amount.
2. the
total benefit of reducing pollution equals the total cost of reducing
pollution.
3. the
marginal benefit of reducing pollution equals the marginal cost of reducing
pollution.
4. the
total cost of reducing pollution is minimized and the total benefits of reducing
pollution are maximized.
Answer: c
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-23 When the choice variable is a
continuous variable, the decision rule for an unconstrained maximization
problem is:
1. If MB>MC, increase the
activity.
2. If MB<MC, decrease the
activity.
3. Choose
the activity so that MB = MC.
4. all
of the above
5. none
of the above
Answer: d
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-24 If profits depend on both how much is
produced (output) and on the level of advertising, then a profit-maximizing
firm should choose the levels of output and advertising at which
1. the
marginal revenue of output equals the marginal cost of output.
2. the
addition to total revenue of the last unit of advertising equals the addition
to total cost of the last unit of advertising.
3. total
revenue equals total cost for both output and advertising.
4. both a and b
5. both b and c
Answer: d
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-25 Gigi consumes only Perrier and cheese.
In order to maximize her happiness subject to limited income, Gigi should
purchase the amounts of Perrier and cheese at which
1. the
addition to happiness of the last bottle of Perrier is the same as the addition
to happiness of the last pound of cheese.
2. the
addition to happiness per dollar spent on Perrier is the same as the addition
to happiness per dollar spent on cheese.
3. she
spends all her income.
4. both b and c
5. both a and c
Answer: d
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-26 A firm is deciding whether or not to
close down its plant and modernize by installing new technology. Which of the
following should management ignore when making the decision?
1. How
much the present plant cost
2. Cost
of lost sales while the plant is closed
3. Added
cost of the labor needed for the new plant
4. All
of the above
Answer: a
Difficulty: 01 Easy
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-02
3-27 In making a decision about whether to
increase its advertising budget the firm management should not consider
1. the
added revenue from increased sales.
2. the
added cost of producing more goods for sale.
3. interest
payments on the firm’s loan.
4. the
cost of the increased advertising.
Answer: c
Difficulty: 01 Easy
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-02
3-28 Which of the following statements
represents bad decision making?
1. I’ve
already spent 3 years in the college so I can’t drop out and go to work now.
2. I’ve
already paid for the ticket so I might as well stay to the end.
3. I’ve
put in so much time on this paper, I can’t quit now.
4. My
stock has dropped $10 a share so I can’t afford to sell it now.
5. all
of the above.
Answer: e
Difficulty: 01 Easy
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-02
3-29 A firm can maximize profit (net
benefit) by choosing to produce that level of output at which
1. the difference
between the additional revenue from the last unit sold and the additional cost
of that unit is maximized.
2. the
additional revenue from the last unit sold equals the additional cost of that
unit.
3. the
additional revenue from the last unit sold is just a little more than the
additional cost of that unit.
4. total
revenue equals total cost.
Answer: b
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-30 A clinic uses doctors and nurses
optimally and is servicing the maximum number of patients given a limited
annual payroll. The last doctor hired treated 1,600 extra patients in a year,
while the last nurse hired treated 1,000 extra patients in a year. If doctors
make $40,000 a year, what do nurses make?
1. $25,000
a year
2. $20,000
a year
3. $15,000
a year
4. $10,000
a year
Answer: a
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-31 A clinic uses doctors and nurses
optimally and is servicing the maximum number of patients given a limited
annual payroll. The last doctor hired treated 1,600 extra patients in a year,
while the last nurse hired treated 1,000 extra patients in a year. If doctors
make $80,000 a year and nurses make $40,000 a year, then
1. the
clinic could serve more patients by hiring more doctors and fewer nurses.
2. the
clinic could serve more patients by hiring fewer doctors and more nurses.
3. the
clinic is making the correct decision because doctors are more productive than
nurses.
4. the
clinic is not making the correct decision because the additional patients per
dollar spent on doctors is greater than the additional patients per dollar
spent on nurses.
5. both a and d.
