Question

Profit contribution equals total:

Select one:

a. revenue minus variable cost.

b. revenue minus fixed cost.

c. profit.

d. revenue minus total cost.

Slack variables:

Select one:

a. allow constraint equations to be expressed as inequalities.

b. measure excess capacity.

c. never equal zero.

d. in some cases have negative values.

The cost of capacity subject to constraints is:

Select one:

a. variable.

b. sunk.

c. semi-variable.

d. nonzero.

To determine the quantity to be produced by each production process at varying points along an isoquant, managers could use:

Select one:

a. the point-slope method.

b. slack variable method.

c. the relative distance method.

d. the relative cost method.

Unit costs are always constant if:

Select one:

a. input prices are constant.

b. the total cost function is linear.

c. constant returns to scale are operative.

d. input prices are constant and the total cost function is linear.

Answer 1

1it is equal to revenue minus total variable cost. It is actually profit contributed per unit. Here fixed costs don't count

2 slack variables can never be zero. Simplex algorithm requires them to be positive or zero

3 Nonzero. If it is zero, then there is no constraint at all.

4 the point slope method. Here slope of isoquant is equal to slope of iso cost curve for profit maximisation

5 input prices are constant and total cost function is linear. When prices are constant factor price do not rise or fall as production increases. Linear ensures that as inputs change cost is not doubled, tripled, halved etc