1) how do you use financial ratios to analyze the performance of a company?  What do we mean when we refer to horizontal and vertical analysis? 2) Are CPA firms impacted in the way they deal with public and private companies?  Why or why not? Question: In a company that is experiencing economies of scale, which of the following is true?  A Average total cost is decreasing B Fixed cost is decreasing C Average marginal cost is decreasing D Marginal cost is higher than average marginal cost Question: What is the definition of market equilibrium?  A The price at which elasticity of demand is unit elastic B The price and quantity at which all consumer surplus is extracted from buyers C The price at which quantity supplied equals quantity demanded D All of the above Question: It costs your company $200 to produce pens and pencils together. To produce the same amount of pens and pencils separately costs $100 for the pens and $120 for the pencils. The production of pens and pencils exhibits  A Diseconomies of scope B Economies of scope C Increasing returns to scale D Constant returns to scale Question: Management at the East Alabama Motor Speedway estimates that the "Friday Night Fanatics" would continue to enthusiastically pack the house (every ticket would be sold) even after a 35% increase in the price of admission. Apparently, the E.A.M.S is operating in the ______ portion of their ______ curve.  A Inelastic, supply B Elastic, supply C Inelastic, demand D Elastic, demand Question: If a firm's average cost is falling (economies of scale) with output, then  A Marginal cost is less than average cost B Marginal cost is rising C Marginal cost is greater than average cost D Average cost is rising as a function of output Question: A company currently sells 60,000 units a month at $10 per unit. The variable cost per unit is $6. The company decided to raise the price about 10%. How much change in the number of units sold can the company afford and still be no worse off?  A - 48,000 B - 12,000 C - 8,000 D + 12,000 Question: A spirits manufacturer is considering two potential production investments. Option A costs an initial $2 billion and will involve variable costs (labor and material) of $5 per bottle of spirits. Option B costs an initial $4 billion and will involve variable costs (labor and material) of $3 per bottle of spirits. Assuming an annual capital charge equal to 10 percent of the initial costs, what is the average fixed cost at production level of 20,000,000 bottles per year for the Option B facility?  A $3 B $20 C $23 D $10 A Configuration A B Configuration B C Configuration C D None of the configurations Question: The U.S. Government bought 112,000 acres of land in southeastern Colorado in 1968 for $17,500,000. The cost of using this land today exclusively for the reintroduction of the black-tailed prairie dog  A Is zero, because they already own the land B Is zero, becaus ...

1. 1)
how do you use financial ratios to analyze the performance of a
company? What do we mean when we refer to horizontal and
vertical analysis?
2)
Are CPA firms impacted in the way they deal with public and
private companies? Why or why not?
Question: In a company that is experiencing economies of scale,
which of the following is true?
A
Average total cost is decreasing
B
Fixed cost is decreasing
C
Average marginal cost is decreasing
D
Marginal cost is higher than average marginal cost

2. Question: What is the definition of market equilibrium?
A
The price at which elasticity of demand is unit elastic
B
The price and quantity at which all consumer surplus is
extracted from buyers
C
The price at which quantity supplied equals quantity demanded
D
All of the above
Question: It costs your company $200 to produce pens and
pencils together. To produce the same amount of pens and
pencils separately costs $100 for the pens and $120 for the
pencils. The production of pens and pencils exhibits
A
Diseconomies of scope
B
Economies of scope
C
Increasing returns to scale
D

3. Constant returns to scale
Question: Management at the East Alabama Motor Speedway
estimates that the "Friday Night Fanatics" would continue to
enthusiastically pack the house (every ticket would be sold)
even after a 35% increase in the price of admission. Apparently,
the E.A.M.S is operating in the ______ portion of their ______
curve.
A
Inelastic, supply
B
Elastic, supply
C
Inelastic, demand
D
Elastic, demand
Question: If a firm's average cost is falling (economies of scale)
with output, then
A
Marginal cost is less than average cost
B
Marginal cost is rising
C
Marginal cost is greater than average cost

4. D
Average cost is rising as a function of output
Question: A company currently sells 60,000 units a month at
$10 per unit. The variable cost per unit is $6. The company
decided to raise the price about 10%. How much change in the
number of units sold can the company afford and still be no
worse off?
A
- 48,000
B
- 12,000
C
- 8,000
D
+ 12,000
Question: A spirits manufacturer is considering two potential
production investments.
Option A costs an initial $2 billion and will involve variable
costs (labor and material) of $5 per bottle of spirits. Option B
costs an initial $4 billion and will involve variable costs (labor
and material) of $3 per bottle of spirits. Assuming an annual
capital charge equal to 10 percent of the initial costs, what is
the average fixed cost at production level of 20,000,000 bottles
per year for the Option B facility?
A
$3
B

5. $20
C
$23
D
$10
A
Configuration A
B
Configuration B
C
Configuration C
D
None of the configurations
Question: The U.S. Government bought 112,000 acres of land in
southeastern Colorado in 1968 for $17,500,000. The cost of
using this land today exclusively for the reintroduction of the
black-tailed prairie dog
A