Answer: b
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-32 A clinic uses doctors and nurses
optimally and is servicing the maximum number of patients given a limited
annual payroll. The last doctor hired treated 1,600 extra patients in a year,
while the last nurse hired treated 1,000 extra patients in a year. If doctors
make $50,000 a year and nurses make $40,000 a year, then
1. the
clinic could serve more patients by hiring more doctors and fewer nurses.
2. the
clinic could serve more patients by hiring fewer doctors and more nurses.
3. the
clinic is making the correct decision.
4. the
clinic is not making the correct decision because the additional patients per
dollar spent on doctors is greater than the additional patients per dollar
spent on nurses.
5. a and d
Answer: e
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-33 A clinic uses doctors and nurses optimally
and is servicing the maximum number of patients given a limited annual payroll.
The last doctor hired treated 1,600 extra patients in a year, while the last
nurse hired treated 1,000 extra patients in a year. If doctors make $64,000 a
year and nurses make $40,000 a year, then
1. the
clinic could serve more patients by hiring more doctors and fewer nurses.
2. the
clinic could serve more patients by hiring fewer doctors and more nurses.
3. the
clinic is making the correct decision.
4. the
clinic is not making the correct decision because the additional patients per
dollar spent on doctors is greater than the additional patients per dollar
spent on nurses.
5. a and d
Answer: c
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-34 In order to minimize the NET costs
associated with crime,
1. steps
must be taken to eliminate all crime.
2. crime
should be reduced to the level at which the total benefit from crime equals the
total cost of crime prevention.
3. crime
should be reduced to the level at which the marginal cost from crime equals the
marginal cost of crime prevention.
4. no
crime should be eliminated.
Answer: c
Difficulty: 02 Medium
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-35 The optimization rule for unconstrained
optimization is to select that level of activity at which
1. marginal
benefit equals marginal cost.
2. total
benefit is less than total cost.
3. total
benefit is equal to total cost.
4. marginal
benefit exceeds marginal cost.
Answer: a
Difficulty: 01 Easy
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-02
3-36 Whenever the additional revenue from
the last unit of output exceeds the additional cost of that unit, a
profit-maximizing firm should
1. do
nothing, the firm is making profits.
2. produce
less in order to increase profits.
3. produce
more in order to increase profits.
4. think
about investing in another industry.
Answer: c
Difficulty: 01 Easy
Topic: Unconstrained Maximization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-03
3-37 A toy manufacturer is experiencing
quality problems on its assembly line. Every defective toy that leaves the
factory costs the firm $20. The firm has decided to hire quality inspectors to
catch defective toys before they leave the factory.
|
Number of Inspectors |
Number of Defective Toys (per day) |
|
0 |
40 |
|
1 |
24 |
|
2 |
16 |
|
3 |
10 |
|
4 |
6 |
|
5 |
2 |
|
6 |
0 |
Given the above information, if each inspector is paid $100 a
day, how many inspectors should the firm hire to minimize the total cost of
defective toys?
1. 3
2. 4
3. 5
4. 6
Answer: a
Difficulty: 03 Hard
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-38 A toy manufacturer is experiencing
quality problems on its assembly line. Every defective toy that leaves the
factory costs the firm $20. The firm has decided to hire quality inspectors to
catch defective toys before they leave the factory.
|
Number of Inspectors |
Number of Defective Toys (per day) |
|
0 |
40 |
|
1 |
24 |
|
2 |
16 |
|
3 |
10 |
|
4 |
6 |
|
5 |
2 |
|
6 |
0 |
Given the above information, if the cost of each defective toy
rises to $50, while inspectors are paid $150 a day, how many inspectors should
the firm hire?
1. 3
2. 4
3. 5
4. 6
Answer: c
Difficulty: 03 Hard
Topic: Unconstrained Maximization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-39 Gonzo consumes only two things–coke and
hot dogs. We can define the addition to “happiness” of consuming an additional
coke as the marginal utility of coke and that for hot dogs as the marginal
utility of hot dogs. The prices of coke and hot dogs are fixed and Gonzo has a
limited budget. To maximize “happiness” subject to his limited budget, Gonzo
should purchase coke and hot dogs so that
1. the
marginal utility of coke is the same as the marginal utility of hot dogs.
