Question

QUESTION 1

1. Suppose a pizza restaurant sells their pizzas for $10 each, their average fixed costs are $4 per pizza, and their average variable costs are $8 per pizza. Should the restaurant continue operations or quit the business?

   	A.	Continue operating indefinitely because they are making money
   	B.	Continue operating in the short run even though they are losing money
   	C.	We do not have enough information to assess this decision for the firm
   	D.	Shut down immediately because they are losing money

2 points   

QUESTION 2

1. What is the net present value of the project that requires a $100 investment today and returns $50 at the end of the first year and $80 at the end of the second year?  Please assume the discount rate is 10%.

   	A.	$10.52
   	B.	$11.57
   	C.	$18.18
   	D.	$30.00

2 points   

QUESTION 3

1. The present value of future payments declines as the discount rate increases.

   True

   False

2 points   

QUESTION 4

1. Your firm manufacturers cell phones at a marginal cost of $50 per phone, and you sell 50,000 per month. If your fixed costs are $500,000 per month, what is the breakeven price for your firm?

   	A.	$10 per phone
   	B.	$50 per phone
   	C.	$60 per phone
   	D.	$100 per phone

2 points   

QUESTION 5

1. If you earn a 4% annual return on your retirement account each year, how long will it take the current account balance to double if you don't make any additional deposits to the account?

   	A.	9 years
   	B.	18 years
   	C.	36 years
   	D.	72 years

Answer 1