A manager invests 400,000 in a technology that should reduce the overall costs of production. The company managed to reduce their cost per unit from 2 to 1.85 . All else equal, if the firm continues its production in the same economic environment, the firm's economic profits should
a. increase if output is low enough
b. decrease
c. stay the same
d. increase if output is high enough
QUESTION 2In a multi-product firm, cannibalization is
a. An increase in the quality of both the brand's products
b. A decrease in the quality of both the brands products
c. An increase in both the brand's sales
d. An increase in one of the brand's sales due to the decrease in sales of the other.
QUESTION 3A manager invests 400,000 in a technology that should reduce the overall costs of production. The company managed to reduce their cost per unit from 2 to 1.85 . All else equal, if the firm continues its production in the same economic environment, the firms accounting profits should
a. increase
b. decrease
c. stay the same
d. does not affect profits
QUESTION 4After acquiring a close substitute, to increase profits the firm must Raise prices on all the products equally
a.
b. Raise the prices only on products with high margins, while reducing prices on products with low margins
c. Raise prices only on products with high margins, while keeping prices constant on products with low margins
d. Raise prices on both the products, but raise the prices more for products with higher margins
QUESTION 5A manager invests 400,000 in a technology that should reduce the overall costs of production. The company managed to reduce their cost per unit from 2 to 1.85 . This affects
a. Economic profits
b. Accounting profits
c. Both a and b
d. None of the above
QUESTION 6After acquiring closely substitutable product brands, a firm can successfully raise prices on both of the brands without losing much of its total sales because
a. Customers are insensitive to price changes
b. None of these sales would be captured by its other brand
c. Some of these sales lost by one brand would be captured by the other
d. All of the above
QUESTION 7Jim is planning on attending a football game. He paid 40 for the ticket. He will have to take the day off losing 8 hours of work. His hourly wage is 10 . He estimates it will cost him around 20 for gas and parking at the game. Jim's accounting (out of pocket) cost of attending the game equals
a. 80
b. 40
c. 60
d. 140
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