2. he
spends the same amount on coke as on hot dogs.
3. the
addition to happiness of the last coke is the same as the addition to happiness
of the last hot dog.
4. the
addition to happiness per dollar spent on coke is the same as the addition to
happiness per dollar spent on hot dogs.
Answer: d
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Reflective Thinking
Blooms: Understand
Learning Objective: 03-03
3-40 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an
engineer is $30,000 and that of a market researcher is $20,000. The marginal contribution
of engineers and market researchers are
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
50 |
1st |
30 |
|
2nd |
30 |
2nd |
25 |
|
3rd |
15 |
3rd |
20 |
|
4th |
10 |
4th |
15 |
|
5th |
8 |
5th |
10 |
Given the above information, if the manager has an annual budget
of $120,000, how should this budget be allocated in order to maximize the
number of new products developed?
1. Hire
two engineers and one market researcher.
2. Hire
two engineers and three market researchers.
3. Hire
three engineers and two market researchers.
4. Hire
three engineers and four market researchers.
Answer: b
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-41 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an
engineer is $30,000 and that of a market researcher is $20,000. The marginal contribution
of engineers and market researchers are
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
50 |
1st |
30 |
|
2nd |
30 |
2nd |
25 |
|
3rd |
15 |
3rd |
20 |
|
4th |
10 |
4th |
15 |
|
5th |
8 |
5th |
10 |
Given the above information, if the manager currently has two engineers
and one market researcher, what must be true?
1. He is
making the correct decision because .
2. He is
not making the correct decision because .
3. Fewer
new products will be developed if he hires fewer engineers and more market
researchers.
4. More
new products will be developed if he hires fewer engineers and more market
researchers.
Answer: d
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-42 A clinic uses doctors and nurses to
serve the maximum number of patients given a limited annual payroll. The clinic
currently has 10 doctors and 30 nurses. The last doctor hired can serve 300
additional patients, while the last nurse hired can serve 200 additional
patients. If doctors make $60,000 a year and nurses make $20,000 a year, the
clinic
1. is
making the correct hiring decision because doctors are more productive than
nurses.
2. is
making the correct hiring decision because doctors are paid more than nurses.
3. could
serve more patients with the same payroll by hiring more doctors and fewer
nurses.
4. could
serve more patients with the same payroll by hiring more nurses and fewer
doctors.
Answer: d
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-43 The optimal level of pollution
reduction is that level at which
1. the
total benefits of pollution reduction exceeds the total cost of pollution
reduction by the largest amount.
2. the
total benefits of pollution reduction equal the total cost of pollution
reduction.
3. the
marginal benefit of pollution reduction exceeds the marginal cost of pollution
reduction by the largest amount.
4. the
additional benefit of the last unit of pollution reduction equals the additional
cost of the last unit of pollution reduction.
5. both a and d
Answer: e
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-44 A Blue Ribbon Committee has decided
that acid rain should be reduced and is trying to determine the optimal level
of reduction. There are benefits from reducing acid rain (more wildlife and
forests, better health, etc.), but there are also costs. The committee
estimates that the marginal benefit of each unit of reduction is $1,400 – 5R, where R is units of
reduction, and the marginal cost is 2R.
If the committee wants to maximize the net benefit from reducing acid rain,
what is marginal cost at the optimal level of reduction?
1. $ 10
2. $ 20
3. $100
4. $200
Answer: d
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-45 A Blue Ribbon Committee has decided
that acid rain should be reduced and is trying to determine the optimal level
of reduction. There are benefits from reducing acid rain (more wildlife and
forests, better health, etc.), but there are also costs. The committee
estimates that the marginal benefit of each unit of reduction is $700 – 5R, where R is units of
reduction, and the marginal cost is 2R.
If the committee wants to maximize the net benefit from reducing acid rain,
what is the optimal level of pollution reduction?
1. 10
2. 20
3. 100
4. 200
Answer: c
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-46 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an
engineer is $40,000, while a market researcher receives $20,000. The marginal
contributions of engineers and market researchers are:
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
50 |
1st |
20 |
|
2nd |
40 |
2nd |
15 |
|
3rd |
30 |
3rd |
10 |
|
4th |
20 |
4th |
5 |
|
5th |
10 |
5th |
2 |
Based on the above information, how should the manager with an
annual budget of $160,000, allocate this budget in order to maximize the number
of new products developed?