6. Is zero, because they already own the land
B
Is zero, because the land represents a sunk cost
C
Is equal to the market value of the land
D
Depends on the value to society of black-tailed prairie dogs
Next Unanswered Question: 11
Question: If a firm is earning an abnormally high rate of return
on invested capital
A
The firm is earning positive economic profits
B
The firm has zero economic profits
C
The firm’s accounting and economic profits are equal
D
The firm’s accounting profits are zero

7. Question: The fixed cost of Boeing's new aircraft, the 797, is $6
billion. The average variable cost is $100,000,000. The sales
price is $ 140,000,000. What is the projected breakeven
volume?
A
100
B
125
C
150
D
175
Question: Which of the following would be considered an extent
decision?
A
A business is considering diversifying into a new line of
business
B
A business is considering shutting down operations
C

8. A business is considering the sale of an underperforming line of
business
D
A business manager is trying to decide how many workers to
hire for a new line of business
Question: You run a small auto service shop. Your fixed
expenses per week are $1,000 and your average customer
invoice is $500 with an associated marginal cost of $300. What
is your weekly breakeven quantity?
A
2 cars
B
3.33 cars
C
5 cars
D
10 cars
Question: Which of the following will NOT cause the demand
curve for turkey meat to shift?
A

9. Rising chicken and pork prices
B
Recent news indicating cancer-fighting properties of turkey
meat
C
Sudden decrease in price
D
Thanksgiving
Question: Dr. Octavio is an ophthalmologist who performs both
cataract and LASIK surgeries. If a competitor starts offering
LASIK surgery as well, causing a decrease in the price Dr.
Octavio can charge for LASIK, this price decrease
A
Increases the opportunity cost of performing cataract surgeries
B
Increases the demand for LASIK surgery
C
Reduces the opportunity cost of performing cataract surgeries
D
Increases the demand for cataract surgeries, if cataract and
LASIK surgeries are substitutes

10. Question: Which of the following statements is true?
A
A firm's accounting costs are the same as its economic costs if
the firm is earning a normal rate of return
B
A firm's accounting costs are larger than its economic costs
C
A firm’s accounting costs take account of implicit costs of
capital
D
A firm's accounting costs are smaller than its economic costs
Question: A brewery is considering two potential production
investments.
Option A costs an initial $2 million and will involve constant
marginal cost of $5
Option B costs an initial $4 million and will involve constant
marginal cost of $3
In order to make the calculations simple, assume that the annual
capital cost is 10% of the total investment. At what production
quantity per year would the brewery be indifferent between
these two investment opportunities?
A
20,000
B

11. 100,000
C
200,000
D
150,000
Question: Smitty's Hot Boiled Peanuts recently reported that its
revenue increased from the previous quarter along with its
profits. What is the most likely explanation for this change if
the only change Smitty’s made was in its price?
A
Price decreased and demand was inelastic
B
Price increased and demand was inelastic
C
Demand was unit elastic
D
Price increased and demand was elastic
Question: As a shoe company produces more shoes, the average
total cost of each shoe produced decreases. This is because

12. A
Total fixed costs are decreasing as more shoes are produced
B
Average variable cost is decreasing as more shoes are produced
C
There are scale economies
D
Total variable cost is decreasing as more shoes are produced
Question: In the long run, which of the following outcomes is
most likely for a firm?
A
Zero accounting profits but positive economic profits
B
Zero accounting profits
C
Positive accounting profits and positive economic profits
D
Zero economic profits but positive accounting profits
Question: Which of the following would most likely make the
demand for an item more elastic?

13. A
Buyers perceive there to be few close substitutes for the item
B
The item represents a small fraction of consumers' budgets
C
There are no costs of switching to competitors' products
D
Buyers have NOT had time to adjust to the price change
Question: Christine has purchased five bananas and is
considering the purchase of a sixth. It is likely she will
purchase the sixth banana if
A
The marginal value she gets from the sixth banana is lower than
its price
B
The marginal benefit of the sixth banana exceeds its price
C
The average value of the sixth banana exceeds the price
D
The total personal value of six bananas exceeds the total
expenditure to purchase six bananas

14. Next Unanswered Question: 24
Question: A company currently sells 60,000 units a month at
$10 per unit. The marginal cost is constant at $6 up to 100,000
units per month. The company is considering raising the price
by 10% to $11. If the price elasticity of demand is constant and
______ in that price range, then profits would increase if they
raise the price to $11.
A
Equal to -3.0
B
Equal to -2.8
C
Equal to -2.6
D
Equal to -2.4
E
None of the above

15. Question: When demand for a product falls, which of the
following events would you NOT necessarily expect to occur?
A
A decrease in the quantity of the product supplied
B
A decrease in its price
C
A decrease in the supply of the product
D
A leftward shift of the demand curve
23
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