1. Hire
2 engineers and 1 market researcher.
2. Hire
3 engineers and 2 market researchers.
3. Hire
4 engineers and 3 market researchers.
4. Hire
4 engineers and 1 market researcher.
Answer: b
Difficulty: 03 Hard
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-47 A manager in charge of new product
development can hire engineers and market researchers.The annual salary of an
engineer is $40,000, while a market researcher receives $20,000. The marginal
contributions of engineers and market researchers are:
|
Engineers (E) |
Market Researchers (R) |
||
|
Worker |
Additional New Products |
Worker |
Additional New Products |
|
1st |
50 |
1st |
20 |
|
2nd |
40 |
2nd |
15 |
|
3rd |
30 |
3rd |
10 |
|
4th |
20 |
4th |
5 |
|
5th |
10 |
5th |
2 |
Based on the above information, if the manager currently hires
four engineers and one market researcher, what must be true?
1. She
is making the correct decision because .
2. More
new products would be developed if she hires more engineers and fewer market
researchers.
3. More
new products would be developed if she hires fewer engineers and more market
researchers.
4. She
is not making the correct decision because engineers are more productive than
market researchers at all levels of output. .
Answer: c
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-48 A radio manufacturer is experiencing
theft problems at its warehouse and has decided to hire security guards to
reduce the thefts. The firm wants to minimize the net cost of warehouse thefts.
|
Number of Security Guards |
Number of Radios Stolen Per Week |
|
0 |
50 |
|
1 |
30 |
|
2 |
20 |
|
3 |
14 |
|
4 |
8 |
|
5 |
6 |
Given the above info, if each security guard is paid $200 a week
and the cost of a stolen radio is $25, how many security guards should the firm
hire?
1. 1
2. 2
3. 3
4. 4
5. 5
Answer: b
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-49 A radio manufacturer is experiencing
theft problems at its warehouse and has decided to hire security guards to
reduce the thefts. The firm wants to minimize the net cost of warehouse thefts.
|
Number of Security Guards |
Number of Radios Stolen Per Week |
|
0 |
50 |
|
1 |
30 |
|
2 |
20 |
|
3 |
14 |
|
4 |
8 |
|
5 |
6 |
Given the above info, if the cost of a stolen radio is $25, what
is the MOST the firm would be willing to pay to hire the first security guard?
1. $200
2. $250
3. $500
4. $750
Answer: c
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-50 A
radio manufacturer is experiencing theft problems at its warehouse and has
decided to hire security guards to reduce the thefts. The firm wants to
maximize the net benefit of warehouse security guards.
|
Number of Security Guards |
Number of Radios Stolen Per Week |
|
0 |
50 |
|
1 |
30 |
|
2 |
20 |
|
3 |
14 |
|
4 |
8 |
|
5 |
6 |
Given the above info, if each security guard is paid $200 a week
and the cost of a stolen radio is $50, how many security guards should the firm
hire?
1. 1
2. 2
3. 3
4. 4
5. 5
Answer: d
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-51 A radio manufacturer is experiencing
theft problems at its warehouse and has decided to hire security guards to
reduce the thefts. The firm wants to maximize the net benefit of warehouse
security guards.
|
Number of Security Guards |
Number of Radios Stolen Per Week |
|
0 |
50 |
|
1 |
30 |
|
2 |
20 |
|
3 |
14 |
|
4 |
8 |
|
5 |
6 |
Given the above info, in order to minimize the NET cost of
theft, a firm should choose the level of theft prevention at which
1. theft
is eliminated.
2. the
marginal benefit of theft equals the marginal cost of the theft.
3. the
total benefit of theft prevention equals the total cost of the theft
prevention.
4. the
marginal benefit of theft prevention equals the marginal cost of preventing
theft.
5. the
total cost of theft prevention equals the total cost of preventing theft.
Answer: d
Difficulty: 02 Medium
Topic: Concepts and Terminology
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-52 The manager of the customer service
department at a bank can hire employees with a high school degree (HS) who earn $10,000
annually or employees with a bachelor’s degree (B) who earn $20,000. The manager wants to
maximize the number of customers served given a fixed payroll.
|
|
Number of Additional Customers
Served
|
|
|
Worker |
High School Degree |
Bachelor’s Degree |
|
1st |
80 |
90 |
|
2nd |
60 |
80 |
|
3rd |
50 |
60 |
|
4th |
40 |
40 |
|
5th |
35 |
35 |
|
6th |
30 |
25 |
Given the above info, if the manager has a payroll of $80,000,
how should the budget be allocated in order to maximize the number of customers
served?
1. Hire
two HS and
three B.
2. Hire
four HS and
two B.
3. Hire
one HS and
two B.
4. Hire
three HS and
one B.
Answer: b
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-53 The manager of the customer service
department at a bank can hire employees with a high school degree (HS) who earn $10,000 annually
or employees with a bachelor’s degree (B)
who earn $20,000. The manager wants to maximize the number of customers served
given a fixed payroll.
|
|
Number of Additional Customers
Served
|
|
|
Worker |
High School Degree |
Bachelor’s Degree |
|
1st |
80 |
90 |
|
2nd |
60 |
80 |
|
3rd |
50 |
60 |
|
4th |
40 |
40 |
|
5th |
35 |
35 |
|
6th |
30 |
25 |
Given the above info, if the manager currently has three HS and three B, what must be true?
1. More
customers could be served if the manager hires fewer HS and more B.
2. More
customers could be served if the manager hires more HS and fewer B.
3. The
manager is making the correct decision because the marginal contributions are
proportionate.
4. The
manager is not making the correct decision because bachelor’s degree holders
are more productive at all levels of customer served. .
Answer: b
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-54 The manager of the customer service
department at a bank can hire employees with a high school degree (HS) who earn $10,000
annually or employees with a bachelor’s degree (B) who earn $20,000. The manager wants to
maximize the number of customers served given a fixed payroll.
|
|
Number of Additional Customers
Served
|
|
|
Worker |
High School Degree |
Bachelor’s Degree |
|
1st |
80 |
90 |
|
2nd |
60 |
80 |
|
3rd |
50 |
60 |
|
4th |
40 |
40 |
|
5th |
35 |
35 |
|
6th |
30 |
25 |
Given the above info, if the manager’s payroll is $120,000, what
should be done to maximize the number of customers served?
1. Hire
six HS and
three B.
2. Hire
five HS and
five B.
3. Hire
four HS and
four B.
4. Hire
two HS and
five B.
Answer: a
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-03
3-55 A government agency is having problems
with personal telephone calls made during working hours. Because each minute of
a personal call costs the agency $0.50 in wasted wages, it has decided to hire
operators to monitor calls. The agency wants to hire the number of operators
that will minimize the total cost of personal calls.
|
Number of operators |
Minutes of personal calls(per week) |
|
0 |
3900 |
|
1 |
2300 |
|
2 |
1300 |
|
3 |
600 |
|
4 |
100 |
|
5 |
0 |
Based on the above information, if operators receive $300 a
week, how many operators should the agency hire?
1. 0
2. 1
3. 3
4. 5
Answer: c
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
3-56 A government agency is having problems
with personal telephone calls made during working hours. Because each minute of
a personal call costs the agency $0.50 in wasted wages, it has decided to hire
operators to monitor calls. The agency wants to hire the number of operators
that will minimize the total cost of personal calls.
|
Number of operators |
Minutes of personal calls(per week) |
|
0 |
3900 |
|
1 |
2300 |
|
2 |
1300 |
|
3 |
600 |
|
4 |
100 |
|
5 |
0 |
Based on the above information, what is the most the agency
would be willing to pay the fifth operator?
1. $100
2. $200
3. $400
4. $500
5. none
of the above
Answer: e
Difficulty: 02 Medium
Topic: Constrained Optimization
AACSB: Analytical Thinking
Blooms: Apply
Learning Objective: 03-02
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